Automaker restructuring: Car manufacturers’ electric overhaul

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Automaker restructuring: Car manufacturers’ electric overhaul

Automaker restructuring: Car manufacturers’ electric overhaul

Subheading text
Automakers are shifting gears to electric vehicles that promise cleaner transportation.
    • Author:
    • Author name
      Quantumrun Foresight
    • June 10, 2024

    Insight summary

    The automotive industry is separating electric vehicle (EV) operations from traditional internal combustion engine units, signaling a strong commitment to the future of electric mobility. This strategic realignment is part of a wider trend, with significant investments in EV technologies, infrastructure, and battery production, aiming to meet the growing consumer demand for sustainable transportation options. As this evolution progresses, it's poised to impact not just the market dynamics and consumer preferences but also contribute to a shift towards environmental sustainability and new energy solutions.

    Automaker restructuring context

    In 2022, Ford Motor Company announced it would move the company's EV and internal combustion engine (ICE) divisions into separate, distinct units to focus on the profitability of its EV sector. The company has also committed an increased investment of USD $50 billion towards EVs and related technologies by 2026, up from its previously announced USD $30 billion through 2025. This step positions the automaker to capitalize on the growing investor interest in EVs, even as Wall Street analysts call for a complete spin-off of the EV business to unlock additional value.

    Ford's strategic delineation creates two separate entities: "Ford Model E" for its electric vehicle operations and "Ford Blue" for its traditional ICE business. This reorganization mirrors broader industry trends, where automakers increasingly recognize the necessity of adapting to a future dominated by electric mobility. Such a move requires focused management strategies and operational practices. The automotive industry is witnessing a transition toward electric mobility, underscored by other manufacturers like General Motors adopting similar strategies. 

    The Italian car company Lancia, owned by Stellantis, is also transforming into an EV-only brand by 2028, further highlighting the industry-wide shift towards sustainable transportation solutions. This transition is not merely about adopting new technologies but signifies a fundamental change in how automakers perceive their role in a future marked by environmental considerations and technological advancements. With EV sales expected to make up 50 percent of the automotive market by 2030 (according to the US Bureau of Labor Statistics), companies are investing heavily in EV technologies, infrastructure, and battery production.

    Disruptive impact

    As the market for EVs expands, consumers may enjoy a wider selection of vehicles, potentially leading to decreased prices due to increased competition and economies of scale. However, the initial cost of purchasing an EV remains higher than that of traditional vehicles, although long-term savings on fuel and maintenance can offset these upfront costs. Additionally, the transition requires changes in daily routines, such as planning for charging times instead of quick fuel stops. These changes could affect individuals who lack access to convenient charging infrastructure at home or work.

    The transition to electric mobility requires significant strategic and operational adjustments for businesses. Companies may need to invest in research and development to innovate in battery technology and stay competitive. Furthermore, automotive manufacturers may need to retool existing production facilities or build new ones tailored to EV production, entailing substantial capital expenditures. The trend also opens opportunities for new entrants and suppliers specializing in EV components and services, reshaping the industry landscape and potentially displacing established players unable to adapt swiftly.

    Governments may need to implement incentives, such as tax rebates and grants, to encourage EV adoption among consumers and investment by companies. They may also have to invest in expanding and upgrading public charging infrastructure to support the growing number of EVs. These investments also involve ensuring the electricity grid can handle increased demand. Moreover, there may be a push towards harmonizing standards and regulations related to EVs and their components, fostering global market integration and cooperation.

    Implications of automaker restructuring

    Wider implications of automaker restructuring may include: 

    • Increased investment in renewable energy sources by governments and businesses, aiming to support the rising demand for electricity from EV charging.
    • A surge in job opportunities in the renewable energy sector and EV-related industries, offsetting the decline in traditional automotive manufacturing jobs.
    • Changes in urban planning and infrastructure development, with cities integrating more EV charging stations and prioritizing electric public transportation options.
    • New educational and training programs focused on EV technology and renewable energy, preparing the workforce for the future job market.
    • The automotive industry forming partnerships with technology companies to advance EV battery technology and energy storage solutions, driving innovation.
    • Consumer behavior shifting towards a preference for sustainable transportation options, influencing other sectors to adopt greener practices.
    • Governments revising tax policies and incentives to encourage the purchase of EVs and investment in clean energy, shaping economic policy towards sustainability.
    • A decline in oil demand leading to potential geopolitical shifts and affecting nations heavily reliant on oil exports for their economy.
    • The emergence of new business models in the automotive industry, such as vehicle-as-a-service (VaaS), altering the traditional ownership-centric model.

    Questions to consider

    • What opportunities could the growth of the EV industry present for your career or education path?
    • How could your local community adapt its infrastructure to support the increasing use of electric vehicles?