If you follow car industry publications, there both facts and well recognised predictions that combined, signal a storm for the car industry.
- Reality: Why Makers Are Lying.
- The Lie and The Sad Truth: Industry Combined Revenues Will Plummet.
- The Predictions of Doom: Both Right and Wrong.
- Bankruptcy, Pivot, Or Downsize.
- The Industry Future: Robotics?
Reality: Why The Makers Are Lying.
- Electric Vehicle Sales are Growing, and their Appeal and Competitiveness is on the increase.
- Value for Money Is Increasing Faster with Electric Vehicles than with ICE Vehicle Value For Money.
- Electric Vehicles will soon (Est by 2025) become less expensive than ICE vehicles.
- New Players, mostly from China, will use the disruption to claim of 50% of the market.
In less than 5 years, electric vehicles will become less expensive than ICE (internal combustion engine) vehicles, and are already significantly less expensive to maintain. Lower cost cars means less revenue from sales, and lower cost maintenance hits the even more significant recurring revenues. The introduction of EVs means less total revenue for the automotive industry. Then, there is the introduction of new players, such as Tesla (already the highest valued car company globally), BYD, XPeng, and NIO, who are predicted to capture 50% of the global market.
This means overall, the mainstream traditional electric car makers overall are looking at less than 50% of todays revenues across the industry as electric vehicles take over.
The Lies and The Sad Truth: Industry Combined Revenues Will Plummet.
The grim reality leads to three ‘lies’, or misdirections from automakers:
- Internal Combustion Engine vehicles will continue to generate sales for many years.
- Hydrogen and Other Technologies Are another Future option.
- Around half of our sales will be Electric Vehicles by…….
1. Sales for Many Years.
The first ‘lie’ is to keep sales moving today while ICE vehicles still have a cost advantage, so consumers do not delay purchases waiting for lower cost Electric vehicles. Truth is there will be sales of ICE vehicles for many years, just in rapidly declining numbers and with as shift to used cars.
2. Hydrogen and Other Technologies will be here soon.
Any automaker who promotes hydrogen cars can enjoy marketing support from ‘big oil’, and help delay electrification with FUD (fear, uncertainty and doubt). The reality is that hydrogen cars can only be cost effective, if they use blue hydrogen and result in more green house gasses than current ICE cars generate.
While creating a new market for fossil fuels certainly can attract financial support, the reality of getting a new technology infrastructure in place that would increase greenhouse gas emissions is sufficiently unlikely that the main appeal is in propping up share prices on the promise of a future for industries that are dying.
Yes, hydrogen cars are an option. Just one that can never really add up. But more options can create choice paralysis on moving to a new technology.
3. Around half of our sales will be Electric Vehicles by…….
Industry pundits continually point out that car makers predict 50% of sales to be electric, by some future date (usually 2030) when it seems certain almost all cars will be electric. They “will go bankrupt if only half their cars are electric by then” is the catch cry!
The automakers are supporting Biden’s new target, announcing their “shared aspiration” that 40-50% of their cars sold by 2030 to be electric vehicles, according to a joint statement from the three automakers.CNN 2021, August 5.
Recently Ford, GM and Stellantis (Chrysler Jeep) all pledged to reach 50% of sales to be electric.
One one hand, huge marketing dollars push into “it won’t happen”, while industry insiders insist the car makers will all go bankrupt if they are still trying to sell ICE vehicles in numbers by then. Yes, in 2030, almost all new cars sold will be electric, but given the average car age in the US is around 12 years, most cars on the road will still use gasoline for much longer than that.
The truth is that the traditional car industry companies will only sell 50% electric, because they will only sell 50% of the number of vehicles they sell today. That 50% electric is all they will sell, because their market share will be halved, so having the same number of models as today would be economic disaster.
The Predictions of Doom: Both Right and Wrong.
The predictions of doom because car makers are taking too long to convert their sales line-up to electric are misguided. Most of todays car industry has to be prepared to sell half as many cars as today, so they need a leaner model line-up once the market is electric.
Those same companies are stopping development of new ICE vehicles in reality, even if their language can be ambiguous to try and prop up shares prices that effect executive bonuses today.
Halving sales is doom. But it is not because they won’t have enough cars ready. Some of it is because they are already too late the catch the market change, but most of it is because with Tesla, the Chinese and other new market entrants, they just have to lose market share.
Bankruptcy, Pivot, Or Downsize.
A common prediction is “(insert car company) will go bankrupt because they will sell less cars!”. They, existing car companies, will all sell less cars. But this is not the first industry to face disruption and new lower cost technologies. Look at the computer industry from the 1970s. Some companies will fail, but many others will learn how to exist on a smaller scale, or pivot into new markets. Are there new emerging markets for companies producing cars?
The Industry Future: Robotics?
Already the leader in electric, Tesla and the Chinese such as Xpeng, have announced the are moving into the market of domestic robots. As revenues decrease due to cost savings as the electric vehicle market matures, robots could be the big new growth market, and requires many of the same skills.