Quote:
Originally Posted by chassis
Don't be so sure that retail transaction prices will decline for EVs, although they are less costly to manufacture than ICEs. Automakers today have a share of consumers' wallets they don't want to give up, for 4 tires and a steering wheel. A vehicle is a commodity, an appliance. Like a toaster.
Did Tesla enter the market with a lower price for an apples-to-apples equivalent transportation solution compared with ICE? They entered the market with a higher price for an equivalent transportation solution.
In 2030 the expectation is that 30% of global new vehicles built will be EV. This means 70% will have an ICE of some type. This means EVs and ICE will live in the same commercial marketplace together for a good long while.
When transportationally equivalent ICE and EV products are sitting in the same showroom, carmakers and dealers will resist lowering price for an EV, for what is essentially the same product delivering most of the same customer benefits as an ICE vehicle. For those who insist on an EV, carmakers and dealers will gladly charge the highest price the market will bear to those consumers. If the consumer balks at a high EV price, they always have the option to buy an ICE vehicle. But for consumers who cannot tolerate ICE, they need to pay the money for an EV.
This is a perfect trap for carmakers and dealers.
Profit margin on the ICE will remain essentially what it is today, with profit margin on the EV substantially higher because it is produced with tens of thousands fewer workers.
KoenG Will you please share your view of price and profit as it relates to ICE, hybrid and EVs? Thanks.
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I believe that your analysis makes perfect sense in a transition phase. During such a period there are all kind of arguments specific to the transition at play that vanish after the transition. Like now, I wonder whether BMW didn't price the i4/X a bit too low seen the immediate delivery delays because of the production start up and covid situation?
Of course, in Europe we mostly are convinced by now that the ICE and hybrids will get eradicated around 2035. As from then, countries seem to only allow new BEV or hydrogen alternatives. In the US, apparently, there is an overall conviction that the buyer continues to choose his preference and ICE will remain one of those options. I don't believe that, the remaining market will become too small to justify the massive costs in keeping ICE alive and the transition will happen irrespective but a few years later then.
So when there is a time in the future where all cars have become BEV, they will have a lower retail price. Wether that's at benefit of the individual buyer or an opportunity to increase taxes for the govenment is still to be seen. It will most probably never become a higher margin for the manufacturer. But for we are that far, manufacturers will price their BEV as high as possible to balance the prices with ICE/hybrid and backlog in their production plants.