Wednesday, July 26, 2017

How Will The Switch From Combustion Engines To Electric Affect The Auto Industry??

The auto industry is at the beginning of a critical transition away from the internal combustion engine to electric engines.  This is one analysis of the transition that is underway.  It argues that by 2025 electric engines will be price competitive with combustion engines. They will also be less costly to operate. They are only competitive today with government subsidies.  The market is also constrained by the lack of an electric charging infrastructure.  Consequently, auto manufacturers are forced to continue investing in combustion vehicles during the transition to electric.  Some of them are financially able to maintain investment in combustion engines while they invest in electric vehicles.  Others may not be as lucky.  The transition from combustion engines to electric engines will also reduce the manufacturing cost.  Fewer workers will be needed to manufacture electric vehicles and fewer workers will be needed to maintain them.  Obviously, the oil industry will also be affected by the transition to electric.  This will not be an easy transition.  Two of our major industries will be affected along with the labor markets in those industries.  The value of used combustion vehicles will also decline during the transition.  That will create problems in the profitable leasing business that has sustained many auto manufacturers.  

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