DETROIT (Reuters) – Tesla Inc. and Wall Street have made 2020 the year the US auto industry decided to go electric.
Tesla’s market capitalization has exceeded $ 600 billion, making the startup founded by billionaire Elon Musk worth more than the five global vehicle production groups. The exclamation point came on Friday, when Tesla reached a record high in frantic trading before the long-awaited entry of the stock in the S&P 500 benchmark.
By 2021, all signs point to the industry accelerating its shift to electrification, a turning point as historically important as the launch of Ford Motor Co’s moving assembly line for the Model T or the bankruptcy of General Motors in 2009.
Tesla’s rise came in the same year that activist hedge funds and other investors increased pressure on corporations to fight climate change. There is growing evidence that more investors have concluded that the century-old dominance of internal combustion engines – “ICE” in the industry’s slang – is heading for closure in a decade.
From London to Beijing and California, political leaders have also adopted plans to begin phasing out exclusively internal combustion engines as early as 2030. Pressure to reduce greenhouse gas emissions undermines the logic of new investment significant in ICE engines. Thousands of jobs in the manufacturing industry are currently linked to internal combustion in the United States, the United Kingdom, Germany, France, Japan and other countries.
Other strong forces have also shaken the status quo of the car industry this year. The COVID-19 pandemic eliminated the sales and profits that current automakers relied on to fund methodical transitions to electric vehicles. China’s rapid recovery from the pandemic has exerted an even stronger gravitational pull on investment in the industry.
WILL CONSUMERS BE CONNECTED?
This was the year that GM CEO Mary Barra and other top executives in the industry began to echo the Tesla Musk, saying that electric vehicle battery costs could soon reach parity with internal combustion technology. However, it remains to be seen whether consumers, especially in the United States, are ready to say goodbye to oil-powered trucks and SUVs.
The best-selling vehicles in the United States remain large, oil-burning trucks. Demand for these vehicles has led to a recovery for Detroit automakers after the pandemic forced factories to close in the spring.
The best manufacturers of electric vehicles and batteries could launch models that match the initial cost of internal combustion immediately after 2023, Bernstein wrote in a report.
“The ICE game is over with BEV ~ 2030,” wrote Bernstein car analysts, using industry acronyms for the internal combustion engine and Battery Electric Vehicle.
The shift to electric vehicles accelerates a parallel transformation of vehicles into largely digital cars, which derive much of their value from software that powers rich visual displays and features such as automatic driving systems.
Throughout the industry, secular manufacturers, such as Daimler AG, strive to hire programmers and experts in artificial intelligence.
The ability of software to manage autonomous driving systems, the flow of electricity from batteries and the flow of data to and from vehicles replaces power as a measure of automotive engineering.
Tesla’s use of smartphone-style over-the-air software updates was once a unique feature of the Silicon Valley brand. In 2020, the best-selling line of models in the United States, the Ford F-150 pickup, was redesigned to provide over-the-air software updates, making the technology just as common.
THE PANDEMIC AND CHINA
In the best of times, traditional internal combustion vehicles would have faced huge costs and labor disruptions to move to software-intensive electric vehicles. But the shock caused by the coronavirus pandemic gave manufacturers much less money and time to adjust.
IHS consultancy Markit predicts that global vehicle production will no longer meet 2019 levels by 2023. Automakers will be producing 20 million fewer vehicles by 2023 than they could have built if production had remained at from 2019.
“Only the most agile Darwinians will survive,” said Carlos Tavares, head of Peugeot SA, which will lead the Peugeot and Fiat Chrysler plants when the merger is completed.
The pandemic has also raised China’s importance for the future of the industry. This country’s rapid recovery from the pandemic has amplified the gravitational pull of its huge market on car investment, despite anti-Chinese rhetoric from American and European politicians.
China’s effort to reduce oil dependence is causing automakers to shift investment to battery-powered electric and hybrid vehicles and refocus design and engineering activities on Chinese cities in traditional centers in Nagoya, Wolfsburg and Detroit. Tesla has said it will set up a design and research center in China.
Daimler AG CEO Ola Kaellenius said it directly in October: “We need to look at our production footprint and where it makes sense, change our production,” he said during a video call. “Last year, we sold about 700,000 cars in China. The next largest market is the USA, with between 320,000 and 330,000 cars. “
Reporting by Joe White; Mountainous of David Gregorio