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Frankfurt Auto Show: Electric Dominates, But Will They Sell?

Frankfurt Auto Show: Electric Dominates, But Will They Sell?

“There is a growing realization being raised at the political level that electrification isn’t the answer to the problems. Will there be enough sales to make them profitable?”

High profile car shows have for years pushed not-yet-ready-for-prime- time electric cars to show how much manufacturers cared about the environment, but now that battery-powered vehicles are street ready and about to hit showrooms, the industry might be hard pressed to sell them.

The Frankfurt Auto Show marks the start of the long-promised electric car era. The trouble is, like many products which reach the market because of government intervention rather than consumer demand, it’s hard to see car buyers clammering to buy them. Meanwhile, some of the supposed benefits of electric cars, like environmental friendliness, are coming under scrutiny. Nevertheless, the industry has committed itself to the project, and experts are divided on the possibilities of success.   

Currently, electric cars are more for the rich than the mass market, but the big reason that expensive cars like the Tesla Model S, Audi e-tron and Jaguar I-Pace appealed to first adopters with money was the halo effect which showed how much the buyer cared about nature and the climate.

At next week’s Frankfurt Auto show, new electric cars will include theVolkswagen ID.3, Honda’s little E, the SmartEQ ForTwo, the electric Mini and the Porsche Taycan.

According to Professor Peter Wells, Professor of Business and Sustainability at Cardiff Business School, there are not only doubts over likely sales prospects, but worries are emerging about environmental issues like mineral extraction and end of life battery disposal, while the role of renewable energy won’t be enough to bolster electric cars’ green basic credentials.

“There is a growing realization being raised at the political level that electrification isn’t the answer to the problems. Will there be enough sales to make them profitable? There undoubtedly are air quality benefits,” Wells conceded.

Massive investments
“Companies like Volkswagen have made massive investments, but I’m not sure if they are going to get the response they want. Markets are contracting further because of trade disputes between the U.S. and China, and Brexit and this overall uncertainty is holding up purchasing decisions. It’s not a great moment to pitch the industry into electrification,” Wells said.

Industry experts may have their doubts, but that worry isn’t apparently shared by most carmakers, which have launched ambitious electrification programs, although this is required by harsh European regulations insisting on a fleet average of the equivalent of 57.4 miles per U.S. gallon by 2021. This increases by a step through 2025 to 92 miles per U.S. gallon average by 2030. The 2030 regulation will require pure electric vehicles of around 50%, experts say.

Volkswagen has been the most ambitious electrifier, although cynics say this might be because of its need to repair its “dieselgate” impaired image. Volkswagen is one year into to its 5-year electric car program, which plans to spend $50 billion. The VW ID.3, a Golf-sized sedan, is making its debut at the Frankfurt show, the company’s first electric car designed from the start to be battery electric. Its engineering will be the basis of electric cars across VW’s mass market brands.

David Bailey, Professor of Business Economics at the Birmingham Business School is much more optimistic about electric cars, but worries that China might beat the Europeans to it.

“There are a host of new electric cars at the show and others due for release later. Yes, prices are high now, but they will come down. China is going electric in a big way, and if Europe doesn’t change it will be wiped out by them,” Bailey said.

Bailey said China is a dangerous competitor because it is building smaller, more affordable electric cars.

Grand scale
Professor Stefan Bratzel of the Center of Automotive Management in Bergisch Gladbach, Germany said the Frankfurt show will see the beginning of electromobility on a grand scale, led by the Germans, but warned that the programs are very expensive and return on investment will take some time. Carmakers will be forced to push electric cars on to the market in the next couple of years to meet the CO2 regulations.

Peter Fuss, partner at consultants EY’s Global Automotive Center in Frankfurt, expects a big role for electric cars, but also sees a challenge developing which includes a role for the internal combustion engine (ICE), hybrids which combine ICE and electricity, and fuel-cells.

The competition between electric cars technology, fuel cell and combustion engine will be a long lasting challenge. Because of different regional requirements and customer mobility behaviours – U.S., Europe, China, India – all of the different transmission technologies will be necessary. There is no “one size fits all transmission technology” yet. Short term, hybrid technology will play an important role to meet the C02 requirements in many regions of this world,” Fuss said.

Investment researcher Bernstein reckons electric cars will struggle to succeed.

“Under pressure from regulators, the media and peers, the traditional industry has got serious about EVs. In 2020 and 2021, a slew of new EVs will arrive on the European market. But does the market actually want these vehicles? The market share of EVs in Europe remains very low” said Bernstein analyst Max Warburton.

In 2018, battery electric vehicles (BEVs) had a market share of close to 2% in Europe. Investment bank Morgan Stanley predicts the global market share of BEVs will only reach close to 10% by 2025 and just over 20% by 2030. If that turns out to be true, manufacturers like VW and all its main competitors will be financially embarrassed, if not ruined, because their expensive plans assume a sales rate of more than twice that.

Dr Diess’s Big Electric Car Adventure
“The hope is that attractive products like the VW ID will suddenly win customers, who have not shown interest in EVs. But given the ongoing absence of charging infrastructure, concerns about range and cost competitiveness, this may prove optimistic. Dr (VW Group chairman) Diess’s Big Electric Car Adventure may prove premature and very expensive,” Warburton said.

Cardiff Business School’s Wells sees some big constraints on electric cars.

“Electric cars pose some challenging environmental questions. Extraction of minerals and the question of disposal of batteries at the end of life, and the resources required are enormous. Mining of cobalt for batteries poses big problems, with the ups and downs of demand being met by poor people in dangerous forms of mining. There is an increasing awareness of these issues,” Wells said.

Batteries need large amounts of cobalt, nickel and lithium.

“Electrification depends on renewable energy to make a significant contribution and the cost of rolling out infrastructure is quite substantial. Big cars with big batteries are hugely expensive and consume huge resources. The smaller electric car segment is beginning to emerge, and there is a spectrum of possibility of new mobility choices with three wheeler cars, electric bikes, and electric scooters. But overall, the battery electric car doesn’t offer enough answers and brings lots of problems,” Wells said.


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