November 24, 2024

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Electric cars are experiencing a mass market leap

Electric cars are experiencing a mass market leap

DETROIT (Reuters) – The past year has been a worrying one for investors who poured money into Tesla Inc. (TSLA.O) and rival electric vehicle startups that hoped to emulate the success of Tesla CEO Elon Musk.

With rising interest rates and volatile financial markets, stocks in many startups working in the field of electric vehicles have shrunk. Rivian Motor Company (Revno)Which had a higher market value than Ford Motor Company (FN) Shortly after going public in 2021, it has lost more than 70% of its value over the past year.

Other electric vehicle startups fared worse. Electric Vehicle Access has warned that it could run out of cash in less than a year. Lucid Group Inc (LCID.O), backed by Saudi Arabia’s sovereign wealth fund, has struggled to build its own sleek luxury electric cars. Tesla’s Chinese competitor Xpeng Inc’s (9868.HK) The shares lost more than 80% of their value.

Now comes the tricky part: convincing more regular consumers to come along for the ride.

why does it matter

The auto industry is pouring more than $1 trillion into a revolutionary shift from combustion engines to software-guided electric vehicles. From Detroit to Shanghai, automakers and government policymakers have embraced the promise of electric vehicles to provide cleaner and safer transportation. European countries and California have set a deadline of 2035 for ending sales of new combustion-powered passenger cars.

Tesla Inc (TSLA.O) Its rise to become the world’s most valuable automaker — achieving a trillion-dollar valuation last year — has dented established automakers such as Toyota Motor Corp. (7203.T) and Volkswagen AG (VOWG_p.DE) that were reluctant to use electricity.

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Starting next year, a wave of new electric vehicles from pickup trucks to mid-market SUVs and sedans will hit major markets around the world.

Industry executives and forecasters don’t agree on how quickly electric vehicles could capture half, let alone all of it, of the global auto market.

In China, the world’s largest auto market, battery electric vehicles accounted for about 21% of the market. In Europe, electric vehicles account for about 12% of all passenger car sales. But in the US, the market share for electric vehicles is only about 6%.

Barriers to adoption of electric vehicles, the industry executives and analysts said, include a dearth of fast-charging public infrastructure, and the high cost of electric vehicle batteries, driven by shortages of key materials and uncertainty about government subsidies that have boosted purchases of electric vehicles in key markets. Including the United States, China and Europe.

The all-electric Ford F-150 Lightning truck is unveiled at the company’s global headquarters in Dearborn, Michigan, US, May 19, 2021. REUTERS/Rebecca Cook/File Photo

By 2029, electric vehicles could account for a third of the North American market, and about 26% of cars produced worldwide, according to consulting firm AutoForecast Solutions.

Joe McCabe, president of AFS, said sales of electric vehicles likely won’t increase in an ever-rising smooth curve. If there is a recession next year, as many economists have predicted, it will slow the adoption of electric vehicles.

Wards Intelligence expects combustion vehicles to account for just under 80% of North American sales in 2027. Based on the automakers’ product plans, Wards analyst Haig Stoddard said at a recent conference that manufacturers “expect strong internal combustion engine volume heading into the decade next.”

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What does that mean for 2023?

Throughout 2022, automakers such as Mercedes, Ford, and General Motors are established (GM.N) Unveiled dozens of new electric cars to challenge Tesla and startups.

Mass production of most of these vehicles begins in gear starting in 2023 and 2024.

McCabe said that by 2025, there could be 74 different models of electric vehicles offered in North America. But he predicts that less than 20% of those models are likely to sell in volumes of more than 50,000 vehicles per year. Automakers can get stuck with having too many specialized models and too much capacity.

Slowing economies threaten overall auto demand in Europe and China as well.

During the early years of the 20th century, new auto companies sprang up, buoyed by investors eager to catch the wave of mass mobility started by Henry Ford and other auto pioneers. By the 1950s, the global auto industry had consolidated and once heralded brands such as Duesenberg had all but disappeared.

The next few years will determine whether the group of electric vehicle brands in the 21st century follows a similar path.

Discover the Reuters group of news stories that dominated the year, and the forecast for 2023.

Reporting by Jo White, Editing by Bernadette Baume

Our standards: Thomson Reuters Trust Principles.