Electric cars have been quite expensive since the industry’s advent over a decade ago, locking out most consumers from the EV market and hindering electric vehicle adoption. For the United States and other nations across the globe to meet their carbon-emission goals, electric cars will have to be significantly cheaper than they currently are to spur EV adoption.
However, Tesla and a few Chinese startups that hit the electric vehicle industry running several years ago now enjoy a massive lead in the EV market. Carmakers such as Toyota and Ford, which previously led the pack, are now scrambling to catch up to pioneer EV companies, often at great cost to their bottom lines.
Legacy automakers may not be able to deliver affordable EVs to the masses while maintaining their bottom lines, especially in time to meet future bans on the sale of new internal combustion engine cars. Deepwater Asset Management managing partner Gene Muster posits that we may be heading to a future where some of the largest car companies in the past century become “a fraction of their size.”
Established carmakers such as Toyota, Volkswagen and Ford are far behind newer car companies. Compared to Tesla and Chinese company BYD, which sold 1.31 million and more than 900,000 battery electric vehicles (BEVs) last year respectively, the Volkswagen group sold 572,100 BEVs under several brands, with Chrysler selling 288,000 electrified models and General Motors and Ford trailing far behind.
The International Energy Agency estimates that the share of global EV sales from the largest automakers in the globe in 2015 to 2022 dropped by 15% from 55% to 40%, thanks to increased competition from newer companies. During the same period, the combined market share of BYD and Tesla went up from 20% to more than 30%.
Experts forecast that European carmakers could lose significant market share to cheaper Chinese electric cars as Chinese automakers see their market share increase from 17% to 33%. Bank analysts point to General Motors and Volkswagen as examples of cheap electric cars putting significant pressure on established car makers.
Consequently, legacy automakers are pouring hundreds of billions of dollars into attempts to widen the massive gap in Europe, the U.S. and Asia (with the exception of China). These massive investments may not pay off, however. UBS analyst Patrick Hummel says legacy automakers simply don’t have the in-house skill sets that allowed Tesla and Chinese EV companies to get so far ahead.
Ford recently reduced its EV production targets and raised its forecast for losses in the EV segment to $4.5 billion. If striking workers in the U.S. automotive industry secure better compensation deals, American automakers will be looking at even lower bottom lines in the future.
EV startups such as Mullen Automotive Inc. (NASDAQ: MULN) aren’t usually burdened by having to reskill staff and retrofit equipment, and that allows them to be nimble and move fast to fill market gaps. It is now upon these new companies to capitalize on their advantages over legacy carmakers by consolidating their position in the market.
NOTE TO INVESTORS: The latest news and updates relating to Mullen Automotive Inc. (NASDAQ: MULN) are available in the company’s newsroom at https://ibn.fm/MULN
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