Electric car threatens European car industry
A new report from ING says that path to a 100% electric car market will lead to more competition for European automakers.
Battery electric vehicles are on way to a breakthrough. The major barriers to success – charging infrastructure, range anxiety and pricing – will be broken down in the coming years, according to a new report by ING. The report, ‘Breakthrough of electric vehicle threatens European car industry’, follows on several announcements from car manufacturers planning new battery-powered models.
Max Erich and Jurjen Witteveen, senior economists at ING and authors of the report, believe that current developments in technology send battery electric cars on a growth path to a 100% share of new passenger car sales in Europe by 2035, posing a threat to the automotive industry as we know it.
Challenge for European automotive industry
European car manufacturers, which have been at the forefront of internal combustion engine development, are set to see their competitive advantage disappear as there is less opportunity to differentiate in electric powertrains (electric motors and batteries). Pressure on powertrain value will rise, while margins will be squeezed. Furthermore, development and production will shift more towards battery suppliers. A segment dominated by North-America and Asia, and in which Europe plays a minor role.
Battery electric vehicle breakthrough
However, while big developments in the electric automobile industry are taking place, a number of challenges still remain in large-scale mass production by leading automakers. According to the ING report, consumers still have their reservations about converting to an electric car. Limits to charging infrastructure (20%), limits to range on one charge (28%) and the high price of electric cars (40%) were all reasons cited for not buying electric. These barriers will be broken down in the coming years. In 2024, the cost of ownership of a high range battery electric car is expected to match that of a similar car with an internal combustion engine in Europe’s largest market; Germany.
Value shifts from product to services
Despite the challenges for European car makers, the report also highlights the opportunities created by the shift to battery electric cars. For example, suppliers developing components for electric motors will see demand rise. Furthermore, future electric cars that are able to offer lower costs of operation can boost services such as (private) car lease and car sharing. Equally, low rates of electric car leasing and sharing can help battery electric vehicles take off. Electric cars strengthen the trend of value shifting from products to services.
The challenge for Europe’s automotive industry will be to move from a traditional business model in which value is drawn from production and sales of cars to a business model that offers value in facilitating efficient and affordable car usage.
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