Industry at a Crossroads: How Disruption is Fueling the Move to Electric Cars
What do Kodak, Blockbuster and Borders Bookstore all have in common?
At the peak of their success, they held tightly onto their business models and were disrupted by new technologies.
Industries across the board are being disrupted by new technologies, and businesses unwilling to re-evaluate what made them successful and embrace the future are destined for obsolescence.
With this disruption in mind, the auto industry stands at a crossroads: bet on the future and go electric, or hold onto technologies of yesterday and risk irrelevance.
So, who will be the first to break the mold?
Volvo sees the writing on the wall. The internal combustion engine is already dead, it’s merely a matter of when the death certificate will officially be signed. Volvo has already taken a cue from the market and is accelerating this transition toward an electrified fleet.
Across the industry, people are questioning this drastic change and wondering whether Volvo’s decision is worth it.
But for our money, Volvo is on the right track.
Its leaders have seen the success of the Tesla model 3. They’ve watched consumer interest as EV sales have steadily increased for 22 consecutive months. And their decision to go electric is reaffirmed by the U.K.’s recent pledge to eliminate cars with internal combustion engines by 2040. Other major cities and countries will surely follow. Volvo may be the first auto to go all-in, but they certainly won’t be the last.
It would be easy for automakers to stick to the successful business model they have followed, and profited from, for the last century. Most automakers are making serious investments in electric vehicles, an expensive business decision that requires vision and commitment.
However, more and more pressure from Wall Street has put traditional companies at odds with innovators like Tesla, who are dominating the EV market. As Bill Ford, president of Ford Motor Company, recently said to The Wall Street Journal, “The role we’re in now requires us to stick our necks out. We’ve got to place bets. We’ve got to have a point of view about the future.” Ford’s recent leadership changes suggest that the company will be more aggressive and take more risks, including accelerating its push toward electrification.
Traditional automakers know this is an inflection point, and betting on the future of electrified vehicles is a chance most seem to be willing to take.
So, who’s doing what to get electrified vehicles over the tipping point and ensure their business makes it past this major disruption?
• Tesla continues to push boundaries with its Tesla Model 3, which will have a range of 220 miles and a competitive starting price of $35,000.
• Nissan is planning to produce an electric car for the China market that costs around $8,000 or less by 2018. Nissan already produces the most popular electric car on the market, the Nissan Leaf, and will announce the latest model in September.
• BMW’s i3 is currently its only all-electric vehicle and the i8 is its PEV. BMW will release four other EV models by 2025.
• Daimler plans for 10 new all-electric models and 15 to 25% of all their production to be electric by 2025.
• Mercedes will stop selling the gas-powered smart car but will continue to make and sell the electric model.
• Ford announced in January that it will invest $4.5 billion in electric and autonomous vehicles. In just five years, more than 40 percent of the company’s models will come in electrified versions, with 13 new EVs by 2020. The investment also includes an expansion in battery research.
• GM plans to roll-out 10 electric cars in China by 2020. While Chevy Bolt sales continue to flourish and rival, with a range of 250 for a single charge. It is also price competitive at $37,495.
• Audi plans to cut costs in R&D by around $12 billion in the next five years in order to fund the launch of their new fleet of electric cars. Next year, Audi will release its first mass-market electric SUV called the e-tron. Audi has four additional all-electric vehicle models waiting to be released.
• Porsche’s CEO says that by 2023, half of their car selections will be all-electric. Mission E will be the first car released in 2019 followed by an electric crossover and a new generation of the Macan crossover in 2022.
• Toyota is set to sell a long-range, fast-charging electric vehicle by 2022. Additionally, Toyota will team up with Mazda to create a $1.6 billion assembly plant for electric cars.
• Hyundai has announced plans to launch a long-range electric vehicle next year. Hyundai’s EV, the Ioniq, has trailed its competitors due to its low range.
The race to the top is on. These investments will continue to drive the electrified fleet forward and may also help drive down the cost of batteries, motors and other components as production scales meet the demand.
But not everyone will adapt in time to realize the economic and environmental potential of the EV revolution.
That’s why the companies that anticipate consumer demands and produce the vehicles that will appeal to consumers most, will get ahead of the curve. Those companies are playing to win and will be the ones that thrive in the 21st century transportation industry. Those who fail to plan for the future and are content with their current success will find themselves playing catch up or maybe become totally irrelevant in the world of electrified transportation.