Global carmakers’ electric push takes overall investment to US$90 billion

Ford Motor’s plan to double its electrified vehicle spending is part of an investment tsunami in batteries and electric cars by global carmakers that now totals US$90 billion and is still growing, a Reuters analysis shows.

That money is pouring into a tiny sector that amounts to less than 1 per cent of the 90 million vehicles sold each year and where Elon Musk’s Tesla, with sales of only three models totalling just over 100,000 vehicles in 2017, was a dominant player.

With the world’s top carmakers poised to introduce dozens of new battery electric and hybrid petrol-electric models over the next five years – many of them in China – executives continue to ask: Who will buy all those vehicles?

“We’re all in,” Ford Motor executive chairman Bill Ford Jnr said of the company’s US$11 billion investment, announced on Sunday at the North American International Auto Show in Detroit. “The only question is, will the customers be there with us?”

“Tesla faces real competition,” said Mike Jackson, chief executive of AutoNation, the largest US car retailing chain. By 2030, Jackson said he expects electric vehicles could account for 15-20 per cent of new vehicle sales in the US.

Investments in electric vehicles announced to date include at least US$19 billion by carmakers in the US, US$21 billion in China and US$52 billion in Germany.

But US and German car executives said in interviews on the sidelines of the Detroit show that the bulk of those investments are earmarked for China, where the government has enacted escalating electric-vehicle quotas starting in 2019.

Mainstream carmakers also are reacting in part to pressure from regulators in Europe and California to slash carbon emissions from fossil fuels. They are under pressure as well from Tesla’s success in creating electric sedans and SUVs that inspire would-be owners to flood the company with orders.

While Tesla is the most prominent electric-car maker, “soon it will be everybody and his brother”, Daimler chief executive Dieter Zetsche told reporters on Monday at the Detroit show.

Daimler has said it will spend at least US$11.7 billion to introduce 10 pure electric and 40 hybrid models, and that it intends to electrify its full range of vehicles, from minicompact commuters to heavy-duty trucks.

“We will see whether demand will drive our [electric vehicle] sales or whether we will all be trying to catch the last customer out there,” Zetsche said. “Ultimately, the customer will decide.”

For now, Nissan Motor’s seven-year-old Leaf remains the world’s top-selling electric vehicle and the company’s sole battery-only car – an offering soon to be swamped by new rivals bringing tougher competition that could add pressure to pricing.

“Everybody will find out that if you push you will have a lot of bad news on residual values,” Nissan chief performance officer Jose Munoz told Reuters.

Jim Lentz, chief executive of Toyota Motor’s North American operations, said it took Toyota 18 years for sales of hybrid vehicles to reach 3 per cent share of the total market. And hybrids are less costly, do not require new charging infrastructure and are not burdened by the range limits of battery electric vehicles, he said.

“What’s it going to take to get to 4 to 5 per cent” share for electric cars, Lentz said. “It’s going to be longer.”

The largest single investment is coming from Volkswagen, which plans to spend US$40 billion by 2030 to build electrified versions of its 300-plus global models.

In the US, General Motors has outlined plans to introduce 20 new battery and fuel cell electric vehicles by 2023, most of them built on a new dedicated, modular platform that will be introduced in 2021.

GM chief executive Mary Barra has not said how much the carmaker will spend on electric vehicles. Much of the investment will be made in China, where GM’s Cadillac brand will help spearhead the company’s more aggressive move into electric vehicles, according to Cadillac president Johan de Nysschen.

In an interview on Monday at the Detroit show, de Nysschen said Cadillac would “play a central role” in GM’s electric vehicle strategy in China, and will introduce an unspecified number of models based on GM’s future electric-vehicle platform. Some of those Cadillacs could be assembled in China, de Nysschen said.

Chinese carmakers, including local partners of Ford, VW and GM, all have publicised aggressive investment plans.

Not every multinational company is moving so aggressively into electric vehicles.

In Detroit on Monday, Fiat Chrysler Automobiles chief executive Sergio Marchionne said it did not make sense to announce a specific number of new electric vehicles – and he said the company was not under pressure, but working to meet emissions requirements. “We do not have a gun to our head,” Marchionne said. He said EVs are likely to become mandatory in Europe because of emissions rules.