A major automotive manufacturer is warning that at the rate we’re going, we could be heading down the path of disaster for both automotive dealers and new car buyers. It could be that new cars are 40-50% more expensive because of electric vehicles, but also, there will be fewer of them available, meaning that dealers won’t have enough cars to sell.
Stellantis, the company that makes Chrysler, Jeep, Dodge, and Ram, says that vehicle tech costs could mean a smaller market for new cars. So the manufacturing of electric vehicles might seem less intense than gasoline or diesel vehicles. It seems more straightforward to build electric motors and a battery, but there’s a lot of tech that goes into that. It may not be as intensive in manufacturing, but the tolerances and tech might be more significant.
And according to their CEO, the cost of technology, the kind that will power EVs, has real implications for the auto industry and its employees and could lead to future cuts. They’re already cutting jobs in automotive manufacturing even before EVs are a large percentage of vehicles sold. EVs are somewhere around 5% of new cars sold. They’re already cutting into manufacturing jobs because of the EV transition. And it can have more of an impact than just jobs, but also on buyers.
One of the challenges, if not the biggest one, is getting the price of EVs to a reasonable amount for consumers. They’re worried that if they do not make changes, we will end up with an overall electrified powertrain that is 40% more expensive than conventional. At the rate they’re going right now, EVs are going to be 40% more expensive than gasoline vehicles for the cost of the car. Not counting the cost of electricity to charge and everything else. So they’re saying it will be a challenge to make EVs affordable for the middle class because already new vehicles are way more expensive than they used to be. Right now, new vehicles are averaging $42,000. If you add 40% to that, now you’re talking about $60,000 for a new car.
So this CEO is warning that if they don’t change the process, new electric vehicles will cost $60,000. And they won’t sell as many, partially because of the cost and the production process. Another warning from the dealer side, if middle-class consumers don’t buy as many vehicles, the market will shrink. And if the market shrinks, we don’t need as many manufacturing plants. We have fewer job opportunities when we don’t have as many plants. And then it’s like a domino effect. It also undercuts the climate goals.
If EVs were to be priced this high, not as many will be sold. There won’t be as many on the road. If we can’t sell EVs to the middle classes, then the volumes are small. And if the volume is small, the impact on the plan is limited, destroying the purpose of what EVs are supposed to do for the climate. The industry will decline in the next three years if they don’t find a way to decrease costs.
By the end of the decade, we predict that the transition to electric vehicles from combustion vehicles is going to be one of the biggest cases of management industry transition and even consumer adoption in the history of the industrial revolution.