The automotive world is experiencing a turbulent time as a result of the combination of different factors. In the first place, the arrival, as a consequence of the pandemic and the lack of components, of a new way of understanding the business on the part of large corporations, which have given up the idea of selling as many cars as possible to adopt a strategy that seeks the highest possible profit per car, even if they must reduce the volume of vehicles manufactured and sold. On the other hand, European legislation that pushes for complete electrification and a new way of interpreting mobility has forced brands to design innovative strategies to respond to the obligations imposed by legislators and the needs of users at the same time.
In this article, we answer some of the unknowns that hang over the future of the automobile and our mobility in the coming years. In some cases, we must move on speculative ground, but in others we will advance some of the ideas that little by little are taking shape in the world of the automobile industry. We do it in the form of ten questions and their answer.
Will the price of cars continue to rise in the immediate future?
Most likely, yes. After seeing increases of more than 10% in the last two years, the price of new cars doesn’t seem to have peaked yet. The main problem is the rampant inflation that exists both in Europe and in other world markets and that affects, above all, the price of the raw materials with which the cars are built, including lithium for the batteries of the electrified models, as well as the energy prices, which skyrocketed as a result of the war between Russia and Ukraine and have remained very high ever since.
Although it is true that in the case of electric models and as production reaches a certain stability in terms of quantities, we can think of a standardization of the components that implies a price reduction as the volume increases, it is also true that, As a consequence of increasingly strict environmental and safety regulations, cars will have to incorporate increasingly sophisticated and expensive technologies, especially in the case of combustion vehicles that, in theory, will continue to be manufactured until the year 2035 and that implies that prices will surely continue to rise.
Finally, it must be taken into account that large companies have had to invest in recent years and will have to continue to do so in the future, huge amounts of money both in research and development to create the new generation of electric cars and in adapting their factories for the production of these vehicles that, in addition, have forced the planning and execution of the construction of huge battery production plants. The fact that the big manufacturers want to depend less and less on the supplies that arrive from Asia (mainly from China) will lead them in the coming years to try to become self-sufficient in the field of batteries and this will entail very important investments that, obviously, will in the final price of the vehicles.
Is the electrification of the entire world park sustainable?
No. At least not with current battery technology. There are many voices inside and outside the industry that warn of the need to start looking for alternatives to the current technology of lithium-ion battery electric vehicles. The scarcity and difficulties of extracting this material, which implies a highly polluted process, forces the industry to start thinking about other alternatives to achieve the zero emissions required by the European Union in 2035. Because let’s remember that the EU does not oblige that all vehicles are electric, but that they are non-polluting models.
The rapid development of electrification and the constant improvement in current battery technology should by no means convince us that this is the ultimate formula. Work must be done on new technologies that make it possible to generate or store electrical energy in a cleaner and more sustainable way, that involve less contamination in its production and that allow for 100% recycling at the end of its useful life. What is evident is that currently, battery electric vehicles are the only existing technology that can ensure zero emissions in use by 2035 and, therefore, this will be the solution adopted in the short term by all manufacturers. We cannot lose sight, however, that if this single model is maintained, it has been calculated that lithium will last 25 years of batteries, so alternatives must be considered.
Is there a chance to reverse the full electrification announced for 2035?
This is one of the great unknowns that the main manufacturers will have to face in the coming years in Europe. Electrification is advancing at different speeds around the world and while in places like China or Europe it has become a priority, in the United States, for example, the term for electrification is much longer, in Japan they will bet, perhaps, on the Hydrogen as an alternative and in other world markets such as Latin America, Southeast Asia, India or Africa, electrification is residual or has practically not been considered.
But focusing on Community Europe, it is evident that there are different speeds of application of the electrification process. While Germany, the Netherlands, the Scandinavian countries and even France are advancing at the expected speed, the countries to the east and south of the continent, including ours, right now have a very difficult time reaching a purely electric 2035. In the case of Spain, the slow progress of the public and private charging network is compounded by other problems for which a short-term solution is hardly in sight: firstly, the increasing price of electric vehicles will make renewal very difficult of an aging park, with an average age, in the Spanish case, of 14 years. Secondly, the large number of vertical homes in Spain means that 70% of vehicle users find it very difficult or impossible to install their own charging point. Finally, the lack of a State political commitment that clearly prioritizes the electrification of the park and promotes policies in accordance with this objective will also prevent reaching the necessary cruising speed.
Given this panorama, it is possible that the European politicians who have approved the ban on the sale of combustion vehicles in the year 2035, should rethink or, in the best of cases, delay the application of this measure. If this is the case, the big losers will be the automobile groups that, in many cases, and taking into account the investments necessary for the complete transformation of their products, have announced an anticipated reconversion to the electric world and that may be left out of a market of hybrid vehicles that was expected to be very short and that may end up expanding.
Do hybrid models have some kind of future in the medium term?
Once the Euro 7 stumbling block has been overcome, which was feared to be much more demanding for gasoline-powered vehicles, and, by extension, for hybrids, it seems clear that this will be a very good transition technology until, at least, the aforementioned year 2035. The brands that are firmly committed to hybrid technology such as Toyota, Honda, the Renault Group and the Korean group Hyundai-Kia constantly explain the advantages of this partial electrification and will continue to develop this technology since in markets such as Latin America, Asia or Africa is a technology with a great future as the first step towards an electrification that is still considered to be very far away.
In the recent presentation of its novelties for the year 2023, in which it also spoke of future strategy, the Japanese brand Toyota presented an interesting study that raised the suitability of hybrids as transition vehicles to pure electrification for a longer term, above all as a vector for renewing the car fleet, thereby drastically reducing current pollution.
