Previously EkaLore has written about many changes in the global automobile market. The migration to low-emission and electric vehicles has been an objective of many governments. The stakes are high for employment, industrial structure, and technology exploitation on a global scale. In this series EkaLore looked at a simple cue: invasions of existing traditional automobile manufacturers’ markets are “No Surprise”. The last release of the series looks at conclusions from a “No Surprise” Alien Invasion.
The “No Surprise” Alien Invasion of Chinese (and other low-cost producers of EVs) combine with global market conditions to drive conclusions:
The investment costs of EV’s development will be heavy on traditional manufacturers. Investment challenges come from legacy investment strategies applied to new production capacity, and business model changes. The result is a requirement for governments to support their chosen champions. Champions will need investment capital, price subsidies, or cost shifts. Government funding for EV charging network infrastructure is one area. An effect of protections will be to force Chinese, and competitors, to even faster innovation resulting from higher investment. Government actions to help traditional manufacturers, by their fiscal nature, will be slower to react and get big results.
Unit profits and sales will drop for traditional manufacturers. This is a result of the collapse of premium ICE vehicle sales in export markets, consumer wanting less pricey EV models, and continuing hard-to-reduce costs. Traditional manufacturers will face: financial and organizational restructuring, higher dependence on protected markets, and a need to sell ICE vehicles. All this while governments and consumers seek lower emissions and lower prices. Competitors will strive to strike at the most profitable segments, highest volume segments, and use time-to-market advantages. These strategies are not easily negated by traditional market tactics.
Change is coming due to combined secular trends in technologies and external cultural changes. Traditional manufacturers will be disrupted due to compelled disruptions in materials, manufacturing, and software-enabled vehicles. Traditional manufacturers are not proving agile in EV’s technologies at any level. Margins and investment returns decline due to materials, manufacturing, and computer-based features. The trends will accelerate compelled changes faster than governments and markets can easily accommodate.
These conclusions are “No Surprise”.
Traditional manufacturers will survive in name while their scale and influence will diminish if their execution of complex transitions is faulty in any way. Market protections aimed to reduce social impacts and financial losses will collide with forcing changes in technologies and business models.
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