Divorce?

ITA

The grapevine became louder and louder, until it turned out it was right all along: in the 2022 Budget, Italy won’t have any electric cars incentives. Media are finger-pointing Minister Giorgetti as the culprit, and they may be right.

I have ALWAYS been opposed to any form of incentive: theoretically the are A Good Thing, speeding up the adoption of new technologies, but in practice they become the fighting ground for lobbyists, looking for ways to distort the playing field to favour the stakeholders they represent.

Moreover, the electric car is currently in a supply-constrained market scenario, due to the fact that repurposing production from ICE to EV is not a matter of a mere retooling, but involves the complete redesign of the supply chain which requires loads of money but also of time.

In less than a week I will state my official prediction of new EV sales in 2022 in Italy based on the sigmoid the market followed so far, but I don’t think that the absence (or presence) of incentive will require significant adaptations (when ready, you will find it here ).

2022 is a turning point

Business as usual, therefore? Not exactly.

The Automotive sector lived its whole existence in a symbiotic relationship with Oil&Gas: the one supported the other but – even more – the existence of the one, was the reason for the existence of the other: the €50B spent in Italy every year to purchase (and finance) new cars mirrored the €53B spent in fuel, with the Government happily playing the role of the third partner.

What was good for one, was – inextricably – good for the other.

And the political assets of the one (enormous jobs creation) matched perfectly the immense lobbying and communications skills of the other, who could make public opinion accept even wars.

With electrification, however, the two paths started to diverge: a brilliant future for Automotive does not necessarily entail a brilliant future for Oil anymore. Moreover, wedges of growing importance started to drive themselves in the cracks of this splintered couple:

  • climate, who is sending humanity an eviction note if we don’t stop treating its atmosphere and oceans like unlimited and free-of-charge sewers;
  • the embarrassing inefficiency of the internal combustion engine, which literally throws away 70% of the energy we feed it;
  • the baroque complication of a mechanical system which (like the typewriter in the ’60s) cannot hold a candle to the ease of manufacture and use or reliability of its electric equivalent;
  • the sharing of transportation which slows down the tendency to have one, then two, then three cars per family, turning la bella Italia in a carpark housing 20% more cars than neighbouring France despite 45% less land and 10% less people;
  • last but not least, on the horizon, the digital car, which makes Automotive gravitate inevitably towards the giants of Digital.

With its back to the wall, the team-member who calls the shots voted (as they say) with its wallet: money on hydrogen and not on electric cars.

What will happen to the market?

As I already said, IMHO not much. The electrification trend wasn’t born in Italy and whatever decisions our Government takes will have little or no consequences on global OEM strategy, given the little more than 2% our car stock represents globally.

Consumers will buy more or less the same number of electric cars they would have bought anyway (or perhaps we should say the cars that OEMs will manage to manufacture) but carmakers won’t be able to avail themselves to Government help as they did in 2021, where dealers discounts plunged very close to zero because there were incentives in place.

Something broke however, and the fault line is perhaps more visible in Italy than in the rest of the world: the marriage between Automotive and Oil&Gas is over, possibly forever.

What we now need to understand is if it will be followed by a liaison with the Utility sector (which however perhaps having been a regulated business for most of its life, has not developed enough survival skills in an open market) or perhaps with the Digital sector, richer and tougher.

In the first case, two turkeys don’t make an eagle, in the second the risk is colonization.

We indeed are living interesting times….


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