Auto execs are having nightmares about the future

I was in conversation recently with the vehicle dynamics engineer for a brand-new vehicle from a large international carmaker who shall remain unnamed, and I could literally see the fear in his eyes. 

To begin with, I think it’s safe to say that his colleagues and him have taken huge strides in the last decade or two. Most new cars on the market today are markedly better than they were ten or twenty years ago. Everything ­— overall quality and refinement levels, ride & handling and, of course, efficiency ­— is considerably improved in the latest generation of most vehicles being turned out by the global automotive industry. Part of this is the result of increasing competition, and part of this has to do with meeting ever-stricter regulations. And, for that – even though the industry fights regulation tooth-and-nail, possibly by force of habit – the various regulatory bodies around the world deserves a pat on the back. 

Post ‘dieselgate,’ however, it appears that the politicians have gone into overdrive and are issuing carte blanche regulation to push for EVs. But there are a couple of unanswered questions. For one, are EVs really that clean if they’re powered by electricity that’s generated by burning coal? Can the grid handle it if everyone suddenly switches to an EV? How do you safely recycle large volumes of lithium ion battery packs? And what are the environmental effects of mining for lithium and other rare earth metals that go into making electric cars? And, lastly, why does there seem to be no real focus on fuel cells considering that they would eliminate most of these unanswered questions? What they would require, of course, is a longer-term vision and a commitment to setting up a hydrogen filling station infrastructure. 

What’s happening here, I think, is something that the MBA text books would call ‘short-termism’ – that’s when CEOs focus on their quarterly targets at the expense of long-term goals. Why? Well, because the company stock price depends on it – and the CEO’s bonus is directly tied into meeting these short-term earnings targets, which in turn is reflected in the company’s performance on the stock exchange. 

In this case, politicians focus on short-term regulations around EVs, and thereby demonstrate that they’ve addressed the problem of automotive emissions. Following this, of course, they ask to be voted back into office – while all the questions raised above remain unanswered. In the meantime, even if EVs do turn out to be the silver bullet, internal combustion powered vehicles aren’t going anywhere overnight, and so carmakers can’t exactly afford to pause manufacturing of the IC engine just yet. 

Oh, there is one other factor driving the roll out and development of the electric car – and that’s the world’s largest car market, China. The Chinese government decided some time ago that they would like to achieve technological leadership in the automotive industry. They also realised very quickly that they were never going to beat the world’s automakers at their own game. They knew they needed to change the rules of the game, and so the single-minded focus towards EVs allows them not only to address the pollution problem in their cities, while also cutting down their fuel import bill, but it also enables them to leapfrog to a leadership position when it comes to the development of EVs – that’s not to mention the fact that China now controls over 90% of the global supply of raw materials that go into the production of EVs. 

The challenges, then, will only be getting more intense for the old guard. Not only do they have to continue to develop new products to cater to existing demand, but also develop vehicles of the future to pre-empt regulations going forward while anticipating future demand, all the while retaining the ethos of their existing brands that have been built up over decades. The nightmares have only just started for global auto execs, it seems!   

Also read: 

Next-gen Porsche Macan set to become fully electric

Push for electric mobility: Government reduces import duty on EV components