Even as carmakers are busy making plans to go electric, Moody's said on Wednesday electric vehicles (EVs) are likely to remain loss making for most mass volume players till early 2020s.
Even as carmakers are busy making plans to go electric, Moody’s said on Wednesday electric vehicles (EVs) are likely to remain loss making for most mass volume players till early 2020s. It said that car manufacturers may lose about $7000-10,000 per EV that is sold in America. In the corporate sector, the auto industry, according to Moody’s, generates some of the lowest profit margins and returns on assets, thanks to the intense competition in the space. Considering the fact, Moody’s says returns may most probably remain negative for the first half of 2020s, whereas companies may earn the highest return from internal combustion engines. “Electrification of vehicle portfolios will require considerable capital investment. However, the returns on electrified vehicles become progressively lower than on internal combustion engines,” it said. Investments in other technologies such as autonomous cars and ride sharing are only going to add to worries of OEMs, it added.
Moody’s also said the rate of adoption of EVs may not be as fast as expected – in India’s case, Siam expects complete EV penetration by 2047. Moody’s has estimated that around 7-8% of vehicles sold in the world would be fully electric ones in the early 2020s, and the penetration may increase to about 17-18% by late 2020s – around when the Indian government wants a complete switch to electric vehicles. The penetration may remain low, according to Moody’s, largely due to uncertainty regarding buyers adopting this technology, considering range limitations and slow battery charging times. An AC charger or a slow charger can on an average take around 6-8 hours to completely charge a battery to run 160 km.
Only with time, the EV technology can become more economically viable for the auto makers with reductions in battery costs and technical improvements, leading to longer driving ranges, and the time frame over which manufacturers can achieve adequate scale of production, Moody’s said. However, as the future path for the auto industry is unclear, most carmakers would have to invest in multiple alternate fuel technologies to stay ahead of the curve. “They will rely on a range of alternative fuel technologies including battery electric vehicles, mild-hybrids, full hybrids, plug-in hybrids, and fuel cells,” Moody’s said.