It is becoming increasingly apparent that governments, throughout the world, are in the process of mandating electric vehicles (EVs), whether or not consumers want them. Auto maker strategies vary widely. Looking at the two largest domestic manufacturers, GM and Ford, it is clear that they are focusing on strategies that build on their strengths to address issues specific to EVs.
At present, the Achilles heel of EVs is the battery. While substantial resources are being committed to improving battery life and lowering costs, EVs are currently at a range and price disadvantage compared to fossil fuel powered vehicles. To what extent is debatable. Moreover, there is considerable difference of opinion regarding the importance of range and the potential for technological advancement.
The vehicle industry, facing mandates, is focused on making the best of the situation. Ford, with its market leading position in commercial vehicles and pickups, is likely to introduce a wide range of EVs in those categories. Commercial vehicles, such as delivery vans, are generally not in use 24/7, leaving plenty of down time for recharging. Moreover, while EVs are currently at an initial cost disadvantage, in a fleet environment, lifetime costs are more than competitive.
General Motors, with a strong position in large, high end SUVs, is likely to add batteries to its highest price models. If the initial cost disadvantage is approximately $10,000 (debatable), it is much easier to absorb/justify this amount on a vehicle with an MSRP approaching six figures than one priced at a more typical $30-40,000.
Investors should note that there are probably more EV manufacturers and aspiring participants than are warranted, given an apparent lack of consumer enthusiasm. Tesla is considered a near term leader with an established product line and actual sales. There at least a dozen want-to-be players with some financing but essentially no revenues. All of the major, established vehicle manufacturers are actively selling and/or developing a wide range of entries for 2021 and 2022.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®