#781: The hand of government ne’er runs smooth

Posted on October 22, 2025 (Updated February 10, 2026) by ewand

This is part 3 of the “Is the car industry doomed?” series, following Part 1 and Part 2.

Looking back through history, government involvement in automobile manufacturing and its supporting infrastructure hasn’t always gone well, though examples do exist of dominant authority proving effective.

From the mid-1920s, the German government decided it wanted to build a network of roads – which became known as the Autobahn. When Hitler took power, he enthusiastically progressed the project and had the idea in the late 1930s of a car for the masses to go with their new road networks, commissioning a well-regarded engineer called Ferdinand Porsche, to make it a reality.

By the early 1970s, the Volkswagen Type 1 (aka “Beetle”) went on to overtake Henry Ford’s “Model T” as the most produced car up to that point, eventually tapping out at 21.5M models over an unbelievable 65-year lifespan. It was eventually overtaken by the Toyota Corolla, which remains at the top with over 47.5M produced in nearly 60 years.

The British Leyland experiment

In 1968, numerous established British car brands merged with the goal of being able to take on the globalising American juggernauts like Ford and General Motors, through creating efficiencies, economy of scale and all that kind of stuff.

Sadly, it didn’t go too well and the UK Government had to step in and nationalise the whole thing in 1975, under the “British Leyland” name.

There followed years of industrial turmoil, cars that were less well built or less well received than expected, and eventual dismemberment and sale of key brands like Jaguar and Rover. Government interference may have partly caused the merger to happen in the first place. Eventually it had to get involved in running a business it knew nothing about, in order to save face and thousands of jobs.

Zero Emissions Mandates

Coming back to the present day, before Covid, legislators in the EU (and the UK, which was still part of it at the time) decided that in order to reduce emissions and enthusiastically champion the kind of growth that Tesla was starting to experience in the US, they should encourage the car industry to invest in a transformation to electrification.

So, governments started offering incentives to offset the additional costs for end users, through direct subsidy to consumers, grants for installing home-chargers and tax breaks for companies supplying EVs to their staff. They also invested in improving public charging networks and ultimately legislated to force car companies to reduce emissions and speed up the uptake of EVs.

The US government never compelled an EV shift (though the law on trying to reduce pollution from gas guzzling vehicles was often mis-appropriated as an “EV Mandate”).

The European Union, however, did set out rules that meant it would no longer allow the sale of petrol or diesel cars after 2035, with stringent targets to reduce emissions of Internal Combustion Engine cars ahead of then. The EU threatens to penalise car companies based on the average CO2 emissions of their sales – though a reprieve has been granted for now.

Car companies reportedly considered restricting the numbers of its most polluting models, dropping certain ICE configurations altogether to avoid selling too many (and racking up fines by the resultant raising of their average CO2 output). In some ways this is what the legislators want, even if that means the highest performance cars in the range (such as Porsche’s 911 GT3) have to be restricted in numbers, even if the demand is there to sell more of them.

The UK government in 2020 decided that they would accelerate the move to EVs, and ICE vehicles would be phased out by 2030. That has now been relaxed to keep in step with the EU, given than the global car industry would be targeting the 2035 date for compliance anyway.

The current US administration quickly tore up the environmental restrictions due to take effect from 2027, so for now it’s perfectly OK to keep on buying the mix of pickups and SUVs that seem so popular.

The best selling “car” in the US is the Ford F-150, which will do about 14-17mpg in real world driving, emitting around 250 – 350g/km of CO2 (in the European model) depending on engine size.

The top selling car in the EU, by contrast, is the ICE-only Dacia Sandero, which will get 53 miles per UK gallon, emitting only 119g/km of CO2. [Note that the UK gallon is about 20% larger than the US one, so if the F-150 could do 15mpg in the US, it would be more like 18mpg in the UK].

Do Consumers want them, though?

Forecast demand for EVs is picking up but it’s still a long way from being the dominant form of propulsion. They are often more expensive to buy than traditional ICE cars, even if the running costs over time might be lower. Residual values have so far been poor – headlines saying that EVs lose half their value in 2 years could be enough to give buyers the jitters about buying a new, premium electric car.

Analyst Statista provides data with forecasting until 2029; taking a straight-line extrapolation (which is unrealistic but serves a purpose) from 2030 to 2040, would conclude that even by 2035, Petrol shipments would still have the upper hand.

