CARMAKING -ALL CHANGE- CHANGING* : MASTER GLOBAL ESSAY

 

Going for a spin in the first car was a bother. The Benz Patent Motorwagen, which hit German roads in 1886, needed ''stain remover'' from a pharmacy for a fuel, mechanical parts greased by hand, and oil and water tanks filled.

Then you had to spin a large flywheel to start the engine, grasp the tiller that controlled the front wheel, and pushed forward the lever to engage a drive belt that set the wheel in motion.

Repeat the process every 10-15 km when fuel and water ran out. Yet the freedom to travel by powering a carriage with an internal-combustion engine [ICE] soon caught on.

A giant industry with annual revenues of nearly $3 trillion has grown to provide transport to the masses. Over a billion cars heave passengers along the world's roads. There were many pioneers beside the Germans.

The French provided words like coupe, chauffeur and cabriolet. America developed mass-manufacturing with the Ford model T in 1908 and then slick marketing in the 1950s.

Japan invented ultra-reliability and just-in-time production. Europe set the mark for luxury, sophisticated engineering and new technologies such antilock brakes and airbags.

The next phase of the industry's history will be one in which tech-centric firms and the Chinese come to the fore.

Elon Musk's Tesla has kickstarted electric vehicles [EVS] everywhere. China maybe a newcomer but it is growing fast. Until the 1980s the country knocked out only a handful of cars such as the Hongqi limousine that whisked Mao Zedong between military parades and tractor factories.

But a 40-year rise to economic superpowerdom has created a car industry to match. China overtook America as the world's biggest market in 2009. Last year it passed Germany as the world's second-largest exporter.

The emergence of Tesla and the Chinese as serious competitors reflects unprecedented upheaval in the industry. The obvious shift is electrification. Although a few carmakers are still trying hydrogen fuel cells, lithium-ion batteries have become the key technology.

In 2022 around one new car in ten sold worldwide was a battery-powered electric vehicle [EV]. Adding plug-in hybrids [PHEVS], which combine a smaller battery with an ICE, and 13% of total sales, or around 10.5 million vehicles, were electrified.

China accounts for 6.1 million sales of what it calls new-energy vehicles [NEVS and PHEVS]. But Tesla is the world's biggest EV-maker, selling 1.3 million cars in 2022.

China's BYD is second for battery-only cars and is way ahead when counting new-energy vehicles. Of the old guard Volkswagen Group [VW] is the boldest electrifier. Yet it is only in third-place, with 570,000 EV sales, 7% of the total.

Electrification is changing carmaking. The old brands have relied on the complexity and cost of the ICES to keep competitors at bay. Having to spend $1 billion to develop an ICE and another $1 billion for the presses, paint shop and production lines to scale up a new firm to 190,000 - 200,000 units a year creates huge barriers to entry.

It is little wonder that, from the second world war until Tesla's arrival, new brands that made the transition to global significance were few and far between.

Those that did, such as Toyota and Nissan in Japan and Hyundai-Kia in South Korea, leant on government support and protected home markets.

The relative simplicity of batteries and electric motors knocks down many of these barriers to entry.

A host of startups in China [including Li Auto, Nio and Xpeng] and America [such as Fisker, Lordstown, Lucid and Rivian ] are now following Tesla's lead.

Electrification has given a leg-up to China's established carmakers, which were long kept from global markets  by the big obstacle of ICE tech. China ahas cajoled state-owned and private companies to build a domestic EV industry partly so as to sidestep petrol power.

The Master Essay on The Car Industry and Future, continues.  The World Students Society thanks The Economist.