Traditional carmakers could boost profits by accelerating move to electric
The world’s largest traditional carmakers could improve their profit margins and boost their value to investors by accelerating the transition to electric cars in the next decade, a new analysis has found.
The electric carmaking operations of Toyota, Volkswagen, Stellantis, Volvo, BMW and Mercedes-Benz will rapidly become more profitable than their traditional petrol and diesel counterparts within the next three to five years as carbon emissions regulations tighten, according to modelling by Profundo, a consultancy.
The world’s biggest carmakers are all seeking to increase electric car production rapidly in the next decade, as laws in major markets including the EU and UK seek to ban new internal combustion engines as part of the effort to curb carbon pollution from transport. Yet at the same time carmakers still intend to sell millions more vehicles with petrol and diesel engines, in part because they remain more profitable but also because making the transition to electric vehicles (EVs) can include major upfront costs.
Several carmakers have warned that a too-rapid transition away from petrol and diesel will result in factory closures or job losses. Stellantis boss Carlos Tavares earlier this month raised concerns over possible shortages of car batteries by 2025.
However, Profundo’s analysis suggests that internal combustion engine operations will rapidly become less profitable – and eventually loss-making – because of the increasing carbon costs.
In the UK and EU, for instance, carmakers are now liable for steep fines if they sell too few electric cars. The UK is also considering a zero-emission vehicles mandate, which would mean half of all vehicles must be pure electric by 2028 ahead of a ban on hybrids, which combine a
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