'VW could be in serious trouble': Which carmakers will survive the electric revolution?

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'VW could be in serious trouble': Which carmakers will survive the electric revolution?

By Alan Tovey

The car industry is bracing for more change over the next few years than it has experienced in the past century as the electric revolution combines with the advent of self-driving technology and other innovations such as vehicle sharing systems.

Volkswagen could be in "serious trouble" if its electric vehicle play doesn't pay off, say analysts.

Volkswagen could be in "serious trouble" if its electric vehicle play doesn't pay off, say analysts.Credit: AP

The switch to electric is already upon us and is likely to trigger a period of rapid consolidation, according to Professor David Bailey, an automotive industry expert at Birmingham University. Developing electric vehicles (EVs) requires huge investment and not every company will be able to afford it, he says. "That means not everyone will survive - we're already seeing alliances, partnerships and tie-ups as manufacturers look for ways to cut costs."

About €300 billion ($486 billion) has been invested by car companies into EVs over the past few years. Taking one of the biggest bets is Germany's VW Group, which is sinking €30 billion in them. A major chunk of this has gone into its basic platform for electric cars.

Described as a "skateboard" consisting of a chassis, drivetrain and battery, this modular piece of kit forms the basis of a car on to which a "top hat" of a body and interior is placed. It can be scaled up or down depending on the size of the vehicle required.

VW's concept means it can be sold to other manufacturers, and VW has already signed a $US2.6 billion ($3.8 billion) deal with Ford. The US giant plans to use the modular electric kit, known as MEB, as the basis for 600,000 cars over six years. Timm Schulze-Melander, industrials analyst at Reburn, says licensing the platform will helps VW defray the massive cost of developing it.

Although VW's sheer size - it delivered 10.8 million vehicles last year - means its targets for EVs will be big, it is more ambitious than many rivals. The company plans to make 22 million electric vehicles over the next decade.

However, IHS Markit automotive analyst Tim Urquhart injects a note of caution about the German giant's plans: "VW has made a massive play on EVs. The company is betting big on them - but that's a bet that's going to need to pay off.

"If electric isn't the future and another technology emerges, or another manufacturer makes a breakthrough, then VW could be in serious trouble."

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BMW is also well positioned. It may be a fifth of the size of its German competitor but has the highest electric car sales in Europe. The company made the decision several years ago to invest in the sector, ring-fencing an EV research budget. Closer to home, Jaguar Land Rover has made waves with its I-Pace, regarded as one of the best electric vehicles on the market - and the first to hit the roads from a mainstream premium manufacturer.

However, it is built by Magna in Austria. How quickly the technology in the I-Pace, which has won plaudits, is introduced across the rest of the JLR range remains to be seen.

Earlier this year JLR said that it would build a range of EVs at its Castle Bromwich plant, investing £1 billion ($1.9 billion) as part of its commitment to offer an electric option across its entire range by 2020. The plan also includes making electric drive units and battery assembly in the UK in an attempt to render EVs affordable. JLR also called for the construction of a big UK battery factory to cut costs.

VW has made a massive play on EVs. The company is betting big on them - but that's a bet that's going to need to pay off.

IHS Markit automotive analyst Tim Urquhart

While Jaguar has stolen a march on many rivals, there are questions about how long this lead will last. Despite making 600,000 cars a year worldwide - ranking it as the UK's biggest car manufacturer - it is a minnow in the car industry. This lack of scale raises doubts about how it can afford to invest in research and keep up with larger competitors. This summer, JLR announced a partnership on drive trains with BMW. Understood to cover the German company supplying JLR with hybrid, petrol and diesel engines, this means the two companies can eliminate overlapping investment and increase the impact of their budget for EVs. The tie-up is also thought to have the potential for sharing of platforms between the two.

Bailey adds: "JLR should be getting synergies from its ownership by Tata but they just don't seem to be coming. Ultimately, I think they need a bigger partnership."

Opinion remains divided over Tesla, which has led the way for EVs but remains dogged by production and quality problems. It benefits from having its own battery factory and not having the legacy problems established carmakers face in the form of factories dedicated to internal combustion engines, but suffers from a lack of experience in actually designing and building cars.

Fiat Chrysler Automobiles (FCA) is widely acknowledged as being the biggest laggard in EVs among global carmakers. The company has spent little on them and worries about how it can meet new emissions controls were highlighted in April when it signed a pooling deal with Tesla.

This summer's failed merger between FCA and the Renault-Nissan alliance may have been partly driven by hopes a combination would allow FCA to close some of the ground it had lost in EVs.

The Nissan Leaf is the world's best-selling electric vehicle.

The Nissan Leaf is the world's best-selling electric vehicle.Credit: Bloomberg

Renault-Nissan is in a sweet spot thanks to the Nissan Leaf - the world's bestselling EV - which Renault also offers as the Zoe, while Ford is playing catch-up - hence the deal with VW - and GM is not much better placed. Although the second-largest market after China, the sheer size of the US makes range anxiety a worry.

Among Japan's car giants, Nissan has a strong position because of the Leaf, and used last week's Tokyo motor show to reveal its Ariya concept car, an SUV an on entirely new platform, as well as a tiny electric city car for the Japanese market. Honda has been accelerating investment for several years but is straddling different forms of power of the future, looking at battery electric and hydrogen fuel cell vehicles.

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Mazda also used the Tokyo show to reveal its first electric car, another SUV, but with a range of just 200km, it is unlikely to set the market alight. Toyota, which got into electric early with its hybrid Prius, lags behind the rest of the market. Although one of the two biggest carmakers in the world, it has pushed hydrogen as form of future power, but only 10,000 of its Mirai cars powered by the gas have been sold. It is pouring billions into research about how cars will be used in the future, but it could be left behind when it comes to actually producing them as rivals put their foot on the gas in the electric race.

Telegraph, London

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