Carmakers’ electric ambitions set to hit half a trillion dollars
Looming zero-carbon mandates add urgency to the industry’s commitments to electric vehicles and batteries
Global carmakers are planning to spend more than half a trillion dollars on electric vehicles and batteries to 2030, according to a Reuters analysis, amping up investments aimed at weaning car buyers away from fossil fuels and meeting increasingly tough decarbonisation targets.
Less than three years ago, a similar analysis by Reuters found car companies planned to spend $300bn on EVs and related technologies. But looming zero-carbon mandates in cities such as London and Paris and in countries from Norway to China have added urgency to the industry’s EV-related investment commitments.
The most recent analysis shows carmakers planning to spend an estimated $515bn over the next five to 10 years to develop and build new battery-powered vehicles and shift away from combustion engines. But industry executives and forecasters remain concerned that consumer demand for EVs could fall well short of aggressive targets without substantial additional incentives and even greater spending on charging infrastructure and grid capacity.
Brian Maxim, head of global power train forecasting at AutoForecast Solutions, likens the growing investment commitments in vehicle electrification to the Cold War: “Once a few manufacturers announced EV programmes, everyone else had to announce their own or be viewed as being left behind.”
However, he added, “this leaves a lot of vehicle manufacturers planning significant volumes for a vehicle category that has unknown consumer acceptance, and will have minimal to no profit” for years.
Reuters compiled the investment data from company statements, investor presentations and regulatory filings.
Other surveys have come up with different spending projections. In June, consulting firm AlixPartners said auto industry investments in electric vehicles would reach $330bn by 2025. In 2020, all global vehicle manufacturers combined spent nearly $225bn on capital expenditure and research & development, according to AlixPartners.
Tesla, the world’s largest EV manufacturer, appears to be the one company that is selling virtually every vehicle it can build and is readying new multibillion-dollar gigafactories near Berlin and Austin in Texas that will significantly boost its annual production capacity. In early November, the company was valued at $1.2-trillion, more than twice the combined value of Volkswagen, Toyota, Ford and General Motors.
Meanwhile, political and regulatory pressure is building on the world’s carmakers to begin phasing out production of fossil-fuelled vehicles, including petrol-electric hybrids, over the next 10 to 15 years, while ramping up output of full electric models.
A number of countries, from Singapore to Sweden, have said they will ban sales of new combustion engine vehicles by 2030. US President Joe Biden has said he wants 40% to 50% of sales to be electric vehicles by 2030.
Germany’s VW Group, which is still recovering financially from the 2016 dieselgate emissions-cheating scandal, continues to lead the rest of the industry, with more than $110bn in EV and battery investment commitments to 2030. Those commitments, which represent more than 20% of the industry total, underpin VW’s aggressive rollout plans for millions of EVs in Europe, China and North America over the next decade.
VW’s investments, like those of many of its rivals, are aimed at improving the range and performance of batteries and lowering the cost of EVs, as well as expanding battery and EV production across the globe, according to public data released by the companies.
VW and fellow German carmakers Daimler and BMW are planning to spend a combined $185bn to 2030, while US manufacturers GM and Ford expect to spend nearly $60bn to 2025.
Chinese vehicle manufacturers, led by VW and GM local partner SAIC Motor, have announced well over $100bn in investment targets over the next decade. Japanese carmakers lag far behind, with Honda, Toyota and Nissan so far publicly committing less than $40bn combined.
These investments do not include the tens of billions of dollars being invested in additional production capacity by the world’s largest battery companies, many in co-operation with their carmaker partners.
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