Data Source: Automotive industry worldwide – statistics & facts | Statista up to 2029, then a straight-line extrapolation from 2030 – 2040.

If government mandates and incentives keep being offered or even increased, it’s likely that EV uptake will accelerate. If we assume that pure petrol and diesel will to all intents dry up post-2030, and that there’s at least a bump in hybrids for a while before them being essentially unavailable after 2035, maybe it would look like …

Data Source: Automotive industry worldwide – statistics & facts | Statista up to 2029, then an estimate of decline in petrol/diesel and stronger uptake of EV and (to 2035), hybrid

In truth, it’s unlikely that diesel, petrol or hybrid will completely stop in 2030/35. Even if the EU keeps its restrictions in place, there’s no telling what the US might do, or what will happen outside of these major blocs. We’d assume that pretty much all petrol and diesel will become MHEV or PHEVs, and for a while at least would continue to out-sell EVs.

Some car manufacturers bet the farm on EVs – take, for example, Geely. Amongst various Chinese domestic brands, they own Sweden’s Volvo & Polestar, the London taxi company and former UK sports car maker Lotus. Polestar used to be a sporty sub-brand for Volvos, like Mercedes’ AMG or BMW’s M-division, but it spun out as a separate company initially offering a high spec PHEV before launching a range of BEVs.

Polestar is reportedly circling the drain, with $1Bn losses and middling sales figures, though their boss said they’re going to stick it out. They have launched several new cars in the last couple of years and it’s taking time for them to gain traction while the 5-year old Polestar 2 is looking less competitive.

Volvo’s pure EV sales are down YoY by nearly 25% and sales across the board are falling. Lotus tried to do a Porsche-style pivot (diversifying from just doing sports cars to more lucrative SUVs) by launching massive Chinese-built EV cars, but is both rowing back its pledge to move to EV-only for its UK-built sports cars, and is even looking to add a turbo-petrol “range extender” engine to it EVs to effectively make them EREVs. The Lotus Eletre SUV, designed and built by Geely in Wuhan, is expensive and heavy enough, and not particularly efficient. Wherever they could fit a petrol engine will only make it even more compromised.

Even with government assistance and tax penalties on more polluting cars, it seems people aren’t rushing to spend £100K+ on a 2.5 tonne luxury electric SUV. Lotus also joined the breathless pre-COVID rush for EV hypercars that would produce crazy power and cost millions of pounds. It seems the uber-rich don’t much want them either.

Complexity and Usability

As well as concerns about how they’re powered, consumers might be cooling on buying new cars in general. What with [waves arms around above head] “all of this”, keeping older cars running make more financial sense for many.

For driving enthusiasts, even buying new ICE cars – in Europe at least – also comes with the downside of a variety of mandatory safety features. On the face of it, more safety = better, but the new GSR2 regs require a variety of systems (like speed warnings) to be enabled every time you start the car, which means the car beeps and bongs for a variety of reasons, and can take many menu options to deselect the features.

Ironically, with the trend to replacing physical buttons with screens, the driver-monitoring camera on a modern car will tell you off for not keeping your eyes on the road, just because you’re trying to change the cabin temperature on the big screen whilst moving.

Car journalists talk about “peak car” being 8 – 12 years ago; stuff that has come out since is often more complicated, more expensive and not as nice to drive, even if they’re supposedly safer and better for the environment.

Will legislators blink?

It remains to be seen whether the powers-that-be will continue to try and make the industry switch fully to EVs. The use of tariffs by the Trump administration might stymie imports from overseas, but there’s little incentive for domestic US automakers to fully embrace EVs or even make their existing gas guzzlers super-efficient – Tesla being the notable exception. At least for now, tariffs are also restricting some cars from being sold in the US, as they’d just be too expensive – Volvo’s new Chinese-built ES90 “saloon” being one example.

In the early 2000s, the UK government (among others) incentivised diesel cars as a more efficient and less polluting (from a CO2 perspective) alternative. Fast forward a few years, and diesel particulate and NOx emissions were recognised as being a health danger and the naughty car companies were cooking the books (“Dieselgate”) when it came to emissions testing. It’s just over 10 years since the United States EPA raised its concerns about emissions not being reported correctly.

