With the motor industry abuzz with the prospect of electric propulsion, just how confident are we they’ve thought this one through?
Earlier in the week we considered the mainstream industry’s lack of leadership when it comes to the design of electric cars. But at the Frankfurt motor show this week, two industry leaders fleshed out some of the challenges they’re facing. Firstly Mercedes’ Dieter Zetsche pointed out to auto journalists the effect the push to electric is likely to have on profitability.
At first glance, this is a case of stating the blindingly obvious, but while the mighty Stuttgart Untertürkheim car giant can weather the loss of 50% of its potential profits, putting aside an alleged €4.0 billion to cover the likely revenue shortfall, it raises questions of how other less financially robust car businesses can possibly weather a similar reversal.
It’s easy to be flippant about car makers’ varying degrees of culpability in deceiving the public over the benefits of diesel, but one can have some sympathy for what’s at stake when you look at the investments manufacturers have poured into combustion engine development, not to mention production facilities and staff, so managing their decline without catastrophe could well become the trickiest aspect of the entire business. Because if the transition is not as measured as the car industry can reasonably handle, the fallout really could be rather messy.
The problem however is that in the short-term at least, nobody can be certain what the uptake of electric cars will be, whether part-hybrid or plug-in hybrid will be favoured as a bridging measure and how best to gauge the delicate balance in second-guessing demand. What looks likely is that car makers will have to take a sizeable financial hit for several years until such time as the market speaks clearly, a matter which plays into the hands of the tech companies and pure-electric start-ups who won’t have to bear the costs of running down huge areas of pre-existing infrastructure.
But with governments actively pushing the industry towards electric however, it’s difficult to avoid the suspicion we’re on the cusp of another unilateral decision on automotive propulsion where once again the necessary due diligence as to the potential repercussions (or indeed the alternatives) has failed to take place. Back in the late ’90s when exhaust emissions took centre stage across Europe, many promising engine related developments are believed to have been sidelined or cancelled entirely due to expedient and short-term solutions pushed by legislators and colluded with by a motor industry bent on a path of least resistance.
PSA’s Carlos Tavares recently made the point that had they invested heavily into the Hybridair technology they were in the process of developing, they would now be contemplating its cancellation as it goes against the favoured direction of travel. It’s a tricky one however isn’t it? Manufacturers, left to their own devices will not innovate for the good of mankind, only if there’s money to be made – and can we realistically expect anything else from them? However, as we know from experience, legislation made in haste very often ends up being poor legislation, (and that’s before we even get to the subject of referenda). But if governments get this wrong once again, it’s difficult to envisage how the dial can be reset.
It’s probably too early to speculate with any certainty, but I can’t help wondering what fresh crisis is being set in motion 15-20 years down the line based on decisions taken in legislatures and automotive boardrooms now?