Investment increases as companies jostle to dominate electric vehicles
Not so long ago, Tesla Motors were the clear front runners in the electric vehicle market. Incumbents, reluctant to take risks, looked on with interest. Sure enough, Tesla’s enthusiasm for electric vehicles quickly appeared to pay off… And where one business is successful, others will follow. That’s precisely what’s happening in the EV sphere today, as legacy car makers make ambitious but justified financial commitments to hybrid and full electric tech. The biggest single pledge so far is Volkswagen’s $40bn. But just how much money is being spent on EVs, which businesses are spending it, and what are they hoping to achieve?
EV development gets the luxury treatment
Joining Tesla and Volkswagen in their efforts to bring out the best EVs include Daimler, General Motors, Ford, Mercedes Benz and Porsche. It’s difficult to work out the exact value of the market, but the list of major names in the game is as telling as any figure. That being said, Statista predicts that by 2019 global revenue will exceed $270bn. It’s no wonder that companies are raising the stakes. Hot on the wheels of Ford’s $11bn investment, luxury automaker Porsche announced that its previous funding commitment of €3bn was to be doubled. Their new total, equivalent to $7.4bn, represents an aggressive strategy that is certainly mirrored by competitors. The total expected investment by automakers is over $90bn. According to data compiled by InsideEVs, approximately 174,000 EVs were sold in the US last year. While that number isn’t large compared to combustion engine sales, it’s a stark improvement. Given the acceleration of the market, the bold pledges of companies like Porsche and Ford come as no surprise. Another factor is changing customer preferences, as consumers opt for sustainable options. It’s not just businesses that have to respond to these demands, either. Regulations, which often present a barrier to adoption and development, are experiencing much needed attention across the transportation industry. Combine customer interest with regulatory revolution, and it’s easy to see why competition has intensified. The more promising the market looks, the less risky it becomes. Ironically, this means that it’s an even harder nut to crack for the companies that decide to make that step.
Rocking down to electric avenue
What will the combined $90bn investment achieve, and what disruptive consequences will it have for the automotive industry? Taking Porsche as an example, the company’s financial commitment is to go towards electrifying existing internal combustion engine models, bringing their Mission E high performance electric sedan to market, and expanding facilities. Likewise, Mercedes Benz has also announced a $1bn upgrade to its Alabama factory to facilitate EV production. Another investment area common to all is developing infrastructure – which is just as well. Hopefully this will allow for a range of new and widely available mobility services. In the realms of electric public travel, governments will have to take a central role. Electric charging points are undoubtedly the most important physical change needed to enable the EV revolution, but there are awkward questions surrounding ownership and integration. Who will own the infrastructure? If the current model endures, then charging stations themselves will profit from users. This might not sit well with automakers, who are already partnering up with emerging companies like Aerovironment to secure their place in the charging market.
Aside from changing the physical set up of legacy petrol stations and even roads themselves, a new electric infrastructure has implications for traditional car repairs and car sales. With the electric epoch on our doorsteps, companies reliant on the combustion engine need to diversify. The challenge for utilities is clear – how will they provide the power? Batteries may have a longer shelf life than fossil fuels, but their production is flawed. Cobalt, a key battery ingredient, has already become highly expensive due to demand. It seems obvious, but the very first consideration for EV expansion should be the availability of electricity itself. Corporate investment should administer to these problems before they stifle advancement.
Now that electric vehicles are an imminent reality, the next big hurdle to overcome is infrastructure. With good reason, companies are piling money not only into the development of competitive electric models but into the systems needed to make them work on a mass scale. Competition is fierce, but automakers are in it for the long haul. Volkswagen’s mammoth spend, for example, will be eked out over the next twelve years. There’s certainly time to hash out regulatory and structural complications, but preparations need to begin now. Tesla has opened the floodgates, and it’s time for automakers to sink or swim.
How much does Tesla have to fear from the efforts of legacy automakers? Will disputes arise over infrastructure ownership? What other implications could come from transforming travel infrastructures? Share your thoughts and opinions.
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