Why this is interesting: Some European manufacturers seem uniquely ill-prepared for the end of the internal combustion engine, with the low end of the market taking the hit.

A little while back, I was asked to share some thoughts about what the next 12 months and beyond might look like for the automotive industry.

While you can listen to the whole episode of The Next Billion Seconds that resulted here, here’s a summary of my main points:

Fluctuations in the price of car making commodities and supply chain constraints will further complicate car makers’ efforts to get back on an even keel,
Manufacturers will double down on extracting more margin per vehicle to fund the transition from internal combustion to electric vehicles,
As such, we’re likely to see the low end of the market abandoned so that manufacturers can focus on higher-margin vehicles.

In the past week, the pressure on European automakers has ratcheted up another notch or two, with the EU agreeing to phase out the sale of ICE vehicles by 2035.

So yeah, the business case for developing entry-level cars for the European market just got even more difficult. Back in December, Carlos Tavares, the CEO of Stellantis, said:

“What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle,”
“There is no way we can transfer 50% of additional costs to the final consumer because most parts of the middle class will not be able to pay.”

The social and brand implications of shutting consumers out of personal automobility are huge, and it will be interesting to see how brands respond.

Will Volkswagen Group, the very definition of the people’s car maker, abandon the folk the company was founded to serve?

Or are the micromobility moves of Porsche, a VW Group brand, a harbinger of what’s to come? Their investments now cover makers of bikes, eBike drivetrains, and micromobility software systems.

My own experiences of discussing micromobility with automakers has been mixed, with reactions ranging between exasperation at failed attempts to enter the market, mild interest and outright cynicism directed towards what senior leaders see as “toys”. It seems telling that at the recent Micromobility Europe conference, only Ford, BMW and Honda had employees in attendance.

Back in 2020, Horace Dediu said that every automaker needs to have a micromobility division. If auto makers want to hold on to their less affluent customers, they might want to get building.

This post first appeared in Looking Out #26, the newsletter I write with Joe Simpson.