The Expert Podcast

A major automotive manufacturer is warning that at the rate we're going, we could be heading down a path for disaster for both automotive dealers and new car buyers. It could be that new cars are 40 to 50 percent more expensive because of EVs, but also that there'll be fewer of them available, meaning dealers don't have enough cars to sell. What do you mean by this? Well, Stellantis, the company that makes Chrysler, Jeep, Dodge, and Ram vehicles, is saying that vehicle tech costs could mean a smaller market for new cars.

The manufacturing of electric vehicles might seem like it's less intense than gasoline or diesel vehicles, which have a lot of moving parts, pistons, and lubricated crankshafts. It seems simpler to build electric motors than a battery, but there's a lot of tech that goes into that, right? It may not be as intensive in manufacturing, but the tolerances in tech might be more significant. According to their CEO, the cost of technology—the kind that powers electric vehicles—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 the sold vehicles. EVs are somewhere around five percent of new cars sold, maybe 10 percent in some markets. They're already cutting manufacturing jobs because of the EV switchover, and it can have more of an impact than just jobs. It could have an impact on buyers.

One of the challenges, if not the biggest one, is getting the price of the vehicle reasonable for consumers. What they're worried about is if they do not make changes, we will end up with an overall electrified powertrain which is 40 percent more expensive than conventional. So, at the rate they're going right now, electric vehicles are going to be 40 percent more expensive than gasoline vehicles for the cost of the car—not counting the power, the cost of electricity to plug it in, and everything else. 40 percent more. So, they're saying it's going to be a challenge to make it affordable to the middle class because already new vehicles are way more expensive than they used to be. Right now, vehicles are averaging $42,000 for a new car. If you add 40 percent to that, now you're talking almost $60,000 for a new car.

What this CEO is warning is that if they don't make changes to the process, new cars are going to cost $60,000 for electric vehicles, and they're not going to sell as many. Partially because of the cost, but also because of the production process. The other warning is for the dealer side. If middle-class consumers don't buy so many vehicles, that means the market will shrink. If the market shrinks, we don't need that many plants, and then that's like a domino effect: you don't have as many plants, you don't have as many employees, you don't have as many suppliers, and you don't have as many dealers. And that's an employment problem. It also undercuts the climate goals. So, if you want people to buy electric vehicles, and they're $60,000 or more, then you're not going to sell as many, and there won't be as many on the road.

If we cannot sell EVs to the middle class, then the volumes—meaning how many you sell—are small. If the volume is small, the impact on the planet is limited, and that destroys the purpose of what EVs are supposed to do. The industry will go from hero to zero in three years if they don't find a way to get the cost down. By the end of the decade, 2029, I 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.