Thomas Edison once proclaimed that “we will make electricity so cheap that only the rich will burn candles”. With exception to the Amish community, Edison’s prophecy came true for most households across the world.
If only car manufacturers found it so easy.
Tesla, arguably the world’s most famous electric car manufacturer, has had well-documented struggles with its production of the new ‘Model 3’ range. Producing a meagre 260 car units in the third quarter of this year, concerns have been raised about the viability of affordable electric cars in a nascent market.
The growth in competition in the electric car market over the past five years has been substantial. There are nearly 50 electric car models that will arrive across the world between now and 2022. Some companies have committed even further, with General Motors Co. promising to sell 20 pure electric vehicles by 2023. Even British inventor James Dyson has pledged to invest £2 billion in creating a new electric car.
Due to a spate of government regulations, virtually all car manufacturers have developed their own electric models. Most significantly, the Chinese government announced new regulations to cut carbon emissions and pollution by 2030 this year. China is the world’s largest car market and thus, manufacturers have had to adjust to these regulations.
Support for electrifying cars has not been unanimous. Among its dissenters is Sergio Marchionne, CEO of Fiat Chrysler, who has argued that battery-powered models should be based on consumer demand, of which there has been very little. Given that electric vehicles make up for 1% of the American automotive market, and 1.4% in each of the Chinese and UK markets respectively, Marchionne’s statement contains some veracity.
Chrysler loses $20,000 on every electrical Fiat 500e sold in the US, and this is a problem that is symptomatic of the electric car-manufacturing industry. Even Tesla, which sold a record number of its electric cars last year, still lost $675 million on $7 billion in sales.
Nevertheless, breaking the frontier of new technologies never came cheap. The future of the automotive industry lies with electric cars and as companies continue to compete and innovate, costs will invariably fall with it to become affordable for everyone.