DETROIT, Dec 15 (Reuters) – The past year has been sobering for investors who poured money into Tesla Inc (TSLA.O) and rival electric vehicle startups hoping to emulate the success of the Tesla CEO, Elon Musk.
As interest rates rose and financial markets turned, the shares of many EV startups deflated. Rivian Automotive Inc (RIVN.O), which had a higher market value than Ford Motor Co (FN) shortly after its IPO in 2021, has lost more than 70% of its value in the past year .
Other EV startups have done worse. Electric van maker Arrival has warned it could run out of money in less than a year. Lucid Group Inc (LCID.O), backed by the Saudi sovereign wealth fund, has struggled to build its sleek Air luxury electric vehicles. Shares of Chinese challenger Tesla Xpeng Inc (9868.HK) lost more than 80% of their value.
Now comes the hardest part: persuading more mainstream consumers to join us.
WHY IS IT IMPORTANT
The automotive industry is investing more than a trillion dollars in a revolutionary transition from combustion engines to software-guided electric vehicles. From Detroit to Shanghai, automakers and government policymakers have embraced the promise of electric vehicles to provide cleaner, safer transportation. European countries and California have set 2035 as the deadline to end sales of new combustion passenger vehicles.
Tesla Inc’s (TSLA.O) push to become the world’s most valuable automaker – hitting a $1 trillion valuation last year – has humbled established automakers such as Toyota Motor Corp (7203.T) and Volkswagen AG (VOWG_p.DE) who were once reluctant to go electric.
Starting next year, a wave of new electric vehicles, from pickup trucks to mid-market SUVs and sedans, will hit major global markets.
Industry executives and forecasters disagree on how quickly electric vehicles could take over half of the global vehicle market, let alone all of it.
In China, the world’s largest automotive market, battery electric vehicles have captured around 21% of the market. In Europe, electric vehicles account for around 12% of total passenger vehicle sales. But in the United States, the market share of electric vehicles is only around 6%.
Among the barriers to adoption of electric vehicles, industry executives and analysts said, were the shortage of public fast-charging infrastructure and the rising cost of electric vehicle batteries, due to the shortage of key materials and uncertainty over government subsidies that have spurred purchases of electric vehicles in major markets. including the United States, China and Europe.
By 2029, electric vehicles could account for a third of the North American market and around 26% of vehicles produced globally, according to AutoForecast Solutions, a consultancy.
Electric vehicle sales are unlikely to rise on a steady, ever-rising curve, AFS President Joe McCabe said. If there is a recession next year, as many economists predict, it will slow the adoption of electric vehicles.
Wards Intelligence predicts that combustion vehicles will account for just under 80% of North American sales in 2027. Based on automakers’ product plans, Wards analyst Haig Stoddard said in a recent conference that manufacturers “expect strong ICE (internal combustion engine) volume as we approach the next decade.”
WHAT DOES THIS MEAN FOR 2023?
Throughout 2022, established automakers such as Mercedes, Ford and General Motors Co (GM.N) unveiled dozens of new electric vehicles to challenge Tesla and upstarts.
Mass production of most of these vehicles starts in 2023 and 2024.
By 2025, there could be 74 different electric vehicle models offered in North America, McCabe said. But he predicts that less than 20% of those models will likely sell at volumes above 50,000 vehicles per year. Automakers could be stuck with too many niche models and too much capacity.
Slowing economies are also threatening overall vehicle demand in Europe and China.
During the early years of the 20th century, new automobile companies sprang up, backed by investors eager to ride the wave of mass mobility launched by Henry Ford and other automobile pioneers. By the 1950s, the global automotive industry had consolidated and once heralded brands such as Duesenberg had disappeared.
The next few years will determine whether the crop of 21st century electric vehicle brands will follow a similar path.
Explore the Reuters roundup of news that dominated the year and the outlook for 2023.
Reporting by Joe White Editing by Bernadette Baum
Our standards: The Thomson Reuters Trust Principles.
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