Weekly Brief: Automaker Self-Belief in EVs a Vital Element

“You can or you can’t, either way you’re right.”

I heard these words of inspirational advice on a run last week with my virtual trainer, who was leading me through the spectacular streets of Supetar, Croatia. White houses flashed by, topped with terracotta tiles and set against the deep blue of the Adriatic Sea. I wasn’t actually in Croatia of course. I was in my basement in Vermont, on a digitally tricked-out treadmill waiting for the snow to melt outside and the pandemic to go away.

Still, it was nice to get out for a run and to be reminded that a lot of what we accomplish in life comes down to sheer force of will. If we tell ourselves we can, we will. If we tell ourselves we can’t, we won’t. Obviously, there are limitations to self-actualization, the pandemic has been a prolonged reminder that there are some things we can’t change in life, no matter how much we would like. However, there’s a whole body of research supporting the notion that self-affirmation really does lead to greater self-belief and positive results.

Traditional carmakers seem to be leaning into this idea. Any given press conference from so-called “old auto” these days reads more like an exercise in self-belief than an exposition of fact. Last week Volkswagen unveiled its Power Road Map, which is the carmaker’s plan to unleash e-mobility over the coming decade. The carmaker wants to integrate EVs across its line-up, secure a pole position in the global scaling of batteries and make charging as easy as fueling. “E-mobility has become core business for us,” said VW’s chairman, Herbert Diess.

By “core business” he means that he hopes by investing in EVs now and pursuing a sage strategy, his company can actualize a world in which e-mobility is core business for VW, rather than the unproven niche that it is today. Last year VW sold 9.3 million vehicles. Only 3%, or about 280,000, were EVs. Compare that to the newer, more nimble guard of EV manufacturers, led by Tesla in the US, which sells 100% EVs and is built from the ground up around e-mobility. Given that Tesla is finally turning a profit quarter after quarter, its market value has shot through the roof. The same is true for Chinese EV makers like NIO and XPeng.

VW certainly has the scale to compete in the long run but whether it has the innovation, expertise and working capital to make the transition quickly and seamlessly is a different story. Back in December Tesla was able to raise $5Bn in funds in a single week, simply by selling off stock. VW can’t do that, in large part because investors are skeptical that old auto can profitably transition to a world driven by a new electric paradigm.

The same challenges face BMW, which unveiled the i4 electric sedan last week with the bold declaration that “It makes the heart of the BMW brand now beat fully electric”. As with VW, this is more a speculative statement of hope than a declaration of truth. Last year the BMW Group sold about 2.32 million vehicles between BMW and Mini. Only 193,000 of those sales were plug-in electrics. If that’s the heartbeat of the company today, it’s on life support.

At the same time, BMW’s sales of EVs increased an impressive 31.8% last year, while its total sales of all vehicles decreased 8.3%. That’s some pretty compelling evidence that the carmaker’s EV division is primed for continued growth. Adoption rates should continue to increase as EV charging infrastructure becomes more common, consumers become more habituated and EV technologies get better. The same trends should hold true for VW, General Motors, Ford, Mercedes and all the other members of the “old auto” club that are taking this seriously. The potential is there. If they can match that potential with the right mix of strategy, action, persistence and, yes, self-affirmation, they should be able to survive and maybe even thrive in the new e-mobility landscape.

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