Speaking to reporters at a roundtable at the recent 2022 New York International Auto Show, BMW CEO Oliver Zipse has flagged up the potential risks associated with switching from building ICE vehicles to battery-electric models. Zipse’s company is already some way down that path, introducing the iX SUV and i4 sedan BEV models this year, with more waiting in the pipeline. However, the CEO believes there may be unintended negative consequences associated with consigning ICE vehicles to the scrapyard prematurely.

The most pressing risk the CEO pointed to was the fact that pushing too hard towards EVs will focus both sales and production efforts to “very few countries”. This comment clearly references the dominance of China in the EV market. The country controls the majority of the Li-ion battery raw material and processing supply chain, so a push towards making EVs means handing an outsized portion of the value chain to China, diminishing the importance of BMW’s traditional European supply chain.

Equally, China is a key sales market for EVs thanks to their availability, favorable government incentives, and a reasonably well developed charging infrastructure. In comparison, traditional triad markets have less EV infrastructure, fewer sales options and, generally, less open attitudes to EV ownership compared with Chinese buyers. This means that as OEMs sell more EVs they may prioritize welcoming markets such as China at the expense of traditional markets that favored ICE cars.

Zipse notes that, in markets beyond China, “if someone cannot buy an EV for some reason but needs a car, would you rather propose he continues to drive his old car forever? If you are not selling combustion engines anymore, someone else will”.

Reading between the lines, we know that Zipse is making these comments at a time when EV raw input costs – which were previously falling rapidly – have suddenly shot upwards, influenced by the Russian invasion of Ukraine and raw material shortages driven by demand outpacing supply. This will have set alarm bells ringing across all automakers as the thin profit margins they earn on EVs get squeezed, and price rises risk pushing customers away.

While Zipse’s comments are clearly influenced by his role as CEO of an automaker that’s made a name for itself as a leading producer of ICE-powered vehicles, they do highlight some genuine risks associated with jumping too quickly towards EVs. Below, we highlight potential holdouts of ICE technology even as many vehicles swap their fuel tanks for battery packs:

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Price-sensitive markets

Zipse’s comments seem to suggest that the largest addressable markets that EVs risk missing out on are in price-sensitive regions. Many developing countries are seeing swathes of their populations being lifted into the middle classes, bringing with them newfound spending power that can be used to buy new vehicles. However, with EVs usually costing at least 25% more than an equivalent ICE vehicle, buyers in these markets might reject them due to their comparatively worse value for money. Equally, many of these markets suffer from lackluster infrastructure investment, making EV charging a hassle.

Long-range and urban sprawl drivers

Some countries, most notably the USA, saw significant infrastructure development after the invention of the motorcar, meaning many of their cities were built around private vehicle use. This meant they could spread farther out than most legacy cities which were built before cars were common – giving inhabitants more space but also bringing significantly longer journey and commute times. In these cases, daily mileages can be very high and come close to the maximum range possible from an EV’s battery pack. For these users, the refueling convenience offered by an ICE vehicle and lack of range anxiety are likely key selling points that encourage the continued use of combustion engines.

Long-range delivery and logistics

BEV powertrains are currently unsuitable for long-range trucks and delivery vehicles because their sheer weight limits their cargo capacity and maximum range. Conversely, ICE versions of these vehicles can travel hundreds of miles on diesel fuel, and be refilled in a matter of minutes, making them far more desirable in these roles. Until battery technology takes a generational shift, or fuel cells become more financially viable, these models will continue to use combustion engines.

This article was first published on GlobalData’s dedicated research platform, the Automotive Intelligence Center