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PRESIDENT’S MESSAGE THE FUTURE OF PASSENGER VEHICLE POWERTRAINS IS ELECTRIC--THE TRANSFORMATION IS ONGOING
by WSIADA
The Future of Passenger Vehicle Powertrains is Electric
The Transformation is Ongoing
By Wasim Azzam, WSIADA Board President
When gas prices went up to $4 per gallon, in 2008, some analysts said that it is the end of low gas economy vehicles. Turns out, the death announcement was premature.
After recovering from the 2008 financial crisis, Consumers appeared to have bigger desire for bigger vehicles which led to an increase in demand and domination of pickup trucks, SUVs, and crossover in the U.S. market.
Now with what’s going on with the war in Ukraine and the shortage of gas supplies globally, could we notice a more desire by consumers for low emission vehicles? Or perhaps EV?
Some analysts believe if gas prices stay elevated for a long period of time, then this will more than ever speed up the demise of internal combustion engines. Contrary to the Great Recession in 2008-2009 which resulted in higher demand for fuel-efficient cars, now consumers have good alternatives and that is more electric and hybrid cars in the market.
By contrast, today there are around 20 EV models available in the U.S., with almost every major automaker focused heavily on battery-electric vehicles for future production. From 2022 to 2028, experts project that over 75 percent of the 200 new models planned to be launched in North America will be electrified, either full EVs or hybrids.
When gas price reach $4.25 per gallon, a Ford F-150 owner who drives an average 15000 miles per year would have to pay $3400 for gas, or around $280 per month. This high cost of gas will push consumers more towards thinking about owning an electric vehicle even though electric vehicle prices are still high.
The combination of strong consumer demand and supply chain disruptions during COVID-19 which resulted in a huge shortage of cars has sent used vehicle prices surging according to the consumer price index 40% for used cars and 26% higher sticker price for new cars between January 2021 and January 2022.
Facing empty car lots and intense competition for both new and used vehicles, consumers increasingly are concluding that, in a pinch, “any car will do.” As a result, nearly every EV model is sold out, and there is a lengthy waiting list for new-car buyers.
But with gas prices expected to stay high for many months, if not years, there is an opportunity to trigger more EV sales. Even if consumers can’t make the switch now, the pain they feel at the gas pump will plant a seed for future decisions to cut their dependence on gas.
That, of course, becomes an added incentive for automakers to rapidly ramp up launches of electric models and push their manufacturing operations and suppliers to overcome logistical obstructions as quickly as possible. Automakers who are tooling up for EVs today will be in prime position to benefit from the pent-up demand for electric cars in the next few years.
According to some expert reports, aside from Tesla who is a leader in EV, General Motors has major investment plans to build out its EV products. It has been aggressively expanding its electric lineup, with announced plans for EVs to make up 30 percent of production by 2028. Ford Motor Co. has announced its own major EV products and is leading the way with the Mustang Mach-E and F-150 Lightning, the electric version of America’s best-selling truck. Add to that the huge potential for the new Lucid, Fisker, and Rivian.
Of course, EV production is facing its own challenges because of the supply crunch putting increasing pressure on battery raw materials and resulting in higher sticker prices.
Still, the fact that electric batteries can be enhanced and developed with different technologies and materials provides another long-term advantage for EVs over the internal combustion engine. Gasoline will always be gasoline, and continuously vulnerable to global instability, economic crises, groups like OPEC and big commodity price swings. n
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