Previously EkaLore has written about many changes in the global automobile market. Many governments seek the migration to low-emission and electric vehicles. The global stakes are high for employment, industrial structure, and technology exploitation. In this release EkaLore looks at a simple cue: invasions of existing traditional automobile manufacturers’ markets are “No Surprise”. The focus in this release are the consequences of traditional manufacturers’ effects on their existing product platforms.
A key example of traditional manufacturers invading their own markets can be seen in Ford’s losses so far in 2024. Ford is losing an accounting loss approaching USD$50,000 per electric pick-up vehicle. The losses are actually worse. Replacing existing Internal Combustion Engine (ICE) sales for loyal customers loses the USD$10-25,000 of profit margin on these vehicles. The combined affect is to limit the free cash flow for investment in the new plants (EV and battery, supply chain, and technologies), pressure sales of ICE, and limit future customers.
EkaLore has previously looked at the high costs of the existing product development, sales, and service networks of traditional manufacturers. New production technologies (such as Tesla’s, and others, use of large scale castings for automotive structures) look to drive down production costs. The early generations of competitors deploying new manufacturing plants are looking to new platforms – primarily NEV/EV – to see production cost reductions. Traditional ICE production is held high by the higher existing costs of more parts, deeper supply chains, final assembly costs, and the design of dispersed production of existing platforms.
Invading their own markets is an objective of existing traditional manufacturers to improve margins while transitioning to future competitive platforms. On its own these “self-invasions” are already proving to be hard to execute, require dramatic governmental interventions, and require expectations counter to global fiscal conditions.
There can be “No Surprise” as profit declines for existing traditional manufacturers resulting from:high unit costs while EV products ramp, costs prove hard to reduce, and new technologies are rushed into platforms incurring high investment costs.
In the next release a deeper look at the Chinese Alien Invasion of traditional markets.
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