Mainstream Automakers Embark on the Big Move to Battery-Electrics

Despite anemic sales and despite losing money on every battery-electric vehicle they sell, mainstream automakers are forging ahead. Here’s why, and here’s what’s needed for them to be successful.
Later this year, Ford is expected to unveil a Mustang-inspired crossover with an all-electric range of 300-plus miles. (Image source: Ford Motor Co.)

After more than a century of rejecting battery-powered cars, mainstream automakers are finally changing their minds.

This year, they’re debuting some of the best battery-electric vehicles (BEV) in their history. The cars are big and visually appealing; feature long-range batteries; and come in popular form factors – crossovers and SUVs. In short, they’re built to sell. And their underlying message is clear: These aren’t your regulator’s electric cars.

Moreover, the new breed of battery-electrics is being developed by some of the global industry’s most established, mainstream names. In the first half of 2019 alone, Audi, Hyundai, Jaguar, Kia, and Nissan debuted new BEVs with 200-plus-mile ranges. Later this year, Porsche will deliver a 600-HP, all-electric luxury vehicle. And Ford Motor Co. will reveal an electric, Mustang-inspired crossover that Ford chairman William Clay Ford has said will “go like hell.”

And the trend will extend well beyond 2019. General Motors has said it will introduce more than 20 new BEVs over the next few years, including a battery-powered Cadillac. And Fiat Chrysler is planning to offer four new electric Jeeps, while Ford is working on an all-electric version of the F-150 pickup. Meanwhile, Volkswagen is said to be investing $50 billion in electrification technology.

All in all, it amounts to a bonanza of BEVs. “It’s still a small fraction of the market,” said Sam Abuelsamid, principal analyst for Navigant Research. “But it’s definitely growing fast.”

Even as the market grows, however, mainstream manufacturers have a quiet but very real concern – the consumer. “The auto companies want to be committed, and they think what they’re doing is a good idea,” noted Mike Ramsey, senior director and automotive analyst for Gartner, Inc. “But they definitely need to see some market pull.”

Indeed, there’s still reason for concern on that front, despite the rollout of so many products. Last year’s US BEV sales amounted to only about 1.5% of the market, mostly because the vehicle prices are still higher than those of comparable gas-burning cars.

And that’s frightening for automakers who have already poured billions of dollars into development of new BEVs. Many fear they will over-produce. They imagine parking lots full of unsold, deeply-discounted, electric cars – and deep financial losses. 

For mainstream automakers, it’s a risk they take as they dive head-long into the electric fray. And they know it. “There is no demand,” one automotive OEM, who preferred to remain anonymous, lamented to Design News .

Still, it’s the reality. “The customer is in charge of the game,” noted David Cole, chairman emeritus of the Center for Automotive Research and a 60-year veteran of the auto industry. “And no one knows what the customer will do.”

The Reasons Why

A confluence of factors – including global competition, government regulations, and falling battery prices – have brought mainstream automakers to this juncture.

It’s a juncture that many automakers couldn’t have imagined a decade ago. Most had been more notable for their tepid acceptance of battery-electric vehicles and, in some cases, outright refusal to build or sell them.  

But for almost every mainstream manufacturer today, regulations have become a forcing factor. In the US, California and 14 other states have taken the lead, calling on automakers to hit prescribed percentages of zero emission vehicles (ZEV). If they don’t, there are penalties to be paid in the form of ZEV credits. Such credits can cost tens of millions of dollars, and end up getting paid to competitors, which most manufacturers are loathe to do.

Then there’s the global market. Most observers say the global market is the biggest motivator of all. At least 17 countries have announced plans to ban internal combustion engines in city centers, mostly between 2030 and 2040. And China has made battery-electric vehicles a national priority, even going so far as to require that customers enter a lottery in order to get a license for a new car with an internal combustion engine.

For automakers, the handwriting is on the global wall. “When you’ve got Europe and China and California holding a gun to your head and telling you to sell EVs, then you’re going to sell EVs,” noted Abuelsamid of Navigant Research. “If you want to be part of the global market, then you just have to do this.”

