For decades, automakers have talked a good game about emissions-free driving, but when it came time to write checks for plant equipment or engineering resources, gasoline-powered trucks and sport utility vehicles (SUVs) got the cash.
That changed dramatically in 2020. While much of the manufacturing world will remember the year as a hellscape of COVID-19 shutdowns and lost sales, it will likely go down as the turning point for investments in electric vehicles (EVs). In the U.S. alone, companies either spent or raised nearly $23 billion for EV production and development in 2020, about as much as the industry typically spends on conventional vehicle investments.
General Motors (GM) made up the lion’s share with plant upgrades in Michigan and Tennessee and new facilities in Ohio. But the nation’s largest automaker was not alone. Traditional competitors, new players such as Tesla, and startups such as Rivian and Lordstown Motors collected or spent huge sums of money to advance electric drive.
“We are seeing increased investments in EVs and previous investments in EVs nearing fruition,” says Michelle Krebs, executive analyst for retail company Autotrader. “Global automakers know which way the winds ultimately are blowing, regardless of politics and pandemics. The future, whenever that specific turn comes, is towards EVs. Tesla’s success, China’s intention to dominate EVs, and Europe’s regulations that require them and incentivize them are leading the charge.”
That European push includes zero-emission vehicle mandates as soon as 2025 in some countries, a regulation adopted by California earlier this year, banning sales of new gasoline- and diesel-powered cars by 2035.
Independent industry analyst Rebecca Lindland says Chinese and European markets are making it critical for American and Japanese producers to develop vehicles and technologies to compete globally.
“Asia’s demand is fueled almost entirely by regulations, and in communist China, where the government is the ultimate ruler, the general public doesn’t have a lot of say in the matter,” Lindland adds.
No such mandates are spurring demand in the U.S. (California’s rules don’t kick in for 15 more years). EV buyers get perks such as tax breaks, special parking spots, and access to high-occupancy vehicle lanes while driving alone in California, but the U.S. is offering carrots, not sticks to encourage adoption for now.
Unifor, formerly the Canadian Auto Workers union, won massive plant investments from Ford and Fiat Chrysler Automobiles (FCA) during contract talks this year (see sidebar, pg. 22). Talks with GM began in mid-October and were still ongoing as of this issue’s press time, but the Canadian union has made it clear that investments in next-generation electric cars and trucks are a priority.
“The commitments we have secured in these negotiations will stabilize FCA’s operations in Canada and position us as a global leader in the transition to zero emission vehicle production,” Unifor President Jerry Dias says after reaching a deal in October. “Workers who have feared plant closures and job losses in recent years can now look forward to a bright future with good jobs for years to come.”
In the U.S., the United Auto Workers (UAW) have also pushed for EV investments. During 2019’s labor talks, UAW officials pushed for massive investments such as GM’s transformation of Detroit-Hamtramck into an all-EV plant and big investments in Ford’s electric pickup production (See sidebar, pg. 24).
“The push towards EVs by the unions is an effort to save jobs now and in the future,” Lindland says. “Unions don’t really care what they build, as long as they have a job to build it.”
Survey data from J.D. Power show that most Americans are still skeptical about EVs, despite Tesla’s growing sales.
“Right now, there are about 50 battery-electric vehicle models scheduled for a U.S. debut by the end of 2022. In that same two-year period, only 13% of the consumers we polled expect to buy one while 30% stated they have no intention to ever consider buying one,” says Kristin Kolodge, executive director of driver interaction and human-machine interface at J.D. Power. “Automakers need to figure out a way to get people into these types of vehicles to increase consideration.”
And while 13% purchase intentions are still a minority of the industry, it would be nearly triple the current sales rate of EVs. Kolodge adds that part of that problem is a classic chicken-or-egg question. People are skeptical about electric drive because they’ve never been in an EV (69% of U.S. drivers), and because drivers are skeptical, fewer EVs are on U.S. roads.
People should get far more familiar with such vehicles as volumes grow, as they did with other automotive technologies. In 1995, for example, turbocharged engines were on less than 1% of vehicles in the U.S. By 2010, turbo market share was only about 3%, and analysts questioned plans from Ford and other automakers to use such devices on new vehicles. However, by 2015, turbo market share topped 30%, and it continues to rise, according to data from the U.S. Environmental Protection Agency. Instead of a backlash against turbos, they became premium options on pickups and performance cars.
Even without mandates in the U.S., demand for EVs, especially Tesla models, has grown as more models have become available. Tesla set a goal of 500,000 vehicle sales for 2020 at the end of last year, and despite the pandemic, is on pace to exceed that number.
“Consumers aren’t buying EV technology as much as they are buying into Tesla, which just so happens to make EVs,” Lindland says, adding that good EVs from Audi, BMW, GM, and Hyundai haven’t fared as well as Tesla. Numbers for most non-Tesla EVs are up in 2020, but Tesla is the undisputed king of the market.
Lindland notes that EVs are getting easier to own with longer ranges, shorter charging times, and lower prices. Fierce competition will likely accelerate those trends and introduce more drivers to electrified technology with mainstream vehicles such as Ford’s Mustang Mach-E hitting dealerships next year.
How quickly consumers warm to new technologies remains a huge question for the industry. What’s not in doubt after 2020, however, is where manufacturers will build and assemble next-generation electric cars and trucks.
Rebecca Lindland https://www.rebeccadrives.com
U.S. Environmental Protection Agency https://www.epa.gov
About the author: Robert Schoenberger is editor of Today’s Motor Vehicles and Today’s eMobility. He can be reached at 216.393.0271 or firstname.lastname@example.org.