Sales of electric vehicles will grow slowly and the auto industry needs to brace for higher development costs and lower profit margins, says expert.
The former boss of Ford globally, Mark Fields, has warned the car industry needs to moderate its sales expectations of electric cars and brace for a period of higher investment and lower profits.
Automotive News USA has reported that Mr Fields – who increased investment in electric cars during his tenure at Ford – voiced his concerns in the EcoMotion conference in Israel on Tuesday.
“I think the industry is going to be under a reckoning over the next two to three years,” Mr Fields was quoted as saying in Automotive News USA.
“My view is that yes, electrification is going to grow over the years, but it’s not going to grow to the extent all the experts are telling you.”
Mr Fields is now a senior adviser at TPG, a global asset management firm.
He indicated automotive companies will face a period of slim profit margins. Some electric cars may even be sold at a loss.
“They are going to have to first restructure the margins of the business and on top of it you’re going to have to incentivise demand,” Mr Fields said.
“If you throw in, during that time period, a recession that’s going to happen at some point, that's going to put a lot of pressure on [car manufacturers].”
When Mr Fields was the CEO of Ford globally the company began plans for long range electric vehicles, including a $4.5 billion investment in electrification of future vehicles.
Since then, however, the new Ford CEO Jim Hackett has been more cautious around the rollout of electric cars.
Mr Fields also forecast that North America would not embrace electric cars as quickly as other markets such as China and Europe, where government policy is trying to shape buyer demand.
“China is setting the tempo and the pace for electrification around the world,” said Mr Fields. “The Chinese government has said, ‘We missed being the leader in internal combustion engines. Now is our opportunity to lead in a 21st-century propulsion system’. They've crafted their industrial policy along those lines.”
Mr Fields also expressed caution about the rollout of autonomous vehicles, saying they won’t be ready until the “back end of next decade” and would initially be restricted to certain precincts or package delivery.
The cheapest electric car currently on sale in Australia is the $44,990 Hyundai Ioniq hatchback. Other examples include the soon-to-be-released Nissan Leaf ($49,990) and Hyundai Kona electric SUV ($59,990), pictured above.
Sales of electric cars are miniscule in Australia, representing 0.03 per cent of all vehicles sold so far this year. According to the Federal Chamber of Automotive Industries, 144 plug-in hybrid and electric vehicles were reported as sold in the first five months of 2019 compared to the total sales tally of 436,649.
This reporter is on Twitter: @JoshuaDowling