Is It Just About Electric Cars?
The Electric Car Craze Has Cooled Down
In recent years, the global automotive industry has been swept up in an electric car frenzy. Car manufacturers made optimistic predictions about the sales of electric vehicles (EVs) and announced ambitious plans for the future. Even investors on Wall Street jumped on board, valuing both established and new EV manufacturers. However, this electric car frenzy has reached its peak and is now on the decline. Major brands like Mercedes, Volkswagen, and General Motors are reconsidering their electric car plans.
Even Tesla, the leading name in the EV market, has had to admit an uncomfortable truth. Elon Musk, the CEO of Tesla, stated that “we’re going to be slower on growth” when talking about the company’s growth rate. By 2023, Tesla’s EV sales were projected to account for 55% of all vehicle sales in the United States.
The Rise of Hybrid Cars Slow Down the Transition to Electric
While the transition to electric vehicles may be slowing down, the rise of hybrid cars (which combine both internal combustion engines and electric motors) could still pave the way for a future of electric cars. However, the transition to electric cars will be much slower than previously anticipated.
One major US automaker, Ford, is increasing production and promoting its hybrid car lineup. Ford sees hybrid cars as a way for users to transition to electric vehicles while still being suitable for those not yet ready to fully embrace EVs. Additionally, hybrid cars help Ford meet greenhouse gas emission reduction targets.
Similarly, General Motors, known for being an early adopter of electric cars, is now planning to produce plug-in hybrid vehicles alongside pure EVs and traditional gasoline-powered cars.
Startups and Their Electric Dreams
As established automakers change their attitudes towards electric cars, should startups like VinFast and Rivian also reconsider their strategies?
VinFast, the first car manufacturer from Vietnam, halted production of gasoline vehicles to focus on developing electric cars exclusively. VinFast previously had four different gasoline models, including the Fadil, Lux A2.0, Lux SA2.0, and President. While these models primarily sold in Vietnam, a small number were exported or given to foreign entities.
VinFast has now diversified its electric vehicle portfolio, offering a wide range of products such as electric motorcycles, electric cars, electric buses, and even electric-assist bicycles. This demonstrates VinFast’s determination to electrify transportation in Vietnam and around the world.
At a recent event, Le Thi Thu Thuy, the Chairwoman of VinFast, expressed optimism about the company’s potential to become a global player, noting the significant transformation happening in the global automotive industry.
VinFast also has a strong foundation for future success. About 80% of VinFast customers in Vietnam choose to lease the battery, making electric vehicles cost-competitive with internal combustion engine vehicles.
Furthermore, leasing batteries provides a stable source of revenue for VinFast. In its 2023 financial report, VinFast stated that battery leasing “has the potential to significantly boost sales in new markets.”
Toyota’s Profitable Path without Electric Cars
While many carmakers invest heavily in electric cars, both startups and established manufacturers might want to take a closer look at Toyota’s approach, which includes hybrid and plug-in hybrid vehicles alongside a limited number of widespread electric models.
Toyota, the world’s largest car manufacturer in 2023 with over 11 million vehicles sold (six times more than Tesla), is notably successful with its broad lineup of hybrid vehicles. Hybrid and plug-in hybrid vehicles accounted for nearly 30% of Toyota’s overall sales last year. In the US, Toyota’s sales increased by 20% in the past two months, with hybrid and plug-in hybrid sales growing by 83%.
From April 2023, Toyota recorded a profit of $27 billion, almost double the previous year. In contrast, Tesla’s profit in 2023 was $15 billion, a 19% increase from 2022.
Investors have recognized Toyota’s strength, with Tesla’s stock price declining by nearly half of its peak value, while Toyota’s value increased by about one-third, reaching approximately $400 billion.
Interestingly, Elon Musk, the CEO of Tesla, has been dismissive of hybrid vehicles, indicating that they are only a transitional phase towards fully electric cars. On the other hand, Toyota believes in diversifying its product lineup to provide a range of low-carbon emission vehicles, including hybrids, plug-in hybrids, electric cars, and even hydrogen-powered cars.
Jack Hollis, Toyota North America’s Executive Vice President, said, “We’re not saying electric vehicles aren’t a great zero-emission solution. They really are. But electric vehicles aren’t the only solution, and many of our customers have told us they want choices – conventional hybrids, PHEVs, and EVs.”
In conclusion, as the global automotive industry undergoes significant changes, it is essential for both startups and established car manufacturers to reevaluate their plans for electric cars and consider a more diverse range of low-emission vehicle options.