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From combustion engine to electromobility: the automotive industry is facing a fundamental transformation.
The only question is how fast the structural change will be. In 2040, according to the vehicle manufacturers’ current market forecast, around three-quarters of all newly sold passenger cars worldwide will be equipped with battery electric drive. In 2021, the figure was not even 7 percent, with around 4.7 million electric vehicles. This technological change in drive systems, which will vary from region to region, is part of a comprehensive structural change in the automotive industry that poses major challenges for manufacturers. Politics is helping to shape the pace of change and can support car manufacturers in a successful transformation.
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Even with today‘s market forecasts and under the current framework conditions, vehicle manufacturers cannot significantly increase their profits by 2040 unless they focus on transformation to electromobility today.
European premium manufacturers can increase their profits this way by about 15 percent, and volume manufacturers by about 5 percent. If they do not succeed in converting to electromobility by 2030, they will have to reckon with losses of around 10 percent compared to the current market forecasts.
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If the worldwide ramp-up of electromobility is accelerated by political decisions, car manufacturers can significantly increase their profits. European premium manufacturers particularly stand to gain.
They can increase their profits by around 30 percent by 2040 compared to the current forecast for the base scenario. If, on the other hand, the already agreed targets for the ramp-up of electromobility are missed, losses would occur for most manufacturers. Only Asian manufacturers, who are still at the beginning of the transformation path, will then have the chance to increase their profits by about 5 percent.
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A slow market ramp-up of electromobility will cause losses for European premium manufacturers - regardless of the strategy they have pursued so far.
European premium manufacturers must expect losses of about 10 percent compared to the current market forecast in the event of a slow ramp-up of electromobility. European and US volume manufacturers also have to expect losses, as do traditional Chinese manufacturers. Asian volume manufacturers can slightly increase their profits in this scenario if they now focus more on the production of BEVs.
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Ambitious policies set the framework conditions in such a way that the challenges of the transformation pay off for the automotive industry in the long term through higher profit expectations and greater competitiveness.
For climate protection and also for the economic success of the automotive industry, it is of enormous importance that the politically set electrification targets are achieved. Currently, the production costs of electric vehicles are relatively high, and supply bottlenecks in particular have made BEVs more expensive. It is therefore all the more important to base the taxes and levies on vehicles and fuels on CO2 emissions - so that climate-friendly mobility is worthwhile for end customers.
This content is also available in: German
Advantage for pioneers
How market developments and electrification strategies affect car manufacturers’ profit prospects
Preface
The focus of this study is the question of what financial impact the switch to electromobility will have on the strength of automobile manufacturers. To this end, Agora Verkehrswende, in collaboration with Boston Consulting Group (BCG), has used a comprehensive market model to investigate the global market shares and profits that manufacturers can secure with various electrification strategies.
The answer depends on how the political framework evolves and what pace of electrification automakers opt for. The bottom line is that our analyses suggest that automakers need not fear a drop in profits at all - not even if structural change is accelerated. On the contrary, if they are quick and if policymakers stand by them, they can even realize a plus in profits, in addition to the social plus for climate protection.
In an earlier study - Powering the Automotive Jobs of the Future - Agora Verkehrswende and BCG already examined the question of how the type of work and the number of jobs in the automotive world of work will develop.
Key findings
Bibliographical data
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Advantage for pioneers
How market developments and electrification strategies affect car manufacturers’ profit prospects
All figures in this publication
Matrix of cumulative profits, depending on the electrification strategy of the manufacturer archetypes and market scenario (principle representation)
From Advantage for pioneers on page 11
