A lot of tech believers—and some automakers—point to a future of the automobile that’s autonomous, connected, shared, and electric. But the time frame for the envisioned wholesale transformation from today’s reality to the next era of mobility is up for debate.
Khodrocar - In guessing just when these changes might happen, and how rapidly, traditional automakers face some tough (and expensive) decisions with make-or-break consequences. Do they spend billions now on the development of new platforms and assembly plants to mass-produce electric vehicles, or will internal combustion still reign for decades to come? Do they go big on research and development of automated driving systems for tomorrow’s production vehicles, or are such technologies going to be in test mode for the foreseeable future? Do they invest in the development of cleaner and more efficient internal-combustion technology, or is electric really approaching the tipping point?
These uncertainties are underscored in a new research paper from the Center for Automotive Research (CAR), which looks at some of the complexities that can make today’s market successes seem to be in conflict with what’s suggested by the much hyped mobility sector and some market projections for electric vehicles. The paper suggests a more pragmatic—some would say pessimistic— view about how quickly some new vehicle technologies will be adopted in the marketplace.
The paper wasn’t commissioned by a particular automaker or group of industry companies; it was funded by CAR’s independent research-and-development budget, which comes from corporate and industry sources plus state, federal, and local governments.
Think Globally?
Right now, automakers are recording near record profits from sales of high-margin vehicles such as full-size (nonhybrid) SUVs and pickups. They get higher profits in general for trucks and crossovers than they do for passenger cars. On the other hand, there’s globalization and the ever increasing regulatory mandates for electric vehicles (in California, but in also in countries such as China and France). Add new EV sales targets in Austria, Denmark, Ireland, Japan, the Netherlands, Portugal, South Korea, and Spain, and widespread calls for the banishment of internal combustion on timelines as soon as 2030. The global current pushing EVs, at this point, looks close to unstoppable.
Most major automakers and many suppliers are hoping to amortize their investments in new powertrain and driving technologies over millions of units at a global scale. But most current forecasts say that the investment required to develop electric vehicles and connected platforms won’t be returned on the 10-year amortization horizon that’s customary in the industry. Not all automakers see this as a major issue: General Motors, for instance, just this past year underscored that it foresees electric vehicles becoming profitable in the very near term, by 2021. Others are investing so heavily in electrification that their profitability looks to be in question if the changeover isn’t rapid. Between 2009 and 2017, automakers invested a relatively small amount, $9.8 billion, on electrified-vehicle technologies. Looking forward, however, investments totaling about $90 billion have been announced toward the development of electrics, a large portion of which is to be spent in China.
The CAR study backs one of the more conservative predictions (from LMC Automotive) about consumer adoption of battery-electric vehicles and hydrogen fuel-cell models: It forecasts that such cars will make up less than 3 percent of the powertrain mix in North America in 2024 and just 8 percent of the market by 2030. The remainder of new vehicles will have an internal-combustion engine on board, it says.
However, many analysts are taking a different tack on projections for EV adoption, prioritizing the rapid evolution of battery technology even if the next decade is one with sustained cheap gasoline prices. For instance, London’s Fitch Ratings, one of the world’s most respected credit-rating agencies, issued a report this week anticipating that oil demand could peak by 2030 because of rising EV sales. "This is not our core scenario, but developments in 2017 show how technological changes and greater product awareness could lead to annual sales of 10 million battery-powered EVs by 2025,” the report authors emphasized. It could be that the North American market for EVs remains disproportionately small compared to their adoption elsewhere in the world, such that both these forecasts are supportable. Still, even the optimistic figure of 10 million units suggests that a large majority of new vehicles sold will still rely on internal combustion more than a decade into the future.
Selling Change to a Conservative Market
Anticipate some behavioral hiccups along the way: There’s a well-established gap between what consumers tell researchers that they intend to buy and what they actually do buy. Whether due to pricing, charging infrastructure, driving range, or issues at the dealership, it’s a gap that persists in the United States; according to a 2018 Deloitte study, if shoppers actually bought what they intended, fully electric and gasoline-electric hybrid models together already would claim nearly a fifth of the U.S. vehicle market. The reality is that fully electric cars, plug-in hybrids, and hybrids combined summed to just over 3 percent of the market, with that mix heavily tilted, still, toward hybrids that depend heavily on the internal-combustion element in their drivetrains.
