Yearender: Electric vehicles confront the leap to the mass market
15/12/2022 12:00
By Joseph White
DETROIT, Dec 15 (Reuters) - The past year was sobering
for investors who poured money into Tesla Inc TSLA.O and rival
electric vehicle startups that hoped to emulate Tesla CEO Elon
Musk's success.
As interest rates rose and financial markets gyrated, shares
in many EV startups deflated. Rivian Automotive Inc RIVN.O ,
which had a higher market value than Ford Motor Co F.N shortly
after it went public in 2021, lost more than 70% of its value
over the past year.
Other EV startups fared worse. Electric van maker Arrival
warned it could run out of cash in less than a year. Lucid Group
Inc LCID.O , backed by Saudi Arabia's sovereign wealth fund,
struggled to build its sleek Air luxury EVs. Chinese Tesla
challenger Xpeng Inc's 9868.HK shares lost more than 80% of
their value.
Now comes the hard part: Persauding more mainstream
consumers to come along for the ride.
WHY IT MATTERS
The automobile industry is pouring more than $1 trillion
into a revolutionary shift from combustion engines to electric
vehicles guided by software. From Detroit to Shanghai,
automakers and government policymakers have embraced the promise
of electric vehicles to provide cleaner, safer transportation.
European countries and California have set 2035 as the deadline
for ending sales of new combustion passenger vehicles.
Tesla Inc's TSLA.O surge to become the world's most
valuable automaker - achieving a $1 trillion valuation last year
- humbled established automakers such as Toyota Motor Corp
7203.T and Volkswagen AG VOWG_p.DE that once were reluctant
to go electric.
Starting next year, a wave of new electric vehicles from
pickup trucks to middle market SUVs and sedans will hit the
world's major markets.
Industry executives and forecasters do not agree on how
rapidly electric vehicles could take over half the global
vehicle market, let alone all of it.
In China, the world's largest single automotive market,
battery electric vehicles have captured about 21% of the market.
In Europe, EVs account for about 12% of total passenger vehicle
sales. But in the United States, EV market share is only about
6%.
Among the barriers to EV adoption, industry executives and
analysts said, were a dearth of public fast-charging
infrastructure, and the rising cost of EV batteries, driven by
shortages of key materials and uncertainty over government
subsidies that have buoyed EV purchases in major markets
including the United States, China and Europe.
By 2029, electric vehicles could account for a third of the
North American market, and about 26% of vehicles produced
worldwide, according to AutoForecast Solutions, a consultancy.
Electric vehicle sales likely will not increase in a smooth,
ever-ascending curve, said AFS President Joe McCabe. If there is
a recession next year, as many economists forecast, that will
slow EV adoption.
Wards Intelligence forecasts that combustion vehicles will
make up just under 80% of North American sales in 2027. Based on
automakers' product plans, Wards analyst Haig Stoddard said at a
recent conference that manufacturers "expect strong ICE
(internal combustion engine) volume heading into the next
decade."
WHAT DOES IT MEAN FOR 2023?
Throughout 2022, established automakers such as Mercedes,
Ford and General Motors Co GM.N unveiled dozens of new
electric vehicles to challenge Tesla and the upstarts.
Mass production of most of these vehicles kicks into gear
starting in 2023 and 2024.
By 2025, there could be 74 different electric vehicle models
offered in North America, McCabe said. But he predicts fewer
than 20% of those models are likely to sell at volumes above
50,000 vehicles a year. Automakers could be stuck with too many
niche models and too much capacity.
Slowing economies threaten overall vehicle demand in Europe
and China, too.
During the early years of the 20th Century, new auto
companies sprang up, backed by investors eager to catch the wave
of mass mobility that Henry Ford and other automotive pioneers
started. By the 1950s, the global auto industry had consolidated
and once-heralded brands such as Duesenberg had disappeared.
The next few years will determine whether the 21st Century's
crop of electric vehicle brands will follow a similar path.
Explore the Reuters round-up of news stories that dominated
the year, and the outlook for 2023.
(Reporting by Joe White
Editing by Bernadette Baum)
((Joe.White@thomsonreuters.com;))