According to the Consumer Insights Global Survey, when asked in 2024, US buyers were 69% looking at Gasoline/Petrol, 19% Electric and 26% Hybrid, with Diesel accounting for only 8% (clearly, each consumer might be considering multiple options since the numbers don’t add up to 100%…)

Germany looked a little more positive, with 53% evaluating Petrol, 26% Electric and 32% Hybrid (though a stalwart 28% still want Diesel, it seems). The UK was 48% Petrol, 31% Electric, 39% Hybrid and still 23% Diesel.

Even a decade before we’re expected to switch to EVs, with these patterns in consumer demand, it feels like we’re going to get a lot of hybrids before we go fully electric, if that indeed happens.

The threat from China

The Chinese market has evolved over the last 25 years; at one point, it was the new nirvana for Western brands as newly affluent Chinese consumers wanted to snap up luxury products from Europe and the US. Auto makers rushed to set up manufacturing facilities in China to serve the growing local market, even producing specific models (like Audi launching the A6L long wheelbase for people to be driven around in).

That is now changing – the overall luxury goods market in 2025 is estimated to grow less than 1% in China, compared to 1.2% for North America and 2.4% for Northern Europe. While still expanding, the Chinese economy growth rate is slowing and consumers are turning more to cheaper, local brands.

At the same time, the Chinese government’s long-term investment program in the infrastructure and manufacturing capability for electric vehicles started to pay off. Now, the list of best-selling electric cars is dominated by Chinese manufacturers.

If the world’s car market is pivoting to be largely if not entirely electric, then BYD and similar brands could be the dominant maker of EVs, even if they have to spin up factories in other parts of the world to sidestep tariffs and other blockers.

Even though the charging networks are more advanced in China than in many other parts of the world, consumers are still worried about range and charging times. This has led to the development of waves of “NEV” – New Energy Vehicles – which are fundamentally electric but not exclusively so. Petrol-powered EREV – range extender EVs – are gaining ground and may become the default since they appear to offer all the benefits of EVs but can run for hundreds of miles.

If Europe and the US are going to still have an automobile industry in 10 or 20 years, they will need to compete with imports from China that are potentially much cheaper, and due to experience and scale, will probably be better than the ones coming from established western auto makers.

So, is the car industry doomed?

Well, obviously not entirely – but the constituent parts of it in a decade or two might be very different to what we’ve got used to over the last 30 or so years. German hegemony at the premium end of the market is certainly looking under threat.

BMW led with innovative electric offerings in the i3 and i8 of 2013/4 but fairly quickly realised they were not going to have true mass-market appeal. It’s taken them years to evolve the rest of the range to offer competitive BEV offerings, but they are now leading the field in Europe (even before Tesla’s sales were negatively affected by it’s CEO’s behaviour).
VW/Audi have had a difficult time, too – early software problems and a poor UX left mainstream buyers waiting (maybe the old adage of not buying anything from Microsoft until v3 also applies here), and they might have struck the crossbar above the open goal of the appeal of an electric Golf replacement when the ID.3 was first launched.
Mercedes, despite having some remarkable technology, have struggled to build and sell something that buyers want. Their boss has even warned of an existential threat to the entire industry if the lawmakers continue to enforce adoption of EVs too quickly.

So far, the Chinese manufacturers are grabbing market share by selling good-enough BEVs at a price that beats the premium offerings from Germany, and undercuts the alternatives from US, Japan and Korea. Renault has scored a hit with its cutesy R5 so there is hope from within the established industry that they can make a product that buyers want.

Time will tell if that’s enough to save the existing car makers or if they’ll be replaced by a new wave of names from China and elsewhere.

#780: The inexorable (?) shift to Electric Vehicles

Posted on October 15, 2025 (Updated February 10, 2026) by ewand

[Following from part 1, #779: Is the car industry doomed?]

Car manufacturers have been working on the assumption that soon, they will only be selling hybrid and then fully electric vehicles (EVs). Given that the gestation of a new car model is measured in years if not decades, they’ve been pouring $Billions into developing new car designs, new software platforms and new electric drivetrains. They need to skate to where the puck will be, which means there’s a lot at risk if they get assumptions and forecasts wrong.

Initially, some makers offered EVs as an alternative to the pure internal combustion engine (ICE) in existing models – hence you’d see different versions of similar-looking cars being sold, some with just ICE, some with a hybrid of ICE and electric and some with just Battery Electric (BEV). Volvo offered its XC40 in 2021 with 4 different petrol engines, 2 plug-in hybrids, 2 diesels and an EV option. Prices ranged from £25K for the most basic petrol T2 to £60K for range topping electric P8.

