Electrification poses cost and technology risk for automotive supply chain


The high R&D, production and supply chain costs of electric vehicles could mean that OEMs will be selling most at a loss for years to come, according to a report by Automotive from Ultma Media.

Increasingly stringent emissions targets are forcing OEMs to rapidly accelerate the electrification of their fleets. And while the sales of electric vehicle sales are growing, the high development and production costs mean that these vehicles will continue to be loss leaders for carmakers well into the next decade.

A new report and forecast on the state of the automotive industry from Ultima Media, which publishes Automotive Logistics, suggests that regulations, rather than consumers, are driving current investments in electrification by global carmakers. For many OEMs, electric vehicles do not yet represent a compelling business case when considering high production and supply chain costs. 

“The high production cost of EVs means that OEMs are often being forced to sell them at cost price or even at a loss,” says Daniel Harrison, automotive analyst and author of the report. “And this will impact the OEMs bottom line for many years to come.

Furthermore, the increasingly bewildering and widening choice of powertrains is confusing many consumers, leaving them uncertain about how future regulations might impact purchases, according to Harrison. The price and performance proposition has yet to convince many consumers to transition to hybrid or electric models. Therefore, OEMs’ willingness to invest in electrification is risky until consumers start buying EVs in significant volumes.

More analysis of OEM impacts, as well as a forecast of global powertrain mix, can be found in the full report, which available to download for registered users of Automotive Logistics.

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