DETROIT (Reuters) – Tesla Inc. and Wall Street turned 2020 into the year the U.S. auto industry decided to switch to electricity.
Tesla’s market capitalization topped $ 600 billion, making the launch founded by billionaire Elon Musk worth more than the world’s top five best-selling vehicle manufacturing groups. The exclamation came Friday when Tesla hit a frantic trading record ahead of the expected entry of shares into the S&P 500 benchmark.
By 2021, all signs point to the industry accelerating its shift toward electrification, a historically momentous turning point such as the launch of Ford Motor Co.’s mobile assembly line for the failure of the Model T or 2009 from General Motors.
Tesla’s rise came in the same year that hedge funds from activists and other investors increased pressure on companies to fight climate change. There is growing evidence that there are more investors who have concluded that the centennial dominance of internal combustion engines (“ICE” in industry slang) is approaching a decade.
From London to Beijing and California, political leaders also adopted plans to begin phasing out vehicles with only internal combustion engines as early as 2030. Pressure to reduce greenhouse gas emissions undermines the logic of new investments significant in ICE engines. Thousands of manufacturing jobs are currently linked to internal combustion in the United States, Britain, Germany, France, Japan and other countries.
Other powerful forces also shook the status quo of the auto industry this year. The COVID-19 pandemic wiped out the sales and profits that current vehicle manufacturers had relied on to fund methodical transitions to electric vehicles. China’s rapid recovery from the pandemic exerted an even more powerful gravitational pull on industrial investment.
WILL CONSUMERS START?
It was the year that Mary Barra, GM’s chief executive, and other industry executives began echoing Tesla’s Musk, saying electric vehicle battery costs could soon reach parity with technology. of internal combustion. Still, it remains to be seen whether consumers, especially in the United States, are prepared to say goodbye to oil-fueled vans and SUVs.
The best-selling vehicles in the United States are still large trucks that burn oil. Demand for these vehicles brought a recovery for Detroit automakers after the pandemic forced factories to close in the spring.
The best manufacturers of electric vehicles and batteries could present models that match the initial cost of internal combustion as early as 2023, the Bernstein broker wrote in a report.
“The ICE game is over with BEV ~ 2030,” wrote Bernstein car analysts, who used the industry’s acronyms for internal combustion engines and Battery Electric Vehicle.
The shift to electric vehicles is accelerating a parallel transformation of vehicles into largely digital machines that derive much of their value from software that provides rich display and features, such as automated driving systems.
Across the industry, centuries-old manufacturers such as Daimler AG are engaged in hiring programmers and experts in artificial intelligence.
The ability of software to manage autonomous driving systems, battery electricity flows, and data transmission to and from vehicles replaces power as a measure of success in automotive engineering.
Tesla’s use of smartphone-style airborne software updates was a unique feature of the Silicon Valley brand. In 2020, the best-selling model line in the United States, the Ford F-150 pickup, was redesigned to offer transmission software upgrades, making the technology the most popular.
THE PANDEMIC AND CHINA
In the best of times, traditional internal combustion vehicles would have had to face huge costs and disruptions to their workforce to evolve into electric vehicles that require a lot of software consumption. But the shock caused by the coronavirus pandemic gave manufacturers much less money and time to adapt.
IHS Consulting Markit predicts that global vehicle production will not match 2019 levels again until 2023. Automakers will have produced 20 million fewer vehicles by 2023 than they could have built if production remained at global levels. 2019.
“Only the most agile with a Darwinian spirit will survive,” said Carlos Tavares, the head of Peugeot SA who will lead the combined Peugeot and Fiat Chrysler when this merger is completed.
The pandemic also raised China’s importance for the future of the industry. The country’s rapid recovery from the pandemic amplified the gravitational pull of its huge market in automotive investment, despite the anti-Chinese rhetoric of American and European politicians.
China’s eagerness to reduce dependence on oil forces carmakers to shift investment to battery-powered electric and hybrid vehicles and refocus design and engineering activities on Chinese cities from traditional centers in Nagoya, Wolfsburg in Detroit. Tesla said it will establish a design and research center in China.
Hi Kaellenius, CEO of Daimler AG, said this bluntly in October: “We need to look at our production footprint and, where it makes sense, change our production,” she said during a video call. “Last year we sold around 700,000 cars in China. The next largest market is the United States, with between 320,000 and 330,000 cars.
Joe White Reports; Edited by David Gregorio