The International ICE Business Cliff Is Right here



By Luvhrtz

As a administration advisor, I spend most of my working life taking part in with numbers and math within the areas of enterprise growth and finance. My evaluation targets have at all times been to make use of information and pc fashions to higher perceive trade developments. With BEVs beginning to go mainstream, we now have sufficient data to make some fascinating predictions.

Courtesy of Luvhrtz

The chart above outlines precise and projected world automotive trade gross sales for BEVs, ICE automobiles, and complete trade manufacturing. The manufacturing numbers are precise between 2015 and 2022, and are after all projected for 2023–2026 primarily based on historic BEV development information & developments. Hybrids are lumped in with ICE automobiles as a choice for full BEVs is turning into clear within the information.

As you possibly can see, the general auto trade has declined from when it peaked in 2017 as a result of pandemic and chip scarcity earlier than it began to get better in 2021. This chart/mannequin is conservative in predicting trade development at 1.6% y/y going ahead and BEV development at 50% for 2023 (common BEV development was 57% for the previous 7 years). I additionally adjusted future BEV development down beginning in 2024 by 2% y/y respecting the way it turns into more and more tough to develop a bigger fleet vs. a smaller one. I feel we now have sufficient information to indicate that ICE automobile gross sales are about to fall off a cliff beginning proper now!

The developments in inner combustion gross sales solely started to diverge from complete trade gross sales in 2020, with 2021 being the primary yr since 2017 that the general trade grew whereas ICE automobile gross sales continued their decline. This pattern accelerated in 2022 and the mannequin helps how this pattern won’t solely proceed however speed up considerably beginning proper now. Placing numbers on it, the drop in ICE automobile demand will imply 2.5 million fewer autos this yr, 4 million fewer in 2024, 6.5 million fewer in 2025, and a whopping 9.5 million fewer in 2026 for a lack of ICE gross sales totaling 22 million autos over the following 4 years. Additionally, be mindful this decline was calculated permitting for 1.6% development general for the trade!

What does it imply?

It has been noticed by many analysts that legacy automakers are in a little bit of a pickle. These automakers know become profitable on ICE automobiles, however, for many, BEV profitability is reportedly both damaging or decrease than it’s for his or her ICE merchandise. Now that ICE automobile gross sales are arguably in everlasting decline, firms making ICE autos must develop their BEV markets quicker than they lose their ICEV market. Additional, legacy firms want to have the ability to make their BEVs at the very least as profitably because the ICE autos they’re shedding lest the transition influence their financials! The actual fact is that many automotive firms don’t look like very nicely positioned to do that at this vital second when the market seems to be swinging quick! We’re in all probability now getting into “crunch time” for a lot of of those firms.

So, which automobile firms are in danger?

Along with amassing information and constructing fashions to undertaking general trade gross sales, I additionally hold information and observe what is occurring at a few of the high automobile firms. Sorry, I don’t have all of them, however possibly sooner or later I’ll add a couple of extra, together with the fast-growing Chinese language firms, as they’re clearly related to this dialog now. Here’s a abstract of what the information suggests for a few of the high automobile producers from 2015 to 2022.

Please notice the expansion percentages and volumes beneath are primarily based on precise information. Percentages aren’t cumulative, however per yr over the previous 7 years! 2022 change vs 2015 is the distinction between complete automobiles offered in 2022 vs 2015 (not cumulatively).

Courtesy of Luvhrtz

The Altman Z scores on this desk are primarily based on a components developed by Edward Altman again in 1968. The components makes use of firm monetary metrics and was created to assist predict which manufacturing firms are prone to going bankrupt. The components was developed utilizing monetary information from firms that went bankrupt. A great rating is over 2.99, and the “hazard” level is a rating of lower than 1.81. The mannequin is taken into account to precisely predict chapter 80–90% one yr forward of the chapter. This doesn’t imply an organization with a low rating will go bankrupt, however moderately how a low rating correlates with bankruptcies.


For an automotive producer to be thought of wholesome right now, they actually needs to be beginning to produce BEVs in quantity quicker than they’re shedding their ICEV gross sales. They need to even be producing them profitably. Plus, they need to have respectable Altman Z scores.

As you possibly can see from the information, Tesla is a transparent outlier and is in a terrific place to proceed its formidable development plans. Of the legacy firms, solely Mercedes and BMW are rising, and each have comparatively good Altman Z scores. Contemplating each firms even have respectable BEV packages, it suggests they’ll anticipate continued development and are in all probability not in peril of going out of enterprise.

On the different finish of the spectrum are firms which are shedding important gross sales y/y, and/or have weak BEV packages, and/or have low Altman Z scores.

The businesses that match this invoice embrace just about the remainder of the pack actually. That stated, it’s tough to foretell that are actually in hassle since there are such a lot of unknowns, together with how shortly these firms can ramp their BEV gross sales, if they’ll accomplish that profitably, and the way deep their pockets are. I think 2023 and 2024 will inform us rather a lot, particularly over at Toyota. Toyota is fascinating because it has some fairly good hybrids and a loyal purchaser base. Whether or not this shall be sufficient to keep up its gross sales within the context of a shortly declining ICEV market is the query.


There have been some holes within the information from the above websites, so I additionally scoured the web for current annual studies and articles on manufacturing. This included a report from Stellantis on 2022 manufacturing, plus some information from and BNNBloomberg.

Featured picture from Pixabay/Pexels (CC0 license)


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