Billions of dollars will be lost by many automakers that continue to invest in autonomous and electric vehicles while consumer buy-in remains low, a study from consulting firm AlixPartners says.

"The AlixPartners Global Automotive Outlook: What's Ahead for the Industry?" was presented to reporters of the Automotive Press Association on Wednesday. The study shows "a pile-up of epic proportions" awaits the auto industry, and that players should be both optimistic and cautious about EVs and AVs.

By 2023, $255 billion in r&d and capital expenditures will be spent globally on more than 200 electric vehicle models, according to the study, up from roughly $25 billion spent in the last eight years.

An additional $61 billion has been set aside for autonomous vehicle technologies -- but consumers say they are only willing to pay about $2,300 extra for autonomy. Current costs are around $22,900 per vehicle.

John Hoffecker, global vice chairman at AlixPartners, told reporters this presents challenges and risks.

"We are moving from an internal-combustion world where people buy their own cars to a world where you're going to have electric being the dominance of it, and autonomous being a key driver of it," Hoffecker said. "What autonomous does is changes things in our view even more than what electric does or anything else we've seen before."

The study says the global auto market will grow at an annual rate of 2.4 percent through 2025, dragging behind expected worldwide GDP growth of 3.3 percent.

Downsides

One of the firm's consumer surveys found 22.5 percent of Americans are "likely" to purchase a plug-in electric vehicle. The study also found return on capital employed for investors reached a three-year low in 2017 of 3.6 percent for automakers and a five-year low of 6 percent for suppliers.

"What we're going to have to have is the falling out of a lot of the automakers and suppliers out there because they're not needed," Hoffecker said. "Because with that kind of return on capital, where we are as an industry is not sustainable."

The cost of warranties and number of recalls has decreased slightly but is still high, Hoffecker noted. Raw materials costs are up $884 per vehicle since late 2015, a 70 percent increase in cost to $2.7 billion for automakers.

Another downside is an increased consumer adoption of autonomous vehicles results in the cannibalization of retail sales in the U.S. to 1.6 million units in 2030 with the use of robotaxis.

Different markets

Mark Wakefield, global co-head of the automotive practice at AlixPartners, said technology companies such as Waymo, Nvidia and Intel entering the industry must also be considered suppliers.

"They've really found a way to play," Wakefield said. "They've also created the opportunity for partnerships."

A dramatic growth in partnerships will play a role in the industry, the study says.

Other markets:

China's auto market is expected to grow to 29.1 million units this year, to 38.2 million in 2025 -- 52 percent of global volume growth over that period. The nation is also forecast to become the largest market in premium vehicles by 2021 with 9.7 percent annual growth.

The U.S. auto market is expected to fall to 16.8 million unit sales in 2018, down from 17.2 million in 2017. AlixPartners expects full battery-electric vehicles to reach 16 to 21 percent of the U.S. market by 2030.

The European auto market is expected to be 21.1 million units this year, up from 20.6 million in 2017, with EVs predicted to capture at least 40 percent of that market by 2030.

55 percent of the deals in automotive merger and acquisition market in 2016-17 were in some way connected to electrification or autonomy.

Risk to automakers and suppliers could also come from potential changes in the North American Free Trade Agreement and in changes worldwide with regard to tariffs. $45 billion in U.S. auto parts exports could be impacted.

The study was based on months-long analysis of data from public and proprietary sources. It also included two consumer surveys -- one regarding attitudes toward autonomous vehicles and one regarding electric vehicles.

"Study questions massive investments in AVs" was originally published by Automotive News on 6/21.

This content is created and maintained by a third party, and imported onto this page to help users provide their email addresses. You may be able to find more information about this and similar content at piano.io