How will EVs damage the car industry?
Could electrification see the death of some brands?
The future of the car industry is almost certainly going to be full of electric vehicles. This will be an opportunity for many manufacturers to reinvent their brands. However, getting timing right in terms of what the brands should mainly sell whether it be ICE cars, hybrids or EVs is vital. This could lead to brands falling behind and losing traction in the market and possibly even going bust. This article will cover some reasons why the switch to electricity could be dangerous for brands.
Whilst the demand for alternatives to petrol or diesel has risen significantly in a few years, there still isn't enough demand for EVs to make it worth switching right now. In the big markets, such as the USA, UK, Japan and Australia, there is still a decent majority of people who would not want a hybrid or electric car as their next vehicle. This means that it is hard to judge whether to start switching now or hold out for another few years. As 41% out of 9,000 people said they would want an electrified vehicle next, it would be hard to judge if there is a large enough market right now. Of course future demand will increase drastically, but ditching the engine now could lead to a drop in revenue at the moment.
With a switch to EVs on the horizon, emission laws are coming in. These laws can prevent manufacturers from making faster ICE cars and this can draw potential customers to faster EVs and lose sales for that company. These laws have angered enthusiasts because it has prevented cars from entering markets. Another law that affects the industry and a reason that companies are moving towards EVs are the congestion charges. These mean that certain ICE cars have to pay tariffs to travel through congested city centres each day. These don't currently apply to all-electric or plug-in hybrid vehicles, which is a reason for consumers to switch, as an electrified car may be more economical in the long run. Laws also mean that a company must not produce a range of cars with average emissions of over 95g CO2/km for cars. This can limit some brands as to the number of cars they can make which can also limit their sales and profits.
The UK Government currently gives £2500 to buyers of electric vehicles below £35,000, making the switch more appealing. This means that brands that offer electric cars that are a similar price to its ICE counterparts will probably sell more and this will sway customers away from other vehicles and lose revenue for brands that are slow to switch.
For years, EVs have been marketed as the environmental solution to the climate change problem. However, this isn't as clear as some may think. EVs require more carbon during production than petrol or diesel cars and use precious metals such as lithium to make batteries. Add this to the fact that most electricity produced isn't from a clean, renewable source and most likely comes from fossil fuels or nuclear power and they start to become less eco-friendly than you thought. The durability of electric cars is not as good as ICE cars, meaning they will be on the road for a shorter period of time, such that they may not have time to offset this additional release of greenhouse gases. The marketing has been really effective in convincing drivers to go hybrid or electric but these problems aren't often highlighted. The fact that most countries won't be able to produce enough electricity, let alone from renewable sources, to enable the charging of all these EVs at similar times makes it problematic. If electric cars are let down by the infrastructure, then people won't buy them. This will affect the car industry, as they will have to find a solution that fits international guidelines.
Whilst synthetic fuels are seen as a great way to revive internal combustion engines, they could also cause problems for manufacturers. It will make them question whether they should stay with EVs or switch back to engines. After all, companies will have invested billions into a new technology and therefore may be hesitant to go back to what they had. They will be allowed to make them as long as they can only run on synthetic fuels as opposed to petrol and diesel. This would be a challenge and the questions over them could prevent them from being a viable option. Brands like Porsche have invested large sums towards the development of these fuels but that could be wasted. As the synthetic fuels proposed by Porsche will actually extract carbon dioxide, it could persuade eco-friendly buyers to ditch their EVs. This could create a rift in the market, as timing will yet again be key.
These reasons explain why this switchover period is vital for manufacturers to get right. Make the switch too early and the short term sales will decrease but there will be an increase in the future. Changing too late will most likely have an opposite effect. The balance needs to be right and companies that are indecisive will most likely suffer as a result. Brands that have built their reputations for decades could lose market share to other, newer brands that focused solely on electric cars, namely Tesla who have gained larger shares in the market and have taken on the more established brands. The future will definitely see some brands flourish and some brands fail as a result of the biggest change in the car industry in its history.
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