The CAR study also takes a conservative tack on the adoption of autonomous technologies, looking to IHS Markit projections anticipating that the serious growth for the autonomous-vehicle sector won’t happen until the 2030s. It sees the Level 4 and Level 5 autonomous-vehicle market—vehicles that require no driver input or oversight under at least some conditions—to be just 3.8 percent of the market in 2030, rising quickly to 54.9 percent in 2040.
These uncertainties are underscored in a new research paper from the Center for Automotive Research (CAR), which looks at some of the complexities that can make today’s market successes seem to be in conflict with what’s suggested by the much hyped mobility sector and some market projections for electric vehicles. The paper suggests a more pragmatic—some would say pessimistic— view about how quickly some new vehicle technologies will be adopted in the marketplace.
The paper wasn’t commissioned by a particular automaker or group of industry companies; it was funded by CAR’s independent research-and-development budget, which comes from corporate and industry sources plus state, federal, and local governments.
Think Globally?
Right now, automakers are recording near record profits from sales of high-margin vehicles such as full-size (nonhybrid) SUVs and pickups. They get higher profits in general for trucks and crossovers than they do for passenger cars. On the other hand, there’s globalization and the ever increasing regulatory mandates for electric vehicles (in California, but in also in countries such as China and France). Add new EV sales targets in Austria, Denmark, Ireland, Japan, the Netherlands, Portugal, South Korea, and Spain, and widespread calls for the banishment of internal combustion on timelines as soon as 2030. The global current pushing EVs, at this point, looks close to unstoppable.
Most major automakers and many suppliers are hoping to amortize their investments in new powertrain and driving technologies over millions of units at a global scale. But most current forecasts say that the investment required to develop electric vehicles and connected platforms won’t be returned on the 10-year amortization horizon that’s customary in the industry. Not all automakers see this as a major issue: General Motors, for instance, just this past year underscored that it foresees electric vehicles becoming profitable in the very near term, by 2021. Others are investing so heavily in electrification that their profitability looks to be in question if the changeover isn’t rapid. Between 2009 and 2017, automakers invested a relatively small amount, $9.8 billion, on electrified-vehicle technologies. Looking forward, however, investments totaling about $90 billion have been announced toward the development of electrics, a large portion of which is to be spent in China.
The CAR study backs one of the more conservative predictions (from LMC Automotive) about consumer adoption of battery-electric vehicles and hydrogen fuel-cell models: It forecasts that such cars will make up less than 3 percent of the powertrain mix in North America in 2024 and just 8 percent of the market by 2030. The remainder of new vehicles will have an internal-combustion engine on board, it says.
However, many analysts are taking a different tack on projections for EV adoption, prioritizing the rapid evolution of battery technology even if the next decade is one with sustained cheap gasoline prices. For instance, London’s Fitch Ratings, one of the world’s most respected credit-rating agencies, issued a report this week anticipating that oil demand could peak by 2030 because of rising EV sales. "This is not our core scenario, but developments in 2017 show how technological changes and greater product awareness could lead to annual sales of 10 million battery-powered EVs by 2025,” the report authors emphasized. It could be that the North American market for EVs remains disproportionately small compared to their adoption elsewhere in the world, such that both these forecasts are supportable. Still, even the optimistic figure of 10 million units suggests that a large majority of new vehicles sold will still rely on internal combustion more than a decade into the future.
Selling Change to a Conservative Market
Anticipate some behavioral hiccups along the way: There’s a well-established gap between what consumers tell researchers that they intend to buy and what they actually do buy. Whether due to pricing, charging infrastructure, driving range, or issues at the dealership, it’s a gap that persists in the United States; according to a 2018 Deloitte study, if shoppers actually bought what they intended, fully electric and gasoline-electric hybrid models together already would claim nearly a fifth of the U.S. vehicle market. The reality is that fully electric cars, plug-in hybrids, and hybrids combined summed to just over 3 percent of the market, with that mix heavily tilted, still, toward hybrids that depend heavily on the internal-combustion element in their drivetrains.
The CAR study also takes a conservative tack on the adoption of autonomous technologies, looking to IHS Markit projections anticipating that the serious growth for the autonomous-vehicle sector won’t happen until the 2030s. It sees the Level 4 and Level 5 autonomous-vehicle market—vehicles that require no driver input or oversight under at least some conditions—to be just 3.8 percent of the market in 2030, rising quickly to 54.9 percent in 2040.
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