Can ICE Manufacturers Survive?

[dhrivnak]

While I would like to think the change will happen fast, I predict it will be a while.

For example if Tesla is wildly successful and produces double the planed cars in 2013 that would be 40,000. Let's assume Nissan is wildly successful and does sell 100,000 Leaf's and for argument sake lets assume the Volt is an EV and sells 60,000 units next year. That is a HUGE growth of 1000%. That would still only be 200,000 EV's sold in 2013, or about 1.5% of total vehicle sales. And if EV sales grows as 100% a year from then on it will be 2020 before we convert. Then since cars average a 20 year life even in 2020 gassers will still be over 50% of our fleet on the road at that time.

Then remember we are a long way from consider moving the long haul truck fleet away from oil power.

So I am afraid we will be dependent upon oil for a long time to come.

 

[richkae]

There are 250 million cars in the US.
When gas gets too expensive, lots of people will abandon their cars. If 10% of people decide they can't afford their car, thats 25 million used cars on the market - double the size of the new car market.
A new car has a hard time competing with a cheap used car that is only a few years old. There will be lots of choices. At first most of them will get lousy fuel economy, but there will be enough that don't, and the glut will make them very cheap.

Those who can afford the gas will keep driving and burning it - at a reduced rate. But the market for new ( ICE ) cars will crater.

 

[dhrivnak]

Just in from the Washington Post, if we cut back on our gasoline purchases then prices will slow. I would like to see $6 gasoline I do not expect to see it in 2012.

On Tuesday (2/28), WTI dropped $2.01, or nearly 2 percent, to $106.55 a barrel. Brent fell $2.62, or 2.1 percent, to $121.55 a barrel.

Petroleum demand in the U.S., the world’s largest oil consumer, has fallen 5.5 percent so far this year, compared with a year ago. A weekly survey by MasterCard SpendingPulse shows that Americans have cut back on gasoline spending for the past 49 straight weeks. Last week, the Federal Highway Administration said that motorists drove 1.2 percent less in 2011.

 

[richkae]

This won't last.
China will be the world's largest consumer of oil by 2020 or sooner. Every year the decisions of US consumers becomes less and less relevant to the world price.

 

[Doug_G]

I see it happening the same way the paintball industry changed there was a paradigm shift in the late 90's (going from mechanical to electronic).
Back in early 90's the highly respected paintball marker makers were AGD and WORR to the point where there were shops dedicated to modifying them, electropneumatics came along and wiped the mechanical markers out, they were just better to the point where most paintball markers are battery operated now (10% increase in price offers a huge advantage- who wouldn't take it?).

Now that's taking things in an unexpected direction. Tom Kaye is a friend of mine. As I understand it, it wasn't an inability to adapt; rather, one company got a patent on electric triggers, which made it impossible for the other companies to follow suit. They eventually had to sell out or close down.

 

[Dan5]

Now that's taking things in an unexpected direction. Tom Kaye is a friend of mine. As I understand it, it wasn't an inability to adapt; rather, one company got a patent on electric triggers, which made it impossible for the other companies to follow suit. They eventually had to sell out or close down.

Exactly right! That's why I think it's a good analogy. Tesla has the alot of the patents concerning EVs and EV battery manufacture, others can "buy" the rights to the IP (expensive), like Toyota and Diamler from Tesla and there are other EVs out there who are making the batteries differently (and more expensively) to try to get around the patents. Currently the Leaf, Focus Electric, and MiEV are selling at a loss.
One qualifier to this: Unless the government steps in and says "play nice and share your IP for a decent cost"

 

[GSP]

@GSP you wrong, GM failed despite the fact being the biggest. The Quick ones may survive. But i see that new competitors comes from niches like Teslamotors, who are trying to take the business model from a new innovative approach (like tesla did).
I think the old ICE-car makers will fail, because they cannot survive the gap from the transformation ICE to Electric cars. If customers stops to buy the current gasser-models, because something total new will be ready, they may wait 2-3 year with the buy because they cannot sell the current old-fashioned car (or with a huge loss). And thousands of engineers will loose their jobs because they are no longer needed to develop new ICEs or gearboxes.
the paradigm change will comes within a few years like the change from analog to digital cameras.

Eberhard, I agree completely, except for that "GSP you wrong" part.

I am not saying that big will win out over quick. I am not smart enough to predict the winners. However, I do think Tesla is doing all the right things to be a survivor.

I am saying that some of the companies like Daimler, VW, BMW, Porsche, Toyota, Ford, Honda, Mitsubishi, Nissan, SIAC, BYD, Hyundai, (maybe even GM and Chrysler-Fiat) will adapt and survive. ICEs and gearboxes will be phased out over decades, and the other parts of the business are more than 80% of the job.

GSP

 

[ElSupreme]

I think we are getting a little ahead of ourselves. The big ICE players aren't (all) going away. Even if the EV market explodes. Even if you ramp up EV production every year at STUPID rates you not going to even get to 50% new cars in 10 years being EVs. This isn't an industry that can react quickly. It is too big and to refined (efficient) to change quickly. Even if Tesla could produce 200,000 cars a year that is just a small dent in annual auto sales. So even if EVs catch on really quick it will take 10+ years before they can take over the ICE market (baring some catastrophic event). It isn't like you are changing the phone everyone carries around, you are changing THE MAJOR world transportation system.