Abbreviation soup*

The purest EV/BEV is simply a car that uses one or more electric motors to propel itself. Power probably comes from a large, heavy lithium-ion battery that can take hours to recharge. Public fast-charging stations are springing up but can be complex to install (given the power requirements they need from the grid), and are many times more expensive to use than domestic electricity costs.

The industry keeps playing with other charging solutions such as swappable battery packs (like old laptops used to offer), or hydrogen fuel cells which generate their own electricity, dispensing with the battery but needing to find ways of getting the notoriously tricksy hydrogen on board.

As technology has matured, existing car companies evolved their ranges by launching new models that were designed specifically as EVs, so could be different to traditional cars in layout.

Mild Hybrids (sometimes known as MHEVs) are easiest to engineer, since they have a small electric motor and battery combination that may just provide additional oomph to the existing ICE, so don’t necessarily have the ability to run on electricity only. They can help the engine be more efficient but don’t replace it in function.

These have been around for years, in various forms – the first outside of Japan was launched 25 years ago, the Honda Insight.

**2001 Insight**, 80g/km, 1L/3cyl and 87bhp, 85+mpg | **2007 Audi**, 322g/km, 4.2L/8cyl and 414bhp, ~20mpg

Honda was just showing what was possible if engineers tried really hard to be efficient. Volkswagen did it 10 years later, with the XL1, and various other manufacturers tried, but the most ultra-efficient cars were never really mainstream. Nowadays, Mild Hybrid (or “Self-charging Hybrid” as Toyota calls them) are the easiest way for manufacturers to add some electrification to an existing car platform.

Plug-in Hybrids (PHEVs) try to offer the best of both worlds – a decent sized battery and an electric motor that could drive the car for maybe 50-60 miles, with a reasonable ICE there to provide longer range and more power. On the face of it, PHEVs are the perfect compromise – no real “range anxiety” of needing to charge the car when on longer journeys, while all the pottering about near home or even short commuting can be done like an EV and charged cheaply from home with a plug-in wall charger.

But there are downsides – when the PHEV runs out of electricity, it’s running just like an ICE car, but it’s got a 200kg-ish battery to lug around. When it’s on EV mode, the battery might be a lot smaller than the three-quarter-tonne affair you’d find in a Tesla, but it’s now got the anchor of a passive ICE to make it less efficient, and the motor is probably not as powerful as a pure EV car would have.

Clearly, we have the complexity of both systems to deal with, meaning there’s also more that might one day go wrong.

There’s also a generally unspoken concern about PHEVs – drift up to a roundabout in EV mode and give the accelerator a boot to get in with the flow of traffic, or sweep down a motorway slip-road in EV mode and put your foot down to get up to speed, and you might cause the ICE to fire up and join the party. In principle, that’s great – more ICE power when you need it, and after a while it’ll shut down to let you cruise along in EV mode again.

But what if that ICE hasn’t had the chance to warm itself up yet? If it was a regular car, its oils and seals and things would ideally have been ticking over for a while before being asked to perform at max power.

If the PHEV had been wafting around on electric drive before arrival at that first roundabout, then the driver demands a slug of power that the EV bit can’t deliver, the car is showing the same kind of mechanical sympathy as starting it up from cold and then jumping straight on the power at thousands of RPMs. Sure, the engines should have been designed and lubricated for this mode, to some degree, but who knows what this kind of “duty cycle” will do for long-term reliability.

Finally, there’s another variant that might become more prevalent than PHEVs – the EREV or Extended Range Electric Vehicle. The earliest example was probably the original BMW i3 REX – it’s an electric car but also has a small petrol motor which is used to top up the charge in the battery, giving it additional range. It’s quite possible that more EV makers will start offering this kind of option as a way of dealing with range anxiety. If they’re allowed to.

*Friend of the newsletter Neil Marley eloquently ranted on LinkedIn recently about the distinction between acronym and abbreviation. It would be tempting to say “PHEV” is an acronym, but it’s an abbreviation. Acronyms are new words like “laser” or “radar”; if you have to spell the letters out (like “WFH” or “EV”) then it’s an abbreviation. Capisce?

