The world's largest automaker, Volkswagen Group, is having second thoughts on its all-electric future. Group CFO and COO Arno Antlitz announced a renewed focus on making internal combustion engine (ICE) vehicles more competitive. One-third of the company's EV investment plan will now be directed towards ICE-powered cars. Antlitz acknowledged, "EVs are the future, but the past isn't over yet."
While Volkswagen is still dedicating two-thirds of its initial €180 billion investment to electrification and digitalisation, this shift in focus might delay its goal of becoming a fully electric car manufacturer. Volkswagen isn't alone in rethinking its EV strategy. Let's delve into which other brands are following suit and explore the reasons behind this slowdown.
Rimac CEO Mat Rimac revealed that the company isn't exclusively focused on electric vehicles. He stated, "Rimac isn't exclusively electric; it's doing whatever is most exciting at the time." This shift in focus, with the CEO also leading Bugatti, suggests a potential change in strategy there as well. To reinforce this point, the Volkswagen-Renault Twingo and other low-cost electric vehicles from the joint venture have been completely abandoned.
Reports indicate that Mercedes has completely halted the development of its latest electric vehicle platform. This comes alongside the news that the Mercedes Benz EQS has the highest depreciation rate within the first year of ownership, with a resale value plummeting by 48.7% in the US market. In India, the EQS starts at a price of 1.62 crore (ex-showroom) for comparison. Interestingly, Mercedes' gasoline-powered G-Wagon boasts one of the lowest depreciation rates.
Similarly, Ford is holding back on further investments in electrification and has drastically cut battery orders. Even the electric version of their legendary F-150 truck isn't selling as expected. General Motors has also halted plans for a new EV truck factory and ended a collaboration with Honda to develop affordable EVs. Additionally, supercar manufacturer Lamborghini has lost interest in making an electric car in the immediate future.
Even in India, Tata and Mahindra have begun offering discounts on EVs, a shift from just a year or two ago. However, there are exceptions. Legacy brands like Jaguar are still committed to a 100% electric transition by 2025. But the point is for how long or will they cave as well?
Also read: Toyota Gazoo Racing to build ICE cars until they are banned.
Every traditional carmaker aimed to dethrone Tesla. They thought they could copy the formula and also use their experience and legacy in the automotive industry to their advantage. However, Tesla's advantage lies in being a first-mover.
The game has changed. Chinese manufacturers have emerged as major disruptors in the global EV market. Meanwhile, Japanese automakers like Toyota and Nissan are heavily invested in parallel clean energy solutions like hydrogen fuel cell vehicles and solid-state battery technology.
Also read: What are the different types of Hydrogen and which is the future.
Several factors are contributing to the car industry's cautious approach to EVs:
Slower-than-expected EV sales: Demand hasn't reached the heights as anticipated. Higher sticker prices compared to traditional ICE cars are partly to blame. Additionally, some countries are removing initial tax breaks for EVs, and rising interest rates make auto loans more expensive. Early adopters, typically tech-savvy and risk-taking individuals, have likely already moved into the EV environment.
Market Adjustment: Faced with slower sales, some manufacturers are rethinking their strategies. Hybrid vehicles are emerging as a bridge technology, catering to those interested in eco-friendly options but hesitant about the upfront costs or limitations of EVs like charging infrastructure and range.
Affordability Hurdle: Manufacturing cost remains a challenge. Car companies are seeking ways to bring down EV prices to compete with traditional ICE cars. This might involve delaying new models or scaling back production until battery costs decrease.
Cutthroat Competition: Chinese manufacturers are years ahead in battery innovation and are fully committed to EVs. China boasts a well-developed EV infrastructure and access to rare earth metals crucial for battery production, giving them a significant advantage in manufacturing as well as testing and some of them are backed by giants from the US.
Car manufacturers aren't abandoning EVs entirely. They're simply adjusting their approach based on current market realities. The focus might shift towards making existing EVs more affordable and developing a wider range of clean energy options. The electric revolution might take a longer route than initially anticipated, but the destination remains the same: a sustainable future for transportation. But if there are other options that might emerge as the fuel of the future, all these investments might go down the drain as well. Now, the ball lies in the Car Company’s court.
