#Record my 2024# In recent years, with the rapid development of new energy vehicles, the proportion of new energy vehicles in the market has gradually increased, and the transformation of new energy vehicles has become the general trend of the market.
1. Is it hindered for traditional car companies to switch to new energy?
According to Jiemian News, when asked recently about the challenges faced by electric vehicles such as the sluggish market demand in the United States, Toyota Chairman Akio Toyoda said that the automotive industry is gradually realizing that there is no single answer when it comes to reducing carbon emissions.
Although Akio Toyoda has been resisting full electrification, the current reality is that with the increasing uncertainty of the electrification transition, some multinational automobile companies have decided or are considering extending the production and sales time of gasoline vehicle products, while slowing down related investments in the field of electrification.
According to Reuters, GM plans to extend the production of its most profitable gasoline trucks and SUVs by 10 to 12 years. CEO Mary Barra reiterated on the third-quarter earnings call that slowing EV production would help protect market pricing, and that previous attempts to push the entry-level market will no longer be a future goal for GM, which and Honda have announced that they will abandon plans to jointly develop low-cost EVs.
Mercedes-Benz has taken similar steps, announcing in the third quarter of this year that it could improve overall returns with a portfolio of gasoline vehicles if EV profits continue to fall short of expectations.
Declining profits may be a direct factor driving the decision for car companies. General Motors' third-quarter financial report showed that although the company's operating income increased slightly, it still did not offset the negative impact of the weak profitability of electric vehicle products - the net profit for the quarter was $3.038 billion, down 7 percentage points year-on-year.
2. Why do traditional car companies want to extend the life of fuel vehicles?
Recently, a number of world-renowned traditional car companies have announced that they will extend the production plan of their traditional fuel models. As one of the mainstream directions of the future, new energy vehicles, which have long been regarded as one of the mainstream directions in the future, have experienced the accumulation of technology in the early stage and the continuous expansion of the market scale, why is the current situation occurring?
First of all, making new energy vehicles is not profitable is the psychological expectation that all enterprises must have to enter this market. In the current market, it is not easy to make a profit as a new energy vehicle. Judging from the continuous losses of international brands such as Tesla for many years, and the fact that some new car-making companies in mainland China are generally facing losses in every car sales, the development of the new energy vehicle industry is indeed full of challenges. This reflects the fierce competition and limited profit margins in the new energy market. Therefore, traditional car companies are no exception, they realize that the transition to new energy vehicles may not bring considerable profits in the short term, so they choose to extend the life of fuel vehicles to maintain the existing profitability.
Secondly, for the old car companies, doing traditional fuel vehicles has formed a stable economy of scale. Economies of scale mean that the larger the scale of production, the lower the cost per unit of product, resulting in higher profits. However, new energy vehicles need to start from scratch, which means that a lot of R&D investment, production line transformation and marketing are required, which require a lot of capital investment. Therefore, this lack of adaptation also directly leads to the lack of its competitiveness.
Third, since the beginning of this year, Tesla's continuous price cuts have triggered a price war in the market. For the old car companies, it is even more unsuitable for such a market model. Due to the relatively high production cost of new energy vehicles, if you follow Tesla's pace and reduce prices, then it is likely to face a serious decline in profits. Therefore, they chose to extend the production cycle of gasoline vehicles to maintain the current level of profitability.
Fourth, in the long run, new energy vehicles are a difficult but correct thing. Although facing many challenges in the short term, the new energy vehicle market has huge development potential in the long run. Therefore, for the old car companies, whether they can endure this hardship is an important issue to consider their future development. At the same time, the market outlook for new energy vehicles is still uncertain, facing multiple challenges such as technological breakthroughs, charging infrastructure, and battery costs. Therefore, it is not easy for traditional car companies to make breakthroughs and make profits in the field of new energy vehicles, and they need to carefully evaluate the market prospects and their own strength, and weigh the pros and cons.
In general, the serious decline in profits and the extension of the life of fuel vehicles by traditional car companies are the result of multiple factors such as the rise of the new energy vehicle market, the economic effect of the scale of the traditional fuel vehicle market, and the market competition situation. In the short term, established car companies may face some difficulties, but in the long run, the new energy vehicle market still has huge development potential. This requires that the established car companies must have enough determination and perseverance to successfully transform, which is not an easy thing for the old car companies.