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Ford, GM Slow Rolling EV Ramp Up

Production plans show increasing focus on high-profit trucks
#Cadillac #Ford #GeneralMotors

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The combined electric vehicle production of Ford and General Motors in North America is due to jump nearly tenfold over the next six years.

But the spike isn’t expected to have much, if any, impact on reducing tailpipe emissions. That’s because the growth comes from such a low starting point and that the industry continues to shift to larger SUV/crossovers and pickup trucks, most of which still will be powered by a combustion engine.

Big Picture

Prior to the coronavirus outbreak, Ford and GM planned to build a paltry 35,000 EVs this year, Reuters reports, citing data from AutoForecast Solutions.

According to the Chester Springs, Pa.-based forecasting firm, the two carmakers’ current production plans indicate their combined annual volume of such models will grow to 325,000 units in 2026. For some perspective, Tesla delivered more EVs on its own (nearly 368,000 worldwide) last year.

Trucks Rule

The projected EV increase would hike the penetration rate of such models from 0.5% of Ford and GM’s overall North American volume last year to 5% in 2026, Reuters notes.

Over the same period, the two Detroit automakers are projected to add 600,000 light trucks for a total of 5.2 million units in 2026. By that time, crossovers, SUVs and pickups will account for 87% of the North American market, up from 82% today.

Carmakers cash in on the truck binge in two ways. Such conventionally powered vehicles are less expensive to develop than EVs and their pricey batteries. Trucks also generate much larger profit margins, especially the large luxury models that are becoming increasingly popular. In fact, Reuters says GM could pocket as much on the sale of one $80,000 Cadillac Escalade as it would earn on that of a dozen compact cars.

EVs Coming…to Other Markets

Ford and GM have plenty of EVs in the pipeline. But the bulk of these are targeted for China and Europe, where there is more demand for such models, fueled in large part by government subsidies and stringent emissions regulations.

EVs are expected to account for about 10% of the market in both China and western Europe by 2026, according to analyst estimates. Hybrid-electric models could tally another 10% in Europe and 5% in China. The U.S. will be more skewed toward hybrids with a 13% projected market share, while pure EVs will be just under 5%, according to the report.

COVID-19 Effect

The spread of the coronavirus could further limit any near-term growth for EVs. The pandemic’s drain on the economy is driving fuel prices down, which extends the payback period for buyers to recoup the cost premium of electrified models. In addition, automakers likely will face greater financial constraints to invest in the technology.

At the same time, the Trump administration is expected to scale back tougher upcoming fuel economy regulations that would have dictated a large-scale transition to electrified vehicles.

The continued growth of the truck market will compound the problem, environmentalists warn. These vehicles tend to be far less fuel-efficient than comparable sedans and the larger ones are subject to less demanding standards.

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