Business outlook for electric and autonomous cars still stuck in neutral

The business outlook for electric and autonomous cars hasn’t improved much in the past year, according to a report from global consultancy AlixPartners (New York). Last year’s report projected a “pile-up of epic proportions” for the industry “as investments necessary to an electric and autonomous future balloon just as the market slows.” The latest report, released in June 2019, describes the auto industry as “entering a profit desert, as heavy spending on new mobility and stagnation in key markets take hold simultaneously.” Spending on connected, autonomous, shared and electric vehicles, particularly for electric and autonomous vehicles, along with stagnation in key markets globally, including the United States, will adversely impact the automotive market, said the new report.

Autonomous vehicles in cityscape

Last year, AlixPartners predicted the auto industry would face “a monumental capital drain in the near term, as hundreds of players, including non-traditional ones, pour unprecedented sums into electric and autonomous vehicles years before those technologies are fully cost-competitive in the market.” AlixPartners notes in the 2019 report that the new mobility future isn’t yet at hand and technology costs are still inhibiting sales.

Powertrain costs for electric vehicles (EVs) are identified as being two-and-a-half times higher than for traditional vehicles, yet sales per model through 2022 are predicted to be just 15% of traditional models historically. Total global industry sales are forecast to grow just 1.6% annually through 2026, as China cools significantly over the next two years and the United States begins a cyclical downturn to 16.9 million units this year and down to 15.1 million units in 2021, said the 2019 report.

Reflecting fluctuations in consumer preferences, the 2019 study cites a new consumer survey, which finds that “Americans seem to be quite open” to battery electric vehicles (BEVs), “with 14% saying that their next vehicle is likely to be a BEV, rising to 20% for how they think they’ll feel in 2025 and to 33% in 2030.” However, the cloud hanging over this survey is the fact that it also found that “concerns about the cost of electric vehicles are up significantly from responses in a similar AlixPartners poll a year ago, with 51% of Americans citing cost as a top-three concern, up from 29% in last year’s survey,” said AlixPartners.

With the continued push toward renewable sources of electricity, which are not reliable, costs of electricity are on the rise nationwide.

Technophiles are always on-board for new techie products, but all too soon the bloom is off the rose as reality sets in. An article in the July 24 Wall Street Journal noted that Tesla’s sales of higher-end cars have eroded in the company’s largest and most important market, the People’s Republic of California. Citing new data from research firm Dominion Enterprises, the stylish sedan that arguably changed car buyers’ view of electric cars is losing its luster, said the WSJ article, “Tesla’s Sales of Higher-End Cars Erode in California.” Registrations of new Model S sedans in the second quarter plummeted 54%, to 1,205 in California, according to the Dominion Cross-Sell report.

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