Have Carmakers Overestimated The Demand for Electric Cars?

Tesla the electric car maker has proven that hundreds of thousands of people are unlikely to purchase sleek luxury electric cars over models from Mercedes or BMW. The market shares of these legacy brands have been slipping with the rush for electric cars even as automakers are making massive investments in the electric future. Daimler has just placed an order for batteries for $23 billion, GM and Ford are both undergoing massive restructuring to keep pace even as Volkswagen has already announced its $50 billion push for electric vehicles.

The market will undoubtedly transition to electric vehicles but the timing of when it is likely to happen is still not confirmed. Just 2% of plug-in electric cars are presently being used in the US as compared to 2.2% worldwide. The massive numbers of electric vehicles are sold globally over the last year is approximately 2 million but just one in 250 cars operate on electricity. The sales of electric vehicles have only risen in Norway which has lavished subsidies and perks to witness an increase in EV car sales in the region of 30%.

The auto industry is currently facing a dilemma which was studded by the consulting firm Deloitte. The dilemma faced by automakers relates to how fast they should be making investments in fresh electronic technology while generating profits to make the transition. The consulting firm expects 21 million electric vehicles to be manufactured and roll over the assembly lines over the next decade even as the prices for EV vehicles slip below similar gasoline and diesel models by 2024.

However, the rush to expand the manufacturing capacity of electric vehicles is predicted to produce a glut of EV’s affecting the bottom lines of manufacturers. Deloitte has stated that their projections indicate supplies will vastly outweigh demand from the market by approximately 14 million units over the next decade. The research conducted by Deloitte suggests that with every manufacturer looking forward to mass producing electric vehicles ever from over a dozen new car makers from throughout the globe the number of manufacturers cannot sustain itself.

Estimates are also provided that the appeal for electric vehicles may not spread fast enough beyond the techies and greenies that initially fuelled the early days of the market as commented by David Keith and engineer and Prof at the MIT Sloan School of Management who also mentioned that electric vehicles may struggle to break the 5% barrier of the US market in the near future. Consumers in the US believe that isn’t a problem which the electric vehicle can solve for them and this is the reason for the prediction made by David Keith.

A former BMW engineer who presently manages a consulting firm in Silicon Valley, Sven Beiker, also has a similar opinion. Even as prices of electric vehicles begin to come down government subsidies which are presently offered for these vehicles are likely to phase out manufacturers such as Ford, Nissan, GM, and Tesla. Price-sensitive buyers could be deterred by the lack of subsidies. Beiker has commented he finds Tesla impressive with the model 3 being on top of the list for 2018 car sales. However, it still needs to be ascertained whether Tesla is managing to hold its position simply because it is an electric vehicle or whether it is just a cool new car.