What will it take for EV to be successful? Hint: It's Complicated.
Updated: Nov 22
By Michael Entner-Gómez | Digital Transformation Officer | Entner Consulting Group, LLC.
Electric vehicles (EVs) have been a hot topic in recent years as countries around the world aim to reduce their carbon footprint and transition away from fossil fuels. However, despite the growing interest in EVs, there are many challenges that must be addressed before they can become successful. In this post, we'll explore some of the factors that are influencing the success of EVs and what needs to be done for them to be widely adopted.
Profitability: The Elephant in the Room
One of the biggest challenges facing EVs is profitability. While Tesla has been able to achieve a 20-30% profit margin, most other EV manufacturers struggle to make any profit at all. Many of the current crop of EV companies are posting horrible numbers and can't even get their cars out the door. The big OEMs in Europe, the USA, and Asia are attempting to pivot to EV, but the impact on their businesses has yet to be seen. It's clear that profitability remains a significant challenge for EVs, and it may take some time before a sustainable business model is established.
Going Green: Not a Priority for All
While many people are focused on reducing their carbon footprint, not everyone is caught up in climate anxiety. Being green takes multiple forms, and some are free, like taking a walk, while others cost money, like buying solar panels, which many people don't have right now. There's also a lot of debate about whether the supply chain leading up to EVs is really green or ethical, which can lead to skepticism or apathy towards EVs. Different countries have varying attitudes towards green and renewable energy development, which can impact the adoption of EVs.
ICE and EV: The Infrastructure Challenge
We live in a fossil fuel economy, and it impacts society, commerce, and technology development. The world is set up for internal combustion engines (ICEs), and the infrastructure to support EVs will take decades to establish in any meaningful form without dipping into taxpayers' pockets. Fossil fuels are convenient, portable, readily obtained, and don't require any additional investment beyond signing the sales contract for an automobile and taking the keys. While EVs can be more efficient than ICE vehicles, they do not work for every use case, like towing with trucks. Therefore, it is critical to acknowledge that a thoughtful transition to EV over time is needed which will allow the use cases to mature.
The EV Blockers: Identifying the Challenges
There are many blockers to the success of EVs, such as battery range and durability, sparse EV infrastructure, low profit margins, legislation backlash, range anxiety, non-existent or low ROI, entry-level EV cost, limited vehicle types, "dirty" components, supply chain issues, lack of SDV platform, and increased competition. All these challenges need to be addressed if EVs are to succeed.
Time: The Friend of EV Adoption
Time is a valuable commodity, and it cannot be bought. The automotive industry must adopt a "middle path" approach to next-generation vehicles that embraces both ICE and EV and accepts their love child, Hybrid Electric Vehicles (HEVs). While not required for EVs, there is time to develop a fully-articulated SDV architecture, which could smooth the transition between technologies and prove the value in "electrification" of the automobile. The market will saturate with EV players, lowering entry costs. However, this is a double-edged sword for OEMs as profits will be highly diluted. Infrastructure to support EV will come with time and patience AND monetization opportunities.
Critical Next Steps for EV Success
The industry needs a serious reality check. We must step outside the bubble we are living in and be open to constructive criticism. It's critical to stop looking at ICE as evil and recognize it as the hard worker that's paying the bills to transition to EV. It's also essential to adopt an open-standards, highly extensible, inexpensive and truly next-generation automotive architecture that enables REAL monetizable use cases and delivers value to customers. We need to stop pushing "EV via mandate" and let the market dictate what it wants and needs at its own pace. We must continue developing critical technologies and solve for complex use cases like towing in trucks. Lastly, we must acknowledge the market dynamics of EV and make realistic investments with achievable ROI that respect existing shareholders.
Following the Middle Path
In conclusion, the success of EVs is a complex issue with many challenges that must be addressed. While profitability, infrastructure, and consumer attitudes are some of the most significant hurdles, there are many other factors to consider. The automotive industry must take a middle path approach that acknowledges the value of both ICE and EV and accepts HEVs as a viable option. By doing so and focusing on critical next steps, we can transition to EV over time and leave a better world for future generations.
For a more in-depth analysis on the challenges facing EVs we have a 30-minute video recording on this topic at: https://youtu.be/IUFLnf0vVnA