Which are the manufacturers that, in the opinion of Elon Musk, could disappear very soon? Here are those who are in a more delicate position.
The electric car has become the main alternative to mechanics based on fossil fuels. This is not something new, but an acceleration in the number of sales of these technologies is being observed. This is so because there are more options available in the market. Automotive electrical technology is reaching a new phase based on consolidation. It is a critical moment for some manufacturers, since competitiveness becomes the most important factor.
It is known that the heat of purely electrical solutions a whole series of competitors have been born. Now, to what extent will all of them come out unscathed in the market? Elon Musk, CEO of Tesla and possibly a forerunner of this transition towards greener models, believes that there are a number of companies that will not be able to be competitive enough in the coming years. This is so due, mainly, to a narrowing of commercial margins, an issue directly related to the volume of production.
The company born in California has been a benchmark that will be studied in the best business schools for years. The obsession of the manufacturer Tesla has always been to increase the manufacturing volume, in addition to introducing a wide range of models and betting on level 3 and following in terms of autonomous driving. Who does not remember the so-called ‘production hell’ lived in Freemont during the first months of manufacturing the Model 3? This has allowed the company to increase profit per car sold above the competition.
Elon Musk believes that some manufacturers will sink in the market soon
The first factor that determines not being on the evil list formed by Elon Musk is belonging to a business holding company that supports operations. Elon Musk, for example, have you referred to Ford or Polestar as companies that do have a future ahead of them due to the economic support that the American giant and Geely can give, respectively. Something similar happens with BYD, a Chinese manufacturer that is considered one of the leading automotive companies based on electrical mechanics.
The problem, in the opinion of the South African tycoon, resides in newly invoiced firms, such as XPENG, NIO, Lucid Motors or Rivian. Without having a large structure capable of supporting their respective projects, it is likely that they will end up being swallowed up by more established manufacturers or, simply, going bankrupt. We are, without a doubt, facing a completely new business model in which some of the most necessary requirements to survive in the market are being seen.
The more competition in the industry, the more difficult it is to maintain margins without reducing prices. Manufacturers must be profitable in the medium term and, of course, there may be a time when a company of these characteristics may be in deficit. The problem lies in knowing How long is the shareholder willing to sustain these ‘burns’ of money. Companies like Rivian or NIO have proven to be very interesting alternative options, but they have problems that will make it difficult to finance them in the future.
Will have to wait a while to see which of Elon Musk’s predictions are met and, of course, to what extent we are facing critical months in the automotive industry.