x Abu Dhabi, UAESaturday 20 January 2018

Car industry's centre of gravity moves towards electric power

Eco-Money Full-scale production of electric cars for the 21st centruy is most likely to come from China

The global car industry is undergoing a metamorphosis on a similar scale to the transformation that took place in the early decades of the last century.

The industry is adopting the 21st-century technology of cars that run on electricity rather than the fossil fuels that have powered private transport for the past 100 years. But, this time around, production is shifting away from western economies towards the developing world.

In the study, Automotive Landscape 2025, conducted by the Germany-based international firm Roland Berger Strategy Consultants, two key findings were produced. The first is a dramatic shift in car production and sales away from developed regions such as Europe and Asia. This coincides with a move away from fossil fuels; by 2025, it is expected that electric cars will account for 10 per cent of new vehicle sales, with hybrid cars, which run both on electricity and fossil fuels, taking 40 per cent of the market.

According to the study's co-author Wolfgang Bernhart, the shift to production in Asia will be accelerated by a significant shortage of skilled labour in Europe and the US, putting about 300,000 jobs at risk in Europe alone. Car ownership in China, on the other hand, is expected to grow by 36 per cent a year.

At the same time, Roland Berger believes that cars are continuing to lose their appeal as a status among younger drivers in developed countries, many of whom are becoming increasingly aware of the ecological damage done by car engines that burn fossil fuels.

The study predicts that cars will be increasingly connected to the internet and compliant with other mobile devices, forcing the car industry to converge with companies in other areas, such as the IT and communications industries.

Marcus Hoffan the study's co-author, says: "Automotive companies will engage in multiple partnerships as a way of accessing technology and customers and securing economies of scale. These new business models will not just be about selling cars, but about integrating software and hardware."

But, in many ways, electric cars are still at the stage horseless carriages were 100 years ago. There are, for example, very few filling stations for electric cars, although this has started to change.

This month, the US energy secretary, Steven Chu, and the Los Angeles mayor, Antonio Villaraigosa, opened the 500th electric vehicle (EV) charging station installed by Coulomb Technologies as part of its ChargePoint America network. Coulomb received US$15 million (Dh55.2m) last year from the Department of Energy, and $22m in private funds, to install 4,600 chargers across the country by the end of this year.

California is also ahead of much of the rest of the world in terms of electric car purchasing. According to a study by the University of California, Los Angeles (UCLA)'s Luskin Centre for Innovation, EV sales in Los Angeles are projected to compose 9 per cent of total car sales in 2015, rising to 11.7 per cent in 2020. The study reports that 65 per cent of prospective early adopters of EVs are multi-family residents and renters. It adds that these groups face major challenges in accessing home charging.

Nevertheless, for the moment, California continues to lead the world in electric-car design production. California's Tesla, which makes electric sports cars and is listed on the Nasdaq stock exchange, beat analyst expectations with revenues growing 35 per cent year on year to $49m versus conservative estimates of $43.3m for the first three months of this year.

When unveiling the figures, Tesla chief executive Elon Musk also confirmed the company was on schedule to start deliveries of its new Model S electric car by the middle of next year. The Model S is a full-sized battery-driven electric sedan, which will have a base price of $57,400. It will have a range of 257 kilometres when fully charged and will be able to accelerate from zero to 60mph (96.5kph) in less than six seconds. Tesla is also understood to have plans to build electric family sized minivans, SUVs and electric fleet vans. The SUV has been dubbed the Tesla Model X and is expected to launch in 2014.

But, as long as cutting-edge electric-car production is confined to small western independent manufacturers, widespread adoption will be limited. And although many of the existing big auto manufacturers are starting to make electronic cars, they still have a huge vested interest in continuing to make petrol engines.

Full-scale production of electric cars for the 21st century is, therefore, more likely to come from China. With its mushrooming car ownership, growing manufacturing and state subsidies for electric vehicles, it seems that China may soon overtake California in cutting edge EV technology and investment opportunities.