According to Lux Research, nearly all automakers now sell some form of battery electric vehicle, so the focus has shifted to making them profitable.
The auto industry continues to face pressure to reduce carbon emissions, and now battery electric vehicle (BEV) manufacturers have turned their attention to profitability while trying to address charging speed and range, according to Lux Research.
The firm, which just released “The Electric Vehicle Inflection Tracker: 2020 Edition” report, says consumers are focused on how far a car will go and how much it will cost, with range improving at a compound annual growth rate of 13.7 percent since 2011.
“Prices have also gone down, with the average vehicle’s base manufacturer’s suggested retail price in 2019 at US$33,901, down from US$42,189 in 2016. These changes are making it easier for consumers to own an electric vehicle,” said Chris Robinson, senior analyst at Lux Research.
According to Lux Research, nearly all automakers now sell some form of BEV, so the focus has shifted to making them profitable.
“We’ve seen a large focus on electrifying high-priced brands,” Robinson explained. “Luxury brands offer vehicles at higher price points and are able to absorb the additional costs of the battery pack.”
But Lux Research believes automakers should focus on their battery supply chains, as battery shortages have already caused some automakers to reduce their BEV production plans.
“To fix this issue, which will only be exacerbated over the next few years as more electric vehicles come to market, automakers should secure raw materials like cobalt and lithium for their future vehicles,” reads the report, which came out on Tuesday (June 9).
Some examples of companies making moves to secure raw materials include Tesla (NASDAQ:TSLA), Volkswagen (OTC Pink:VLKAF,FWB:VOW) and BMW (ETR:BMW), which have signed agreements with Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460) for lithium supply. Earlier this year, Tesla was also reportedly seeking to sign a deal for cobalt with Glencore (LSE:GLEN,OTC Pink:GLCNF).
As automakers continue to improve charging speed and minimize battery size, more consumers are expected to seek out electric vehicles. In fact, Lux Research predicts that between 2035 and 2040, electric vehicles will make up more than half of all vehicle sales.
“Currently, BEVs are more expensive and less convenient to use than their nonelectric counterparts, but technology will continue to close this gap,” said Robinson. “We expect to see efficiency front and center as the next major focus of BEV design, with automakers either downsizing packs to increase profitability or offering more range.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.