Global paradigm shift: The return of small cars and the extended life of conventional engines

Big cars and small cars. Beyond electrification, the automotive world is realizing that markets need both extreme products and are beginning to change their industrial strategies.

The gap between car consumers continues to grow across the world. There are more and more premium brands as well as more affordable models. Meanwhile, the supply of “middle class” cars has been steadily declining year over year. Although costs reduce over time on an industrial scale, it still occurs technologies Which are in the early stages of entry into the world of cars and at the moment, although their quality has improved, They inevitably raise the price.

is the best example of electric carsAre expensive in design and technology, but which plan to reduce their costs over time and mass produce their required components, Batteries. The trend is up for the first time after exponential and sustained growth since 2018 flatten that curveWhich, although it is continuously increasing, has forced some large manufacturers to take urgent measures or decisions in order not to create a balance between investments and sales, that is, cost effectiveness.

The last person to react to this seemingly inevitable reality was Mercedes-Benz, whose global CEO is Ola Källeniusannounced a few days ago that the plan to reach 50% electric products by 2025 had been changed and that target This is expected to be achieved only by 2030. One of the reasons given is the similarity of costs, and hence prices, between conventional cars with internal combustion engines and 100% electric cars, “It’s many years away”According to the executive.

Ola Källenius, CEO of Mercedes-Benz, announced that electrification objectives have been postponed by at least five years and will be reached by 2030. In addition, the German brand will develop new combustion engines for the reformed Euro 7 standard that will come into force in 2027. Reuters/Steve Marcus

“In Europe, sales will probably not be fully electric until 2030, as battery-powered cars currently represent only 11% of total sales, and 19% including hybrids”Callanius said. The numbers show this clearly. Mercedes-Benz expects the share of fully electric and plug-in hybrid vehicles in sales to remain stable between 19 and 21% in 2024, meaning Profitability margin for this year is only 10%, This is worse than the return for 2023, which reached 12.6% and was considered the low end of forecasts.

This means that the objectives of electrification have been postponed. heat engines are expanded, because car brands live from the sale of units. But the decline in demand for sustainable cars is not the only reason for this decision. What happened is that European Union Ultimately had to bow to pressure from car factories who asked for a reconsideration of the time frame and requirements of the new emissions standard. euro 7Which was to come into force the following year with much higher standards, forcing the industry to abandon many existing mechanics, stop production or openly turn to electrification, with two possible paths.

final decision European Parliament to delay Euro 7 rules by two years, and postpone it from July 2025 to July 2027 for cars and vans, and to 2029 for trucks and buses. Manufacturers making less than 10,000 vehicles per year will also be exempted from compliance until 2030.

For this reason, it is no coincidence that the CEO of Mercedes has also indicated that they will develop a New technology for its internal combustion power plantsWhich will begin to be implemented in 2027 and “last for the next decade”, although the commitment to stop the manufacture and sale of cars with engines powered by petroleum-derived fuels by 2035 remains unchanged.

Chinese brands compete in Europe with market-breaking prices. Complaints from manufacturers seeking protectionist measures also include an investigation into whether they are dumping. Reuters/Annegret Hilse

However, it’s not just the cost of electric cars that the industry faces, the cost of manufacturing them and the cost of selling them. Invasion of products from China This is the second major concern of the historic automobile manufacturers as it does not seem possible to achieve this with the cost Europe or United StatesAnd questions are raised on that too dumping practices In many markets, they offer consumers more affordable vehicle options than brands in that Asian country.

Jim Farley, Global CEO of Fordjust commented Wolf Research Global Auto Conference in New Yorkthat “it is non-negotiable that we are going to allocate capital New affordable electric vehicle. I told my team that it had to be a product that would make us money in the first 12 months of sales. And I don’t want to be handed a poor roadmap. I need a real plan. And unless there is a concrete plan, we will not launch that car.”

This decision by Ford’s top executive does nothing more than Show what has changed in the world automobile market In just five years. In 2018, Ford announced that it would stop manufacturing midsize and small cars, leaving the world Ka, without Fiesta, Focus and EcoSport, and they will focus specifically on SUVs, pick-ups and utility vehicles. That was the case until now, but the paradigm shift in the automobile industry reached even companies the size of the Detroit Colossus.

Ford CEO Jim Farley said that there can be no compromise on making an affordable electric car. Thus, the policy of devoting itself only to pick-ups, SUVs and vans changes to adapt to market signals. Reuters/Rebecca Cook/File

“Small and accessible electric cars It is necessary to compete with Chinese manufacturers, which represents a huge strategic threat. These companies sell large numbers of electric vehicles in China and are expected to enter the U.S. market sooner rather than later,” Farley concluded, adding, “A small, electric car offers a Better running costs than a Corolla, Civic or even the Ford Maverick.

Even if it is through electric platform, two big companies like Ford and Mercedes-Benz are showing it There is no one recipe to improve the profitability of an automotive company, and both extremes will remain potential solutions to face the new world, with new actors, new technologies and buyers who continue to search for Cars that suit your needs.

toyota Bets continue on hybrids, Renault has recently launched the electric R5 at a price of less than 25,000 euros, Citroën Since DS’s independence it has redirected its objectives towards more accessible cars, Charter Future small electric cars like the Panda Concept announced, volkswagen ID.2 introduced for 2025 with similar segmentation objective as Renault 5, and Tesla Development has begun on the Model 2 or whatever it will eventually be called, which will be the accessible car from Elon Musk’s brand.

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