The brand maintains that with 100 kWh of battery an electric car can be made, ten plug-in hybrid cars or 100 conventional hybrid cars and that, for a CO2 reduction strategy, an electric car replaces a polluting thermal car, with 10 Plug- in 10 thermal cars are replaced and with 100 hybrids 100 combustion cars are replaced. The CO2 savings of these 100 hybrids compared to the replaced thermal ones is obviously much greater than what the electric one achieves and taking into account that, if we assess the entire life cycle of the car (production included), the emissions from kilometer of a hybrid and an electric are not so disparate, massive hybridization, taking into account the unknowns posed by the production of large batteries on a large scale, is a more than reasonable solution. If the European Union bought this argument, hybrids could also have an interesting future in Europe, but the truth is that community legislators do not seem to be very keen on the job. And even more so now when the big German manufacturers have plunged headlong into pure electrification as if there were no tomorrow.
Can hydrogen be the alternative solution to electrification?
It can be, of course, and many specialists believe that this, despite Tesla’s advances with its electric tractor unit, is the best formula for converting transport (trucks and vans) into electric vehicles. Establishing a hydrogen distribution network along the major European motorway routes in a relatively short period of time is possible and progressively changing the current fleet of trucks to hydrogen-powered fuel cell vehicles is also feasible and could be completed in a couple of decades. For fleets of vans, owned by large companies that have spaces to install hydrogen generators, converting to hydrogen is also an interesting possibility. For this, however, it is necessary that the hydrogen generated to power these vehicles be produced in the same location where it is marketed and be the result of a process powered by electricity from renewable sources because, otherwise, the neutrality of carbon required would not be a reality.
If this distribution network for transport exists, dimensioning it and giving it the necessary capillarity to serve a part of the car park should also be easy, but proposing hydrogen as an alternative solution to battery electric ones in the short term is really complicated. . In addition, a technical discussion would have to be resolved: fuel cell or direct use of hydrogen as fuel? The battery has the drawback of its high price and the use of scarce materials in its production, which would limit large-scale manufacturing, while the use of hydrogen directly, which would allow, with a relatively simple adaptation, to take advantage of the technology of existing engines, has the problem that it continues to generate CO2 emissions when there is combustion and that its energy efficiency is low. In any case, it is a technology that brands must continue to insist on.
Will the mobility model change in the future?
The mobility model will surely change due to many factors. First of all, due to the aforementioned price rise that will prevent many families who currently choose to buy a new car from continuing to do so in the future. For this type of customer and for others such as young people or seniors, who will also be unable to purchase new vehicles, there will be new formulas beyond the typical purchase of a used vehicle.
Formulas such as car sharing, pay-as-you-go, short-term subscriptions or individual leasing will develop significantly in the coming years, and will be successful among the new generations, already accustomed to paying a monthly amount for having a access to music or video content, to rent a house and share it instead of buying it and to use new payment methods. Thinking of à la carte mobility, with monthly payment, with optional complementary services and without worries is something that will be developed in the future and, for this, brands are already considering their conversion from product manufacturers to mobility service companies.
In the future, the ownership of the vehicles will belong to the brands or their large fleet management subsidiaries that will rent them to users in the form of leasing a specific vehicle or mobility services with à la carte models depending on specific needs. People with fewer resources who now buy cheap second-hand vehicles will see how the supply of this type of vehicle decreases, but, in exchange, they will have used vehicle rentals, maintained and reconditioned, if necessary, by the manufacturer itself and that They will be offered at cheaper prices than when they were new. These second, third or fourth wave leasing of four, eight or twelve-year-old cars will cover the needs of most users and will maintain part of the benefits of this type of sale, that is, the all-inclusive formula with guarantee, insurance And maintenance.
Will the distribution model change in the future?
Of course. From the outset, in some cases it is already changing and some brands have already modified their contract with dealers who go from being stores to simple commission agents. I explain. There are two ways to get a car to a final customer. The first is the one that has been used so far in most brands, that is, the dealer buys the car from the brand and resells it to the customer. In this way, it establishes a commercial contact with the end customer, it can play with the profit margin per operation to offer better conditions to the user and it completes its business with the commercialization of other aspects related to the vehicle such as financing, repair, maintenance, or the sale of the second-hand vehicle.
On the other hand, the increase in online operations in which the customer buys the car directly from the brand, without intermediaries, and picks it up at the dealer who only intervenes in the delivery, leads brands to a new need. That of ending the price disparity. If a manufacturer sets a price online and its own dealership offers that same car cheaper, the online model loses all meaning, so that, for it to work, the brand must have the power to establish a single price that can only be lowered by a generic online offer.
And finally, what car do I buy in 2023?
The arrival of the mandatory low emission zones in 2023, which will prevent unlabeled cars from accessing the urban centers of cities with more than 50,000 inhabitants should speed up the renewal of the park, but at the price of new and second-hand cars hand with a label, it seems complicated. In principle, the regulations should be increasingly restrictive and no label will protect us from anything, especially since many town halls will seek to reduce not only the environmental impact but also the circulation of vehicles directly.
Those who use an electric utility (a few kilometers, almost always in the city, with few long trips a year and with a plug at home, if it is powered by solar panels, all the better) can now take the step to electrification, in renting better than buying, in order to avoid the mystery of depreciation in a few years of a battery electric. For those who need to do many kilometers, a hybrid is the best option, whether it is plug-in or not, due to its diesel consumption and its Eco or Zero environmental labels and those who cannot afford what an electrified car is worth, have light hybrids. with the gift of the Eco label to get out of trouble. In any case, and taking into account that there are so many unknowns, my advice is to buy the car that you like best… provided, of course, that you can afford it.