Car Companies Follow Tesla’s Lead – 7/11/16

The popularity of Tesla’s electric cars and a rapid decline in battery costs has inspired and/or forced many other companies to commit to electric car development for fear of being left behind.

On the list of companies aiming for a piece of the pie, we have many companies at home and abroad. Hyundai Motor Co. has promised a new electric car later this year for the U.S. with another one planned for 2018 with a 200 mile electric range to compete with Tesla’s Model 3. General Motors Co. will also begin selling a new 200-mile range car later this year while Nissan, BMW AG, Mercedes-Benz, and Audi have committed to releasing electric cars in the 2018-2021 time frame. Meanwhile, Volkswagen AG chiefs are vowing to resolve its ongoing emissions cheating scandal and recover through a shift from diesel to electric vehicles.

German brands in particular are feeling pressured by the new technology. After decades of “German engineering” representing the pinnacle of car quality, the country is struggling to keep up with U.S. innovations. In response, the German government is doing all it can to revitalize the sector.

At the moment, affordable German electric cars are still years from hitting the streets so Tesla’s Model 3 – set to ship out in late 2017 – will have little in the way of direct competition from a pricing standpoint. It is unclear just how Tesla’s affordable “luxury” car will affect German automakers, but industry giants and the government that relies on them as one of the nation’s largest employers are already preparing for the worst.

Chancellor Angela Merkel’s government pledged new subsidies for 2016 to speed e-car sales in Germany and help bouy its native producers. The program of cash incentives is expected to bring sales of electric cars up to about 500,000 by 2020, according to the Environment Ministry, in hopes that it will speed up the development process. Amiable policies could skyrocket electric vehicles as a percentage of cars in Germany to about 8% in 2025 from 0.6% this year, according to a forecast of the Center of Automotive Management institute.

The government’s plan is to put 1 million hybrid and battery plug-ins on the road by 2020 and 6 million by 2030. Still electric car sales still remain a fraction of all German vehicle sales. About 130,000 hybrids and 25,000 all-electric cars were registered on German roads as of January compared with 30 million gasoline cars and 14.5 million diesels, according to the KBA vehicle registration authority.

We are entering what is likely the most disruptive era in automotive history since the invention of the assembly line. It will be interesting to see which companies come out on top.

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