Will Combustion Engine Vehicles Get More Expensive?

A lot of publicity is emerging about the rollout of electric vehicles slowly creeping into the market. Future adoption rates are expected to accelerate at a rate of knots, with ongoing costs set to be the driving factor to encourage motorists to make the switch.

While the above trend should help increase accessibility to mainstream audiences, what does it mean for our existing fleet of cars? With the majority of vehicles on our road being powered by combustion engines, manufacturers will need to refocus their strategy with particular care. Will combustion engine vehicles get more expensive?

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Word out of the industry

Many of the major players in the industry have been lining up to give their say. None of these are as prolific as Mercedes-Benz, where Chairman Ola Kaellenius had the following to say:

“As we sit here, the product cost structure for electric vehicles is significantly higher than what we have been used to in a combustion engine vehicle. With tightening regulation all around, the cost of combustion-based vehicles will go up in the future as well. We have made a very conscious decision on the road to 2025 that there will not be a combustion engine that is not electrified. 48-volt mild-hybrids is the minimum entry.”

That makes it pretty clear that at least one – if not other – key player(s) have a vision mapped out where combustion vehicle prices will increase.

A case of self-serving interests?

What needs to be considered in respect of this or similar commentary is that it naturally goes to serve the pitch for increasing electric vehicle adoption. The natural beneficiary of that is the very car manufacturers who are positioning themselves to make this full transition.

As it so happens, Mercedes-Benz is one of those companies that has flagged this development as part of its plans. It’s little doubt that cynics would be lining up to question the reliability of such remarks.

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The economics at hand

History has always shown us that as technology ages, it typically becomes cheaper for consumers. It’s always been new and emerging technology that boasts higher retail and production costs since parts are typically more sophisticated.

Sure, there is little doubt electric vehicles will eventually become cheaper. After all, demand does tend to drift towards innovative products, which offer early adopters benefits - in this case, lower running costs and less impact on the environment. And if regulatory implications do come into the fold, as the boss of Mercedes-Benz expects, it will strengthen demand for electric vehicles.

At the same time, demand for combustion engines will drop to lower, albeit notable levels. But unless governments directly intervene through taxes or tariffs targeted at combustion engine vehicles, it is more likely manufacturers will also need to lower these vehicle prices to maintain sales in a shrinking category.

If auto-makers do otherwise, they’ll lose out to competing brands and effectively pigeon hole themselves in the EV category. If it was a sure-fire technology, that might make sense. However, given combustion engines have been around more than 200 years, not to mention uncertainty as to what other emerging fuel technologies could rival electric power, it just doesn’t make strategic sense. What does appear likely is more choice and bargaining power for motorists in the long run.

 

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