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article imageEVs will be successful when automakers can call them profitable

By Karen Graham     Feb 7, 2019 in Technology
Major automakers are still dependent on the profits made from high-margin conventional cars, even as they change their focus to electric vehicles. The big question surrounding the success of EVs for automakers is when will they become profitable?
According to Bank of America Merrill Lynch, the annual increase in global oil consumption will dramatically slow until it reaches its peak in 2030, "before falling at a relatively rapid rate thereafter."
The Fairfield Sun-Times reports the culprit behind the demise of oil demand is electric vehicles — a glut of EVs is predicted. Bank of America Merrill Lynch sees EVs having a "meaningful negative impact" on oil demand from 2021 onwards.
While the prediction sounds great for the future of the electric vehicle, major automakers are still being very careful with their predictions on the future success of EVs.
Other than the electric car company, Tesla, which has gone through some growing pains as it matures — many conventional car makers still have to rely on manufacturing what they know best — gasoline or diesel-powered vehicles.
The key for Tesla is producing an entry-level car in the mid-$30 000 range  which would put it in di...
The key for Tesla is producing an entry-level car in the mid-$30,000 range, which would put it in direct competition with major automakers.
While Tesla has been the exception, mainly because it started out producing an electric car, companies like General Motors, Ford Motors, and Volkswagen are still relatively new to electric vehicle manufacturing.
Volkswagen shakes off its "dieselgate" past
The German automotive giant, Volkswagen is betting its life, literally, on the success of electric vehicles — to the tune of 80 billion euros ($91 billion), on being able to mass-produce EVs and make a profit, as reported by Reuters.
The company's major strategy change dates back to a crucial meeting of VW officials in 2015. There, the emissions scandal was discussed along with how the company could move forward.
The I.D. series - The first Volkswagen on the all-new electric-vehicle platform.
The I.D. series - The first Volkswagen on the all-new electric-vehicle platform.
“It was an intense discussion, so was the realization that this could be an opportunity if we jump far enough,” said Juergen Stackmann, VW brand’s board member for sales. “It was an initial planning session to do more than just play with the idea of electric cars,” he told Reuters. “We asked ourselves: what is our vision for the future of the brand? Everything that you see today is connected to this.”
A few days after the meeting, Volkswagen announced plans to develop an electric vehicle platform, codenamed MEB. This paved the way for the mass production of affordable EVs. VW plans to raise annual production of electric cars to three million by 2025, up from 40,000 in 2018.
VW brand chief Herbert Diess joined Volkswagen from BMW where he helped pioneer a ground-breaking electric vehicle. He has since been appointed as CEO of Volkswagen Group. As the company moves forward, and after "evaluating alternatives, we opted for electromobility,” chief operating officer Ralf Brandstaetter told Reuters.
Volkswagen CEO Herbert Diess  has vowed to steer the company out of the Dieselgate cloud and continu...
Volkswagen CEO Herbert Diess has vowed to steer the company out of the Dieselgate cloud and continue its pivot towards the greener, cleaner cars of the future
Ford Motor restructuring and going electric
Ford Motor is gearing up to launch new electric cars as soon as next year, CEO Jim Hackett told CNBC in January. Ford had announced plans earlier to restructure the business by investing $11 billion in electric vehicles by 2022 and produce 40 hybrid and fully electric cars.
But Hackett said there is one more "big surprise" for drivers. "We talked about a huge investment in electric vehicles. We have 16 models that are in design and development. We have a pretty big surprise coming next year," Hackett told CNBC's Phil LeBeau on the sidelines of the Detroit Auto Show.
In the first nine months of 2018, Ford's profits dropped an astounding 27 percent compared to the same period in 2017. Shares of Ford bottomed, dropping 39 percent in 2018 and today, Ford shares are at $8.30 on the NYSE.
Ford F-150 pickup truck
Ford F-150 pickup truck
Ford Motor Company
"Some of the pain in the margins additionally [is] because the vehicles are old. We have on average the oldest fleet in the industry and we are going to have average the newest fleet. 75 percent of the portfolio is being turned over," the CEO said.
So the company is now in the midst of a massive restructuring plan, aiming to slash costs by $14 billion over the next five years. The company is also planning to slash thousands of jobs in Europe.
But just like General Motors, Ford has also begun "cleaning house." Hackett told CNBC that investors "needed to be a little patient with some of the long-lived problems that haven't been addressed that I'm going to represent. In less than 19 months, I've addressed every one of them."
Right now, Ford is betting heavily on its battery electric and hybrid versions of it’s F-Series vehicles, including the large F-150 pickup. “We are going to electrify the F-Series with battery electric and hybrid and we are doing the same for Transit," said Hackett.
Ford s 2017 Focus Electric is powered by a 35 kWh lithium ion battery.
Ford's 2017 Focus Electric is powered by a 35 kWh lithium ion battery.
Ford Motors
“We launched a PHEV version of Transit and that will be on a journey of electrifying Transit globally,” Hackett said, referring the PHEV Transit van unveiled in September last year. The neat think about the new F-150 is the company has also provided battery electric power - opening up the possibility for tradespeople to power tools on site.
“With the F-150 electric, you don’t have to have an expensive generator on site now,” Ford Executive Vice VP Farley. “You can just plug your tools into your truck and that electric powertrain will run all the tools on the job site. Customers will pay for that because now they don’t have to buy an expensive $10,000 generator.”
General Motors believes in an all-EV future
General Motors posted an $8.1 billion net profit in fourth-quarter earnings thanks to high-end pickup and crossover sales in its North American market, according to Reuters on Wednesday. And all of the company's profits came from North America, where sales of many smaller SUVs rose and the average sale price of a GM vehicle hit a record of $36,974.
A worker on the line at the General Motors Fairfax Assembly Plant  Kansas City  Kansas. Image date: ...
A worker on the line at the General Motors Fairfax Assembly Plant, Kansas City, Kansas. Image date: August 20, 2012.
General Motors
GM has also been going through a restructuring program that resulted in the loss of thousands of jobs in the U.S. and Canada. But in an investors call, GM CEO Mary Barra said, "We can’t run at a 70 percent utilization. We had to improve that ... It’s a transition we have to go through.”
While Barra shrugged off questions about an electric pickup like Ford's F-150, she did point out the company's battery-development partnership with Honda and its strong position in China. “So I think we’re in a good position, driving our cell costs down,” she said, as quoted in Green Car Reports.
The 2018 Chevrolet Bolt EV
The 2018 Chevrolet Bolt EV
Press Room/Chevrolet
As for profitable electric vehicles, most people look to the Chevrolet Bolt EV platform. But actually, the profitability award may end up going to a Cadillac. The EV is expected to be launched in 2022 and will feature a completely new electric-vehicle architecture termed BEV3.
Barra reiterated that "GM believes in an all-EV future," noting that the company is being repositioned “from one that was trying to be all things to all people in all markets to a very strategic, agile, and profitable company.”
“We are intent on reinventing personal transportation, capitalizing on a trillion-dollar opportunity, while making the world safer, better, and more sustainable,” said Barra.
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