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It doesn't matter how many billions automakers sink into fleet electrification and autonomous features aimed at owning mobility's future—barriers are cropping up that could wreak havoc on their balance sheets.
The bets
In a recent report, AlixPartners estimates that from 2019 to 2023, the global auto industry will spend $225 billion on electric vehicles (EVs). Meanwhile, spending on autonomous vehicles (AVs) is slated to reach a cumulative $85 billion through 2025. But the consulting firm also predicts trouble down the road.
From headway to headwinds
On the supply side, there are nontrivial sums of money on the line to put up or shut up. What about demand?
- The consumer POV: Last year, consumers told AlixPartners they were willing to fork over an extra $2,300 for autonomous features...about 1/10th of what automakers pay to put them in a car. And compared to gasoline cars, EVs still come at a premium.
- The global outlook: Higher-priced EVs and semi-autonomous cars aren't immune to the global trend of slowing auto sales, from the U.S. to China to Europe.
One frustrated exec's take
Not even Arnold Schwarzenegger selling electric cars could convince BMW exec Klaus Fröhlich. At an event last week, Fröhlich called EVs "overhyped" and said regulators—not customers—are driving demand. As BMW knows, EVs and AVs require expensive tech that keeps margins thin (or loses manufacturers money). And the field is very competitive.
Big picture: Automakers could face a "multi-year profit desert," AlixPartner's Mark Wakefield said in a press release. This could disrupt the dual races to full autonomy and the post-internal combustion engine world. With their sunk costs, carmakers won't give up on either...but it might be a tough few years in the desert.
+ On a lighter, louder note: The EU now requires new EVs to use a sound-emitting device to say vroom-vroom at low speeds. For its acoustics, BMW has turned to Hans Zimmer, who scored Lion King, Inception, and the black hole of my youth, Call of Duty.