Manufacturers Race To Dominate The Electric Vehicle Market
Competition is heating up on the highway to sell
When it comes to sustainable strategies, businesses across the scale have paid particular attention to electric vehicle (EV) technology. Interest and investment hasn’t always come from automakers themselves – big energy companies like Shell and BP, as well as tech startups, have contributed to the electric infrastructure. The most recent public commitment has come from one of the most influential car manufacturers of the century, Ford. At the Detroit Auto Show earlier this month, the firm announced an $11bn investment in electric vehicles in the next five years. Who else is revving their engine at the starting line of the EV race, what roadblocks do they face, and how will the accelerating EV market disrupt the automotive industry?
The electric evolution
In 2014, former Toyota executive Bill Reinert claimed that electric vehicles were not economically viable. Back then, he was right. But not today. The EV market is thriving, with a current total investment of $90bn. Ford isn’t the only automaker flashing their cash. Volkswagen made the largest single investment pledge of $40bn by 2030, with Daimler setting aside $11.7bn for 10 electric and 40 hybrid models, and GM promising 20 battery and fuel cell vehicles within the next five years.
Nonetheless, statistically speaking, EVs only account for one per cent of the automotive market. So why are automakers making such generous investments? The answer could largely be summed up in one word – Tesla. The company’s unprecedented disruption of the auto industry meant that, for the first time, EVs began to look like a legitimate, lucrative opportunity. Another important factor is compliance. In the face of ambitious government plans, car manufacturers need to reduce carbon emissions. EVs have also been linked to autonomous driving, another central trend in transportation. GM, the largest car manufacturer in the US, sees EVs as the foundation for autonomous vehicles. As well as chasing existing competitors, auto companies also have to recognise that as demand for sustainability grows, so will the number of businesses vying for consumer support. As well as fending off startups, automakers are also up against tech companies like Google.
Although the market is small, between the third quarters of 2016 and 2017, global EV sales increased by 63 per cent. It looks like the explosion of electric vehicle technology is inevitable. Not all automakers are throwing themselves into the market, though. Fiat Chrysler chief executive Sergio Marchionne believes that electric cars lack profitability, stating that the company will simply work to meet emission requirements. Is this evidence of apathy in the industry, or is it ‘the Apple approach’ of keeping quiet until the opportune moment? We’ll have to wait to find out.
Mapping the road ahead
When it comes to disruptive technology, it’s always difficult to know what’s around the bend. Even so, certain trends can suggest where the market is headed. For example, as the main geographic recipient of EV funding, China is expected to become a hub for development. This is unsurprising given the country’s giant automotive industry, and the government’s directive that eight per cent of every brand’s production to be focused on EVs. Another trend is the repositioning of automotive incumbents into mobility companies. Volkswagen, for example, is using a chunk of its $40bn pledge to fund the development of new mobility services. It’s not hard to see why – ride sharing, car hailing and autonomous vehicles have brought ongoing disruption that isn’t slowing down.
Changes in personnel also suggest a shift in focus. Ford, for example, recently replaced veteran CEO Mark Field with Jim Hackett, head of Smart Mobility. This could indicate that the automaker wants to become a technology company as well as a leader in mobility. It’s generally accepted that to survive the digital age, all industry giants need to be tech firms too. This could increase the tension between businesses and governments as, deliberately or not, they challenge their power. Governments are certainly not pumping as much money into the market as their corporate counterparts, but they are responsible for making the rules that have forced automakers to disrupt themselves.
Now that the electric vehicle market has demonstrated considerable growth, automakers are becoming more aggressive in their strategies. This is also the result of relatively new regulations, increased competition, and changing consumer preferences. Consumers have demonstrated support for sustainability, but their ambitious plans rely on demand. Many new models are under development, but the question is who will buy them.
“We’re all in,” said Ford executive chairman Bill Ford Jr., “Will the consumers be there with us?”
If Tesla’s mass following is any indication, then presumably they will.
Will the increasing number of EV models be snapped up by consumers? Do the huge investments made by big businesses demonstrate their growing influence over governments? Can incumbents hold their own against the likes of Uber and Lyft by repositioning as mobility companies? Share your thoughts and opinions.