That’s why many of the aforementioned BEVs won’t be sold in the US. GM, for example, has talked about more than 20 BEVs, many of which are ticketed for China, Abuelsamid said. Ford has discussed as many as 14 different BEVs, of which only six will be offered in the US, and FCA’s electric Jeeps are targeted for other countries, he added.

Some automakers are unhappy about the mandates, but have little choice. “This is more of a forced march than a happy migration,” one foreign manufacturer wrote to Design News.

Others, such as GM, have concluded that if they have to build EVs globally, they might as well call for a national EV mandate in the US. That way, they can spread the cost of their massive BEV development efforts.

Either way, they want to be careful not to build too much, for fear US consumers won’t bite. It’s an especially difficult calculation, given the fact that virtually every automaker is losing money on every BEV it sells. “It’s really hard to make a business case for something that you know will lose money for an extended period of time,” Abuelsamid said. “So everybody aside from Tesla is trying to limit their sales to what they need to do in order to meet the mandates.”

Better Batteries

Having been pushed to build EVs, however, automakers in recent years have begun to make a curiously pleasant discovery: There's light at the end of that long, dark, development tunnel. And that light is the lithium-ion battery.

Lithium-ion batteries have come a long way since a decade ago, when the National Academy of Engineering estimated that they were costing OEMs more than $1,000/kWh (at $1,000/kWh, an 85 kWh battery would have cost $85,000). Today, most experts believe that the figure is under $200/kWh, and in many cases, around $150. Moreover, that’s a pack cost, including not only the lithium-ion cells, but the modules, cabling, and cooling systems, as well.

And still, the numbers appear to be dropping. For the first time since the U.S. Advanced Battery Consortium set a goal of $100/kWh more than two decades ago, some automakers believe that figure may be in sight, said Cole of the Center for Automotive Research. “There’s at least one company that’s enthusiastic about it,” he told Design News. “In fact, they believe they can go well below that number, which would give them a huge competitive advantage.” If that’s true, then automakers could finally put EV costs on a par with those of internal combustion-based vehicles, Cole added.

Even today, some OEMs are finding that they can get volume discounts from lithium suppliers if they can scale up their production. “We’re seeing that the cost of a battery is about 40% of what it was six years ago,” Mike Duhaime, head of electrification architecture and technology at Fiat Chrysler, told Design News. “We’re almost at a point where battery-electrics are on a par with plug-in hybrids in terms of cost.”

Moreover, energy density is up, which means that automakers can also squeeze more range out of a BEV. “The battery technology of five, six, eight years ago got us 100 or 150 miles of range,” Duhaime said. “Today with the new battery technologies and the new electronics, we’re seeing 300 miles.”

A New Optimism

For some automakers, the battery improvements are translating to real optimism. Ford, for example, now believes that electric vehicles can succeed in their own right. “There’s an opportunity to be margin-positive here – to have profitability on battery-electrics,” Ted Cannis, global director of electrification for Ford Motor Co., told us.

For Ford, such thinking represents a major strategy shift. Only eight years ago, the company rolled out the Ford Focus Electric, a hatchback with a tiny 23 kWh battery and a meager 76-mile driving range. Sales were disappointing, but not unexpected. In retrospect, Cannis said, their approach was understandable, given the cost, the limited capabilities of the time, and the knowledge that they would be losing money. “Part of the thinking was, ‘it’s a compliance play,’” he said.

Now, however, that’s changed. For the as-yet-unnamed BEV that will be unveiled late this year, Ford engineers have taken a different tack. They built atop the Mustang name, added a big battery with a 300-mile range, employed a popular crossover form factor, and trotted out their chairman to let the world know that the new vehicle would “go like hell.” 

The first model on GM’s new EV platform will be a Cadillac. GM says the new platform will allow engineers to quickly respond to customer preferences with a relatively short development time. (Image source: Cadillac)

“We had a couple of key principles,” Cannis said. “We decided we would leverage our iconic vehicles – the ones that brought us to the party. This is the strength of our brand around the world, where we have the greatest loyalty, and where we have the greatest connection to our customers. That’s been key.”

