The proof is in the pudding – or sales numbers in the case for automobiles.
In 2016, electric vehicle sales hit a record: two million electric cars were sold around the world. Electrified car enthusiasts are buzzing with excitement over those numbers. But the buzz may wear off when confronted with the reality that 92 million new internal combustion engine (ICE) cars also hit the road. Of the total new cars sold around the world in 2016, EVs made up a paltry 2 percent.
It’s not until at least 2035 before markets expect EVs to be more than 50 percent of new car sales.
“There’s a lot of buzz and a lot of talk about how the world’s going to change to electrified vehicles overnight, and I’m here to tell you it’s not going to happen overnight, and it’s not going to happen for decades,” David Dauch, Chief Executive Officer of American Axle & Manufacturing Holdings Inc., told a JPMorgan conference in New York recently. “I’m a strong believer in the internal combustion engine. I think it’s going to continue to be here for some time.”
Governments, however, are beginning to demand a transformation in the auto industry as they develop policies to address poor air quality in big cities and climate change mitigation. Recently, both the United Kingdom and France announced their intention to ban ICE vehicles. Norway, perhaps ahead of the pack with its goal, is aiming to have ICEs off the road by 2025.
These policies could have manufacturers walking a tightrope as they attempt to balance what policy makers are looking to change and what consumers are actually buying – in the near term at least.
“Right now you have an industry that’s sort of stuck between the market and what they see from their clients,” said Matt Stover, an analyst with Susquehanna International Group in Boston. “They see Tesla with an enterprise value of $70 billion, and they see what their clients are awarding to them, and they say, ‘Wow, something doesn’t make sense here.’”
Not all manufacturers agree, of course. Dana Inc. is readying itself to manufacture new parts for cleaner-running semi trucks and construction equipment, though the company expects a decade at least will pass before there will be commercial electric vehicles navigating the world’s highways.
Dana CFO Jonathan Collins told the JPMorgan conference: “We continue to have conviction around that, but investing now from a position of strength is a better position to be in.”
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