Daily Management Review

Global Auto Firms To Expend $300B In Global Drive Towards Electric Cars


Global Auto Firms To Expend $300B In Global Drive Towards Electric Cars
Over the next 5 to 10 years, a total of about $300 billion would be spent on electric vehicle technology by global automakers and almost half of that amount is planned to be targeted at China. According to analysts, this would hasten the process of transforming the global auto industry to cleaner energy sources from fossil fuels which would also shift power to battery and electric vehicle technology suppliers of Asia.
An exclusive analysis of the public data released by such companies conducted by news agency Reuters, a large portion of the amount planned to be spent on alternative fuels is being accorded to Germany’s Volkswagen AG and which is being driven by steps that are being taken by various governments to reduce carbon emissions. The technology advancement from the expenditure would include improved battery cost, range and charging time which would increase the appeal of electric vehicles among consumers.
For decades, China has lagged behind in terms of technology to automakers in Germany, Japan and the United States which dominated the market for conventional internal combustion engines and the associated technologies. But according to industry executives, China is set to lead electric vehicle development.
“The future of Volkswagen will be decided in the Chinese market,” said Herbert Diess, chief executive of VW. This German car maker has been operational in China through joint ventures that are decades-old and works together with the largest of the Chinese automakers SAIC Motor and FAW Car.
China “will become one of the automotive powerhouses in the world”, said Diess while speaking earlier this week to a small group of reporters in Beijing.
“What we find (in China) is really the right environment to develop the next generation of cars and we find the right skills, which we only partially have in Europe or other places,” he said.
Diess added, “We have very clear policies established here in China. Policymakers and regulators are requiring” a shift to electric vehicles.
Auto makers have sped up their shift to manufacturing clean energy cars because of countries such as China imposing greater restrictions on conventional gasoline and diesel engines. Plans to spend about $90 billion on the development of electric vehicles were announced by global automakers about a year ago.
According to analysts, this new figure of $300 billion which is planned to be invested by global automakers for development of electric vehicles and its mass production in China, Europe and North America is more than the value of the economies of countries such as Egypt or Chile.
The Volkswagen Group is expected to account for about one-third of the total EV spending by the industry at about $91 billion. This German car maker is trying hard to distance itself from the Dieselgate scandal that had cost the company billions in fines and a huge dent to its image.
According to Alexandre Marian, AlixPartners managing director, “there has been a rush” to invest in electric vehicles and batteries. He was also the co-author of a 2018 study which estimated that the total spending by global automakers and suppliers on EV through 2023 would be $255 billion.
Alliances, such as those between VW and its Chinese partners, will be among the greatest spurs to innovation, especially in the global rollout of electric vehicles.
VW is “evolving from the model where we have been developing and bringing European technology into this market to a new phase where we will co-develop part of the automotive technology in China for the rest of the world. I think this is a significant step change,” said the company CEO Diess.