(Bloomberg) -- Carmakers readying a salvo of electric cars will be stung by ramp-up costs until about 2025, amid an industry-wide push to make the vehicles more appealing to the mass market, according to automotive supplier Continental AG.
“High battery costs, limits to driving ranges and charging times mean that electric cars won't have an economic advantage over combustion engines until 2025,” Continental's Chief Financial Officer Wolfgang Schaefer said in a phone interview.
Automakers are pouring cash into electric vehicles as tightening emissions rules dictate a shift that consumers have been loathe to bankroll. Volkswagen AG will triple spending on developing alternatives to combustion engines to 9 billion euros ($9.8 billion) over the next five years. Daimler AG's bill for the transformation stands at 10 billion euros. Continental, Europe's second-largest supplier to the industry, says the payoff will take years to materialize.
While consumers are beginning to warm up to choices on offer, battery-powered autos still make up a fraction of the total. European sales of alternative-fuel models, which include fully electric cars and hybrid vehicles, jumped 36 percent in the first quarter to 235,438 vehicles, according to the European Automobile Manufacturers' Association. By comparison, total new registrations during the quarter reached 1.94 million autos.
The low share of electric cars isn't stopping manufacturers. A slew of models aimed at beating Tesla Inc.'s aggressive expansion is slated for sale in coming years, with new versions promising driving ranges of as much as 500 kilometers (310 miles) and shedding the quirkiness that previously put off buyers.
The rollout coincides with efforts across Europe to restrict polluting cars in cities, with manufacturers facing the uphill task of meeting stringent carbon dioxide emissions targets even as buyers favor bigger vehicles.
In the long term, the electric-car market is very attractive for suppliers like Continental, whose customers include the world's biggest automakers. Continental stands to benefit because it'll eventually be selling electric powertrain parts valued at 3,000 euros as opposed to the 750 euros from conventional combustion cars, Schaefer said.
“Our customers have a fireworks of new electric models in the pipeline that'll hit the market in 2019 and 2020,” said Schaefer. “They and we have our hands full to get these new models ready.”
To contact the reporter on this story: Elisabeth Behrmann in Munich at ebehrmann1@bloomberg.net.
To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Dalia Fahmy
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