Why would GM, Ford, VW, Toyota want to rock the boat? They currently are doing pretty well, and I think are pretty happy with their market share. Of course they want more, but probably are willing to bet big to get it. They want to maintain their spot and erode (or wait for someone to misstep) their competitions market share away. Nissan is the only major maker betting on Electric. I think they will win with their bet. But if for some reason EVs don't catch fire Nissan is going to lose big. If Nissan succeeds, and can bring out new EV cars the other major players will be forced to act. There will be shakeup and sure on or two may lose and Tesla, and maybe another will rise. But you aren't going to see all the major manufacturers collapse. And see Tesla, Nissan, and BMW owning the car market. There will be 10-20 large manufacturers of automobiles, just like there are now, when EVs are the dominant force. Sure Tesla may be one of them, and Honda may be on the outs but I really don't see any of the big manufacturers failing unless they see the EV wave coming and just hunker down and make muscle cars, or their first EV is a disaster ridden with safety/recall issues and they take such a huge financial bath on an EV system they basically have to scrap.

There will be however a big shakeup in volume when the EV wave hits!

 

[richkae]

Auto sales in the US fell 39% from 2005 to the 2009 low point. 2010 was still 33% below the peak. 2011 was better but still 25% below the peak.
The auto industry wants them to bounce back to those 2005 levels, but I don't think they ever will.
Predictions for 10+ years ahead are hard to have a lot of faith in, so here is one for 2012:
We will have $4+ gas and auto sales will be down below 2011 levels. Auto makers will cry and whine about it.

I am excited to see the effects of $4+ gas on auto sales - with fewer unrelated economic disasters confusing the issue.

 

[ElSupreme]

I am excited to see the effects of $4+ gas on auto sales - with fewer unrelated economic disasters confusing the issue.

I was trying to convince people when I was in college (early 2000's) that they should raise gas taxes so that it would be ~$5.00 per gallon. And people would take transit more, people would drive smaller more efficient cars, people would stop buying 'light trucks'. You would naturally force the automakers to produce a higher MPG fleet. Without any arbitrary numbers and testing like they try to do now.

I was mostly attempting to point out that people drive too much. I used a bicycle as my primary mode of transportation, and you can cover some serious ground. It is better for you and for the environment. Better for traffic.

 

[Mycroft]

Better for doctors and hospitals as well.

Completely disruptive change can kill companies faster than they can adapt. Remember what happened to Detroit in 70's/80's.

 

[mattjs33]

I haven't read the whole thread, but you are getting way ahead of the game. What's an ICE manufacturer? Manufacturers build cars. Whatever form they take is subject to the whims of the market, the availability of resources and infrastructure, and regulations. There were no minivans before Chrysler introduced them in 1984, yet no one was asking whether the other "non-minivan" makers would survive.

Electric cars will be a part of the market in the future, and they will be produced by the newcomers as well as the usual suspects, the ones characterized as "ICE manufacturers". Nobody will invest in new technology unless they believe the market is there, and they can make a profit doing so. Evidence thus far suggests they cannot without subsidies. A few gamblers willing to push the envelope, like Tesla and Nissan, will be the initial darlings of the wave of change, but don't expect the big guys to go anywhere soon. Unless you think that Tesla has the capability to produce millions of cars a year in the near term.

The fact is that Tesla is merely a bit player at the moment. Even Nissan does not rank among the giants.

 

[strider]

This won't last.
China will be the world's largest consumer of oil by 2020 or sooner. Every year the decisions of US consumers becomes less and less relevant to the world price.

China is slowing down fast. The smart money is predicting a hard landing. Couple this with recessions in Europe and the US and commodity prices are going to fall due to weakening demand. This will be a temporary dip in the face of Peak Oil but just like prices dropped following 2008 they will do so again. Whether people take that as assurance to remain complacent is anyone's guess.

 

[richkae]

40 years ago there were a few big computer makers. We still have computers, and there are still companies that make them.
Almost none of the original players are in the game.
Of IBM, DEC, Control Data, Univac, Honeywell, NCR, Burroughs only IBM still exists in the industry and it barely has a presence "manufacturing computers" anymore.
The technology changed and they did not adapt - the new technology threatened existing product lines and they did not want to abandon them.

I am sure there are lots of other examples.

Suspend, for a minute, arguing about what gas prices will do.
Imagine a scenario where they rise faster than most think is possible.
Under that scenario EV capacity can't grow fast enough and the entire new car market shrinks faster than most manufacturers can react - some don't survive.

 

[Doug_G]

I haven't read the whole thread, but you are getting way ahead of the game. What's an ICE manufacturer? Manufacturers build cars.

And electronics companies build electronics. Explain that to the electron tube manufacturers who were all displaced by transistor startups.

 

[Steph]

Lets make a list of survivors and a death watch list:
Survivors:
Tesla
Nissan
GM
Toyota
BMW

Death watch
Mazda
Honda
Ford
Chrysler
Audi VW

Who else?

 

[Lloyd]

Fiat, Pugeut, Alpha Romeo, Chrysler........

 

[Robert.Boston]

I would put money on Ford over GM on that list.

 

[mattjs33]

Lets make a list of survivors and a death watch list:
Survivors:
Tesla
Nissan
GM
Toyota
BMW

Death watch
Mazda
Honda
Ford
Chrysler
Audi VW

Who else?

What criteria are you basing this list on?

I think some here are being a bit blind to the sheer might of the big players. How are we so certain that Tesla will be one of the survivors? Suppose the market goes to EV very quickly. Who is best funded? Who has the most capacity? Who has access to the most resources? If VW or Ford decided to go all in on EVs tomorrow, it'd be game over for Tesla. Sorry. GM makes about as many Camaros in a week as cars that Tesla has made in its entire existence. You can argue if you want that Tesla has been the latest EV catalyst, but when the majors decide there is a valid business case to get into the game on a grand scale, Tesla will find it hard to make substansial gains. Even 20,000 Model S cars is chump change in a 10 million plus a year U.S. market.

 

[qwk]

First, GM or ford would have to make EV's that people want to buy. Good luck with that.