US Automakers Will Fall Further & Further Behind Chinese on Electrification
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And Europeans, too, for that matter.
An op-ed was recently published in the Wall Street Journal with the title “Can U.S. Automakers Compete With Chinese EVs While Focusing on Gas Guzzlers?” Following Betteridge’s law of headlines, which states “Any headline that ends in a question mark can be answered by the word no,” the answer must be no. And of course it is.
In short, it is through scaling and intense, rapid development that a company becomes a leader on a new technology. If US automakers are going to pull back on vehicle electrification in their main market (as they are doing), they lose much of that potential. In Europe and China, they often partner with local companies, especially with regard to EVs. In any case, they are not as big in those markets as the domestic brands. So, where are US automakers going to get the scaling, development, and innovation benefits needed when it comes to EVs? They are not going to do so. And as the world moves from ~20% of new vehicle sales being electric to 50% of new vehicle sales being electric, while the US probably stagnates, well, we can all see where this is going, right?
But let’s get to the WSJ op-ed and see what Jinjoo Lee has to say. (I haven’t read the article yet, so I don’t actually know what’s in store at this point.)
“American automakers want to boost their profits by selling high-margin gas guzzlers today, all while not falling behind on electric-vehicle technology. It will be difficult to do both,” he starts out. Then he has a long, and useful, section on policy pullbacks, automaker incentives to sell high-profit gas guzzlers rather than EVs, the EV losses automakers were seeing, and then this sobering line: “The Detroit 3 collectively have less than 5% of the global EV market, according to BloombergNEF. The top three EV sellers—BYD, Geely and Tesla TSLA -0.45%decrease; red down pointing triangle—together have nearly 40%.”
The writer then highlights how GM and Stellantis are confident in their flexible powertrain approach. “GM’s Barra has said the company is able to adjust its manufacturing footprint to changing demand for EVs and gasoline-powered cars. ‘When you look at first the way that some of our plants where we’ve added the EV capacity, we have the ability to flex back and forth between ICE and EVs,’ she said at an earnings call earlier this year. Similarly, Stellantis is sticking with its ‘multi-energy’ platform that can produce internal-combustion-engine cars, hybrids and EVs,” Lee writes. But, as I noted above, that doesn’t allow for the scale and competitiveness that is truly needed. Lee goes down the same road of thinking:
“But keeping a smaller EV manufacturing footprint seems to run counter to the idea of producing competitively priced, profit-making EVs. Colin McKerracher, head of clean transport at BloombergNEF, notes that automakers require substantial EV manufacturing volume to get cheaper pricing from battery suppliers. Lack of scale is one reason American automakers are losing money on EVs, McKerracher says.
“Manufacturing EVs in the same factory as gasoline vehicles comes at a cost, too. Efficiencies are inevitably lost when EVs are produced along the same assembly line as internal-combustion-engine vehicles, notes John Murphy, managing director at Haig Partners.
“Being optimistic about the Detroit 3’s EV dominance takes several leaps of faith. First, one has to believe it is possible to manufacture low-cost EVs without scale. Second, that U.S. automakers can somehow keep up with the urgency that Chinese EV makers operate with in a cutthroat, one-directional policy environment. Chinese EV-focused brands roll out a new model every 1.8 years compared with 5.2 years for non-Chinese brands such as Tesla, according to AlixPartners. And third, that Chinese EV companies will stay out of the U.S. market forever.”
Indeed. Without scale, they can’t compete. Without a concerted, intense effort to develop super competitive EVs quickly, they will lose in the EV race.
Well, I guess this is nothing new for longtime CleanTechnica readers. We’ve been saying so for years. Of course, we’re seeing some bumps in the road in certain places, but things are still moving along at a rapid pace globally. And that’s unlikely to change in China, other parts of Asia, Australia, South America, and Africa.
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