Electric vehicles have largely become an emblem of the automotive industry’s future. Getting there requires focus on several critical areas.
Online new-car shopping.
New brands quickly earning chunks of market share.
The global automotive industry hasn’t experienced this kind of intense change.
And the biggest shift, without doubt, is the move to zero-emission vehicles (ZEVs), principally electric vehicles (EVs).
Achieving EV goals in different major markets is critical to the future of the world.
It’s why this is the automotive industry’s focal point for the coming decades.
And what matters most now (and in the coming ten years) is what we do as an industry to get there.
Targets are vital. But without the detailed behaviours needed to convert them into reality, they’re simply ambitious ideas. And the coming decade is critical to bringing them to life.
A decade might seem like a long time but keep in mind it roughly equals the lifecycle of a modern car. That is, the time from the launch of an “all-new” model to when it’s replaced by its successor “all-new” version.
Mid-cycle (mid-life) updates for new cars can occur every four to seven years, but these typically don’t include major changes to expensive hardware such as powertrains and body structures.
In other words: a decade is a pretty short time in car-industry years.
And for the next ten years, here are three vital areas the automotive industry needs to focus on to meet its ZEV / EV goals.
- Strengthening the financial bridge from ICE to ZEV:
It’s evident global automakers are bearing colossal costs right now. The move from making internal combustion engines (ICE) to new zero emission vehicles (ZEVs) such as electric vehicles (EVs) is expensive.
Ford’s global executives have previously spoken about the billions of dollars needed to make this change. It’s said to have even caused short-term concerns with investors.
During the pandemic, GM announced it had increased its EV and autonomous vehicle product development investments by 35% to US $27 billion.
Around the same time, Stellantis announced it was investing more than $35 billion into the development of EVs and their supporting technologies.
Mercedes-Benz is reported to be spending billions of dollars modernising plants to build EVs.
The list goes on.
The scale of these figures means the run-up needed to replace ICE models with ZEV versions requires a pathway of cash. And that’s ideally sourced from boosting the profitability of outgoing ICE models.
It makes sense. Morgan Stanley’s Adam Jonas is reported as saying Ford’s new reporting structure, which recently moved from a geographically regional basis to three separate business internal units, should “confirm our view that the ICE business (Ford Blue) is highly cash flow generative and currently funding the capital consuming EV business.”
The transition to ZEVs can’t be entirely paid for using borrowed funds. Stronger cashflows are needed. That’s why a number of automakers are enhancing current-model new vehicles. The profit boosts they offer are critical to helping strengthen the ICE-to-ZEV cost bridge.
- Addressing the current fleet of cars on our roads:
The ongoing introduction of new-model ZEVs is important to reducing and eradicating vehicle tailpipe emissions.
But what about reducing the emissions from the current fleet of cars on our roads today?
Globally there are more than 1.4 billion vehicles on the world’s roads. That was the 2022 figure reported by research agency Hedges & Company, which said Asia was home to more than one-third of the world’s vehicle fleet, closely followed by Europe (28%) and North America (24%).
Australia is home to more than 20 million registered vehicles. That’s a lot for a market that sells around 1 million new vehicles each year. The FCAI reports that electric vehicles make up about 4.3% of those sales. Even though that figure is expected to grow in 2023, replacing Australia’s current car park of registered ICE vehicles with ZEVs will take a long time.
It’s why we need to address the current fleet of cars on our roads.
EV conversions of selected popular models is a logical solution. Converting Australia’s two best-selling new vehicles (the Toyota HiLux and Ford Ranger pick-ups) to EV power makes perfect sense for fleet operators. Advancing the development of eFuels is another avenue.
We can’t ignore the current fleet of registered vehicles. Given its average age in Australia is around ten years, we can’t wait for these ICE vehicles to be replaced at the current natural sales rate. We need to change them to get their tailpipe emissions down in the near-term.
- Make Australia a leading automotive engineering resource:
All this ICE-to-ZEV change might be causing some discomfort but it’s the perfect opportunity for Australia.
Our local automotive industry is already playing key roles in carmakers’ ZEV technical developments.
The fingerprints of Australian engineers and designers are all over many of the new cars we buy and drive today. It’s the same with the models of the future.
But Australia’s new-vehicle capabilities run deeper than most people know.
When GM-Holden, Ford and Toyota stopped assembling cars in Australia it didn’t mean the end of the local automotive industry. Australian companies like Premcar continue to work with global automakers (often behind the scenes) to develop and produce new cars. Some of these are sold in Australia.
But the EV revolution is a rare chance for Australia to sit at the global auto industry’s Big Table. Besides the fact our country is home to vast reserves of the main minerals needed to make EV batteries, it’s our generations-long car-making knowledge that’s valuable. Companies and countries that are newer to car-making are still gathering this valuable know-how.
They know the most important vein to tap into right now is the one holding this existing new-vehicle development experience, the kind that lives inside specific businesses.
They know developing this know-how takes time: decades and generations.
They know what it’s worth.
Launch any new-model vehicle that hasn’t been properly developed into any established market and you can predict the pain that follows.
Product safety recalls.
Endless “service campaigns” asking customers to return their cars for “fixes”.
Missed repeat-buying opportunities from toxic word-of-mouth marketing.
Lower residual values producing lower trade-in prices and reduced future sales.
Carmakers, especially relatively newer ones, need to create their cars correctly. And Australia knows how to.
Large-scale global automakers are knee-deep making the switch to ZEVs. If we focus on these three areas we’ll achieve the lower transport emissions the world needs, and boost Australia along the way.
Bernie Quinn – Engineering Director, Premcar Pty Ltd
About Premcar – Premcar Pty Ltd is a leading Australian vehicle engineering business that specialises in the automotive, defence and aerospace industries. For more than 25 years, global car-makers have made Premcar their go-to partner for the complete design, engineering and manufacture of niche-model new cars, full-scale new-vehicle development programs, and electric vehicle (EV) conversions and manufacturing. As the name behind more than 200,000 new cars and 55,000 new-vehicle engines, Premcar’s body of work is extensive and has delivered technical and sales success for major car brands from Europe, the USA, Japan, China and Australia. Visit premcar.com.
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