Carmakers are Wasting Billions on Electric vehicles and Self-driving cars: Here’s how

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.

By: | Published: June 21, 2018 11:41 AM

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.”

Six Electric cars to launch in India by 2020, How India’s Electric Car Ecosystem is set to grow!

“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 self-driving capabilities. The systems currently cost about $22,900, AlixPartners said.

Made-in-India electric cars from Mercedes-Benz soon as it bets big on EVs

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.

AlixPartners consults in a variety of industries and has advised most carmakers and major auto suppliers worldwide. While the bulk of its work is for non-distressed companies and private equity firms, it also played a major role in the bankruptcies of General Motors and the city of Detroit.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.