Firefly Electric vehicle on a futuristic display 77137

Do you think Tesla can shut down the traditional automakers?

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Is it possible that we suddenly witness the collapse of traditional automakers as it happened with other traditional companies? 

The major reasons for it not happening are:

  • As the reports show, around 80–90 million global vehicles are sold. The rapid growth of EV sales shows ample room for multiple players to compete with each other and survive the market.
  • The major automakers are financially resourceful; there is no doubt that, with billions in cash reserves, as you can also predict now, the companies can sustain the EV’s temporary losses.
  • The major automakers are globally diversified, and supporting various regions also provides them with the needed experiences to smoothly transition into an EV market and satisfy consumer demands.
  • They will be supported by the government well enough to stop any such flagship with auto employers from failing quickly. So they are well stuffed with loans and incentives to help during the EV transition.
  • Tens of billions are invested by the major OEMs to retool the factories for EVs, with ambitious targets of millions of EVs produced annually by mid-2020.

Well, if Tesla is not your favorite brand and you are loyal to one of the traditional automakers, don’t worry; they are well-equipped to adapt to the new transition with a few here-and-there losses.

The major risks that can be seen in the long term are not being able to adapt to the EV and software disruption.

The key risks are:

  • Falling behind on technology and not developing competitive EV battery, motor, and software capabilities in-house can make it a high risk to be a leader in the EV competition markets.
  • If new-age companies keep outpacing traditional automakers with cutting-edge technologies, then legacy brands may lose their value and reputation in the market, leading to a decline in price power.
  • If they fail to upscale their knowledge about EVs and lack expertise, then they may become victims of expensive EV designs and outdated tools, leading to low-profit margins.
  • One of the major factors with traditional automakers is their ICE-related assets, such as factories, equipment, and technology, which they fear will become obsolete liabilities. The scenario is tough and leads to restructuring costs.

Even though 10 years ago, OEMs’ legacy and their tech knowledge were an asset and a huge billion-dollar worth in the auto industry as well as in the financial stock market, with the advancement of new technology and alternate modes of fuel, it is now questionable whether these assets are assets or liabilities in your financial valuation.

The next 5 to 10 years are crucial for the automotive industry to withstand the sudden change in electrification in the market.

Even the need for new skills and the use of a low-cost battery with long-range support and all its benefits are the real keys to winning the race.

The key automakers will always be supported in their home country or local market. But how far can they go?

However, if we analyze the current trends and patterns of the EV market, the EV companies that can maintain a solid market position over the next 5 years are:

  • Tesla’s sales lead, brand power, and extensive charging network prove that it will be a dominant pure EV maker in the market.
  • Volkswagen: With its massive investment in EVs and growing model lineup, such as ID.3, and ID.4, it will be a high-volume EV maker.
  • BYD is the current EV sales leader, with diverse models cementing its position as a global EV player.
  • Hyundai/Kia: The Korean automakers are investing billions in dedicated platforms and plan to introduce 10 new models by 2025.
  • Ford/GM: The US automakers are investing heavily in large-scale North American units for long-term EV contenders.
  • Nio, Xpeng, and LiAuto: Chinese startups also have enough potential to increase sales steadily in China’s huge market.

As we can see, it suggests a market with diverse brands and unique concepts for consumers to try out in various ways. However, with economic growth and political policies, which country gets to experience the maximum choice from the companies? or, in other words, one of their favorites for the automakers.

Sources:- Freethinkers, protocol, IEA, US News, EV-Volumes, mckinsey

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