Last week Automotive News acknowledged that “there has never been a better time for EV startups.” Even so, the trade journal couldn’t bring itself to fully explain why it has been “at least a century since so many startups have tried to crack the code” to succeeding in the U.S. auto industry.
“The arrival of viable electric powertrains, combined with consumers who are more accepting of the limitations of electric vehicles, has sparked unprecedented investment in new would-be automakers,” wrote Richard Truett, Laurence Iliff and Hans Greimel (2021).
The specter of climate change was not presented as a key factor driving a boom in EV investment dollars. Nor was the slowness of existing automakers in transitioning away from fossil fuel-powered vehicles — which created a void that others would inevitably try to fill. Capitalism 101, right?
Why wasn’t industry foot dragging acknowledged?
Did Automotive News not mention climate change because a goodly portion of its readers are still in denial about it? Or did the trade journal not want to offend the established automakers, who have been major sources of resistance to stiffer government regulation (Laville, 2019)? Whatever the reason, this is weak-kneed journalism.
Also see ‘Auto media largely ignore ‘code red’ IPCC climate change report’
Truett, Iliff and Greimel (2021) were also a wee bit casual in their historical context. The reporters stated that, “Starting a car company and running it profitably has never been an easy job — not a century ago, not in 2021.”
It’s true that the development of mass production fueled the U.S. auto industry’s consolidation. A 1925 issue of Motor magazine counted 49 automakers, of which only 16 were deemed likely to survive (Cray, 1980). That said, in the roaring-20s noteworthy automobile companies were still being launched, such as those that produced the new Chrysler, Cord and Graham-Paige brands. It wasn’t until the Great Depression that the industry shrunk to close to its early post-war size (go here for further discussion).
Indeed, the current churn among EV startups has a lot in common with the early decades of the U.S. auto industry. As a case in point, Lucid Motors was founded by Peter Rawlinson, the former chief engineer of the Tesla Model S. This is reminiscent of Walter Chrysler and Charles Nash leaving General Motors to run their own automakers.
Industry ‘intelligence’ was rather superficial
In general, the Automotive News article lacked analysis from savvy industry observers. This is problematic because the trade journal’s reporters have never been particularly strong at prognosticating (go here for further discussion).
For example, Truett, Iliff and Greimel stated that Bollinger’s prospects “will become increasingly difficult” as “the market fills with electric trucks.” Why? The firm’s proposed truck and sport-utility vehicle are estimated to have prices starting at $125,000 (Stafford, 2021). That’s a much more rarified market than for more “mass-market” vehicles such as the Ford F-150 Lightning, which is expected to be priced in the $42,000-to-$90,000 range; the Rivian, which may start at under $68,000; or even the GMC Hummer, whose base model’s price could list for just under $80,000 (Capparella, 2021).
Also see ‘Is Tesla Cybertruck a brilliant breakthrough or a gimmick?’
In addition, Bollinger has one of the most unique designs among the startups, which could plausibly help it carve out a distinct market niche. Perhaps just as importantly, the body’s almost total absence of curved sheetmetal and glass could make production much less expensive than its competitors. Bollinger may end up being a low-volume producer along the lines of Checker Motors, but it appears to to have less blue-sky aspirations than startups with more exotic designs.
On the other side of the coin, the article does not raise questions about the prospects of Lucid gaining a foothold in the luxury car field given the number of legacy automakers who will be coming out with EVs over the next few years.
Indeed, the authors don’t address one of the most obvious questions about the EV startup wave: Could the firms that target more obscure market niches such as delivery vans have higher survival prospects than those trying to enter mass markets?
How big of a potential challenge is this, anyway?
Truett, Iliff and Greimel seemed hesitant to compare and contrast the prospects of the 10 startups they discussed. Nor did they delve very deeply into the burning question of to what degree these automakers could further undercut the dealer franchise system.
It is also unclear what could be the scale of the threat to legacy automakers. For example, roughly how many vehicles might these aspiring manufacturers plausibly produce — individually and collectively — if they all were successful in ramping up their operations?
All in all, this article was entirely too vague for what was billed as an “intelligence report.” Meanwhile, Automotive News picked up a Reuters (2021) story a few days later that offered a much more nuanced analysis of EV startups regarding their strategies for ramping up production. What is keeping Automotive News‘ reporters from firing on all of their cylinders?
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RE:SOURCES
- Capparella, Joey; 2021. “How Much Will the 2022 Ford F-150 Lightning Cost?” Car and Driver. Posted Nov. 12.
- Cray, Ed; 1980. Chrome Colossus: General Motors and its Times. McGraw-Hill Book Co., New York, NY.
- Laville, Sandra; 2019. “Exclusive: carmakers among key opponents of climate action.” The Guardian. Posted Oct.10.
- Reuters; 2021. “How EV startups aim to avoid Tesla’s ‘mass production hell.'” Automotive News (subscription required). Posted Aug. 17.
- Stafford, Eric; 2021. “2022 Bollinger B2.” Car and Driver. Accessed Aug. 16.
- Truett, Richard, Laurence Iliff and Hans Greimel; 2021. “Big money is suddenly lifting startup hopes.” Automotive News (subscription required). Posted Aug. 13.
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