Carmakers Seen Wasting Billions On Electric, Autonomous Vehicles
(Bloomberg) -- Automakers are in a pickle. If they don’t invest in electric cars and self-driving technology, investors shun them. If they do, they risk burning billions of dollars on cars that won’t make money, according to a new study from consulting firm AlixPartners.
The auto industry and technology players looking to get into transportation are spending $255 billion on 200-plus electric models, many of which will be unprofitable, and $61 billion toward autonomous vehicles that consumers aren’t prepared to buy, the consultants said in the study, released Wednesday. It predicts a “a pile-up of epic proportions.”
“Tens of billions of dollars will be thrown away,” John Hoffecker, global vice chairman at AlixPartners, told reporters at an Automotive Press Association presentation in Detroit. “Not everyone can be successful. We’re going to have to have a falling out of automakers and suppliers.”
Automakers are budgeting to build 207 electric models by 2022, the study said. Many of them will lose money because the cars are still expensive to build and the competition for sales for relatively few consumers is intense.
The billions invested in autonomous models may also go begging for a return, AlixPartners said. The firm conducted a consumer survey that concluded that people are willing to pay $2,300 for a self-driving capabilities. The systems currently cost about $22,900, AlixPartners said.
Adding to the profit challenges presented by technology investments is the fact that global auto sales are leveling off. Alix Partners forecasts vehicles sales to grow 2.4% a year through 2025, lagging expected worldwide GDP growth of 3.3 percent. Meanwhile, U.S. light-vehicle sales will fall to 16.8 million this year from 17.2 million in 2017 and to 15.1 million in 2020, the study said.
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