The past year was difficult for investors who invested money into Tesla Inc (TSLA.O) and rival electric vehicles startups that wanted to match Tesla CEO Elon Musk’s success.
As interest rates soared and financial markets reeled, shares in most EV startups fell. Rivian Automotive Inc (RIVN.O), which had a higher market value compared to Ford Motor Co (F.N) shortly after it went public last year, shed more than 70% of its value over the past year.
Other EV startups performed worse. Electric van maker Arrival cautioned it could become cash-strapped in less than a year. Lucid Group Inc (LCID.O), bankrolled by Saudi Arabia’s sovereign wealth fund, grappled to build its sleek Air luxury EVs. Chinese Tesla challenger Xpeng Inc’s (9868.HK) shares shed more than 80% of their value.
Now comes the tricky part: Convincing more mainstream consumers to go along for the ride.
Why It Matters
The automobile industry is investing more than $1 trillion into a revolutionary switch from combustion engines to electric vehicles guided by software. From Detroit to Shanghai, automakers and government policymakers have accepted the promise of electric vehicles to offer cleaner, safer transportation. California and European nations have set 2035 as the deadline for closing sales of new combustion passenger vehicles.
Tesla Inc’s (TSLA.O) rush to become the world’s most valuable automaker – attaining a $1 trillion valuation in 2021- trounced established automakers such as Volkswagen AG (VOWG_p.DE) and Toyota Motor Corp (7203.T) that once were hesitant to go electric.
From next year, a wave of new electric vehicles from pickup trucks to middle-market SUVs and sedans will reach the world’s largest markets. Industry executives and forecasters do not agree on how quickly electric vehicles could capture half the global vehicle market, let alone all of it.
In China, the world’s biggest single automotive market, battery electric vehicles have taken over about 21% of the market. In Europe, EVs make up about 12% of total passenger vehicle sales. But in the United States, EV market share is only about 6 percent.
Among the barriers to EV adoption, analysts and industry executives said, were a scarcity of public fast-charging infrastructure, and the surging cost of EV batteries, caused by shortages of key materials and uncertainty over government subsidies that have ramped up EV purchases in major markets including the United States, Europe, and China.
By 2029, electric vehicles could make up a third of the North American market, and nearly 26% of vehicles produced globally, according to AutoForecast Solutions, a consultancy.
Electric vehicle sales probably will not rise in a smooth, ever-upward curve, said AFS President Joe McCabe. If there is a recession in 2023, as many economists forecast, that will decelerate EV adoption.
Wards Intelligence projects that combustion vehicles will account for just under 80% of North American sales in 2027. According to automakers’ product plans, Wards analyst Haig Stoddard said at a recent conference that automakers “expect strong ICE (internal combustion engine) volume heading into the next decade.”
What Does It Mean For 2023?
Throughout 2022, established automakers such as Ford, Mercedes, and General Motors Co (GM.N) rolled out dozens of new electric vehicles to keep up with Tesla and the upstarts.
Mass production of most of these vehicles begins starting in 2023 and 2024.
By 2025, there could be seventy-four different electric vehicle models sold in North America, McCabe said. But he forecasts less than 20% of those models are likely to sell at volumes above 50,000 vehicles per year. Automakers could be stranded with too many niche models and too much capacity.
Buy Crypto NowSlowing economies threaten overall vehicle demand in China and Europe, too.
During the early years of the 20th Century, new auto companies cropped up, supported by investors eager to ride the wave of mass mobility that Henry Ford and other automotive pioneers started. By the 1950s, the global auto industry had consolidated and once-heralded brands such as Duesenberg had died out.
The next few years will dictate whether the 21st Century’s crop of electric vehicle brands will go down the same path.