Ford is also tailoring its vehicle design to the manufacturing process, paying special attention to such matters as how the battery is placed in the vehicle. And it’s focusing on the EV “eco-system,” including charging infrastructure and customer experience, all of which is important to tech-savvy EV consumers, Cannis said.

Such consumer focus is key for virtually every mainstream EV maker today. The result is that manufacturers are suddenly getting good grades for their efforts. Jaguar’s new I-Pace won European Car of the Year, the first Jaguar to capture the award in its 50-year history. Also, the Hyundai Kona Electric and Kia Niro EV have received high praise for offering driving ranges of more than 250 miles at relatively low starting prices.

Hyundai’s Kona Electric offers a 258-mile all-electric range for a starting price of $36,850. (Image source: Hyundai

Couple that new breed of vehicles with more fast-charge stations, and the future begins to look even rosier, manufacturers say. “Now, the EV becomes more of a primary-use, rather than a secondary-use, vehicle,” said Duhaime of Fiat Chrysler.  

Inspired by Tesla

Industry analysts credit Tesla with providing part of the inspiration for such changes in mainstream thinking. Tesla, they say, showed there was a willing market for EVs by making an honest effort to appeal to buyers. Their vehicles offered long range and smart styling, along with great safety ratings and stellar acceleration and handling. The result was powerful word-of-mouth and an incredible international media buzz surrounding its vehicles.

“In the past, the theory was that only hard-core environmentalists would want to pay the premium for these vehicles,” Abuelsamid said. “They were just too expensive. But Tesla showed that these cars can appeal on their own merit, and that’s been a huge boon to all EVs.”

The question now is how big the EV market really is. US sales of BEVs this year aren’t much better than 2018, and Tesla appears unlikely to come close to the goals that it set for itself. The company’s mainstay – the Model 3 EV – posted sales of 25,000 units in December, then dropped to 6,500 in January after a $7,500 government tax credit for buyers was cut in half. Although sales have rebounded slightly, the company’s stock nose dived from $385 a share to less than $180 a share in a space of four months. In June, The New York Times questioned whether Tesla would ever be more than a niche player.

Skeptics worry that it’s taking too long for BEVs to make money. Amazon, they say, went through similarly dark, unprofitable days, when consumers balked at its business model. But the electric car re-boot began years before Amazon was launched, and now Amazon is a giant, whereas electric cars continue to struggle, they say.

To be sure, most studies suggest that BEVs will keep gaining share over time. Bloomberg’s Electric Vehicle Outlook 2017 predicted that 54% of new car sales and 33% of the global car fleet would be electric by 2040. The question, however, is whether mainstreamers and startups can keep investing in the technology until the numbers rise.

Industry experts say that the winners in the BEV space may be the companies with the wherewithal to outlast the others. Cole of the Center for Automotive Research believes the OEM market will ultimately be defined along the lines of the “haves” and “have-nots.”  The “haves,” he said, are more likely to be able to make the continued investment that’s necessary for BEVs to compete with gasoline-powered vehicles, especially in the mid- and entry-level markets.

“The ‘haves’ are looking at autonomy, mobility, and electrification, and it’s unclear to them what’s going to happen,” Cole said. “They admit they don’t know. But they’ll have the ability to stay in the game, and maybe even get a competitive advantage, whereas the ‘have-nots’ will have to find a partner – somebody who can help them do it.”

Still, mainstream automakers are more committed than ever, and are likely to keep investing in the technology, as long as governments continue to push and battery costs continue to fall. If the market is ready, they say, then they’re ready.

For that reason, a willing consumer will be the key. “Up to now, economics have been shoved aside in the debate over electrification, at least at the public level,” Cole said. “But consumers will have their say, and economics will ultimately be the deciding factor.”

Senior technical editor Chuck Murray has been writing about technology for 35 years. He joined Design News in 1987, and has covered electronics, automation, fluid power, and auto.

 

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