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13 July 2017

Future with affordable electric and autonomous cars coming fast

No Obligation, Fast & Simple Free New Car Quote

It’s more than hype. Yet another voice has weighed in on the changes coming to how people want to get around and what that means for the auto industry.

AlixPartners has released an analysis of trends, its latest survey, and an updated forecast that automakers ignore at their own peril. Bottom line: People are already putting off getting a license and buying a new car as car-sharing and ride-hailing meets their immediate needs. And the world of electric and autonomous cars is barreling ahead faster than anyone anticipated. By 2025, cost and volume of electric cars could be at parity with combustion engines, and autonomous vehicles will also become much more affordable.

The ideas are not shocking, but the frankness with which yet another respected group of analysts confirms the timeline is noteworthy.

We are on the bridge to the future now and it’s accelerating, said John Hoffecker, AlixPartners global vice chairman at an Automotive Press Association event in Detroit to release the findings. Electric and autonomous vehicles will change how people buy cars, how they make them, and who the competitors are. There are new suppliers and business models, partnerships, and the challenge of paying for it all amid a sales downturn.

There will be consolidation: The more than 50 major companies working on autonomous vehicles today will dwindle to a handful of winners in the future, and the cost of the technology could drop 78 percent by 2025.

Costs are also coming down on electric vehicles. The costs of battery cells and packs have fallen 80 percent since 2010, and the cost of electric motors could come down another 20 percent by 2025. No one expected such a drastic drop, said Hoffecker. Costs should reach parity with combustion engines in about 2025.

China will lead the charge. Domestic automakers only have 43 percent of market share in the world’s largest auto market, but they have a 96 percent stranglehold on the EV market and 49 of 103 new EV launches by 2020 will come out of China, said Hoffecker. Tesla is the only outsider with any perceptible share. China is also targeting to have 65 percent of the world’s manufacturing capacity for lithium-ion batteries by 2021 or the equivalent of five Tesla gigafactories.

Here in the U.S., Tesla created major value by branding electric and has double the customer satisfaction of other brands, according to the most recent AlixPartner survey. But investors are expressing concern about Tesla’s future with the launch of the make-or-break Model 3. And would-be competitor Faraday Future this week canceled plans to build a $1 billion electric vehicle assembly plant in the Nevada desert.

Every major automaker has invested in electrification and autonomous technology, as have big name newcomers including Apple and Waymo and a growing number of suppliers. Despite traditional automakers having a century of automotive experience, AlixPartners found consumers have more trust in Silicon Valley for the AV tech, said Hoffecker.

In the meantime, consumers have lost some fervor for car-sharing and are hard-pressed to name companies offering it such as Zipcar or Car2go. But ride-hailing (Uber, Lyft) is proving so popular that people are putting off getting their license or buying a car because these companies make getting around so easy, said Mark Wakefield, global co-head of AlixPartner’s automotive practice.

There would be about 12 million more vehicles on the road today if not for car-sharing keeping people from owning and driving their own vehicles, he said, noting 29 percent of car-share users avoided or postponed buying a new vehicle and 21 percent of ride-hail users put off getting a car. It’s a major factor in the consultant’s forecast that U.S. sales will fall to 16.9 million this year and hit the bottom of the trough at 15.2 million in 2019.

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