Driving EV adoption

Leaving aside the truly experimental, the highly compromised early EVs in the modern era were very much the environmentalist’s choice, before Tesla launched the Model S in 2012 and made them arguably as good as existing car options. Most people – though not all – who drive EVs are won over by their smoothness and technology, as well as the feeling they’re helping the planet.

As it happens, the earliest electric cars arguably pre-date the OG petrol vehicle, but lead-acid batteries and later nickel-cadmium rechargeables can’t hold enough juice for any kind of range. It took the development of lithium-ion batteries in the late 20th century to make a mass-market EV practical, banishing the milk float memories of the 1970s.

There’s increasing evidence that EVs can last better than expected, better than petrol or diesel cars. With lower vibration and heat cycles running through the car every time it’s used, and fewer moving oily bits and other parts, there’s less to go wrong, and less that needs servicing. Even the brakes might not wear out as quickly since they’ll use the motors to slow the car down: so-called “regenerative braking” is really just reversing the motor to slow the car through putting drag on the drivetrain, also generating & storing electricity for later use.

Electric car sceptics might say that if the average EV is heavier than an ICE alternative, they’ll potentially wear the roads out more quickly, and though they might not be chucking out CO2 and NOx, they could be throwing tyre particles around in greater volume than lighter cars… though that argument is largely debunked.

Whatever, the industry was at an inflection point a few years ago – when should they stop developing or even stop producing “traditional” cars, and instead put all their efforts into the new technology? Eventually, the price difference between the two might go away but at least in the early days, it was not uncommon for EV versions of an existing car to be significantly more expensive.

Charging challenges

YouTuber Harry Metcalfe has covered a few gremlins with relying on public charging networks; if you can find a charger that works, it takes a long time and isn’t necessarily cheaper than petrol or diesel.

If you could charge your EV at 350kWH and it could cover 3 miles for every kW used, a large 100W battery would still take ~25 minutes to fully charge, and might give you 300 miles of range, at a cost of up to £79 from (for example) GridServe.

Compare that to an average petrol car that could do 36mpg, and you could fill a 55 litre tank in a few minutes, giving you 435 miles of range for about £74.

Right now, EVs only really make sense if you can charge them overnight on a domestic tariff at home – but that can only be for a proportion of the population. And taking a 100kW battery from 10% to 100% charge would take 13 hours and cost (for UK users) about £22, or considerably less if they are on the right power plan.

Maybe the ideal scenario for many households would be to have a larger PHEV or EREV for longer trips or carting the whole family+dog+gear around, and a small 2+2 city car for short haul stuff.

According to the UK government’s Office of National Statistics, the 2021 census gave us some interesting demographic information:

23% of UK households have no cars, 41% have a single vehicle and 36% have two or more
21% of households live in a flat. maisonette or apartment.
According to ZapMap, 67% of households have access to a driveway. 9 million households do not, so would need to rely on some kind of public charging network.
EVA England says that over half of existing EV owners who do not have a driveway rely solely on public charging. 60% of disabled drivers reported issues with accessibility in public chargers.

Is Hydrogen the answer?

Ideally, government should get involved to make sure there’s a sensibly-priced charging infrastructure in place, so people living in cities or blocks of flats don’t get disadvantaged when it comes to using an EV. An alternative might be to invest in having a hydrogen filling network, and then car companies could have a different fuel source for powering their EVs.

Car makers have experimented with Hydrogen as an alternative fuel source for years; a fuel cell car can take hydrogen, combine it with atmospheric oxygen to release electrical power, and produce nothing more than H20. It’s also possible to separate hydrogen from water, though it takes a lot of energy to do so – but large arrays of solar panels in a desert could capture huge amounts of power that would otherwise do nothing and split out hydrogen for onward shipment to where that energy is needed.

The challenge with Hydrogen is that it’s somewhat explosive.

Well, it’s one of the most explosive elements, and can combust at very low concentrations in air. BMW, when making the experimental BMW Hydrogen 7 (which burnt hydrogen in its Internal Combustion Engine rather than using a fuel cell to generate electricity), advised users not to park the car under their house or in fact in an enclosed garage for any amount of time, in case the hydrogen leaked out and blew the whole thing to bits.

While it’s possible to transport hydrogen using variations of the natural gas supply network, it’s not without challenges and speaking with oil & gas safety and risk management specialists, there is little appetite to get involved with it right now. If that could be overcome, a good hydrogen distribution system was established and it became easy to refill your car, then it could provide a useful alternative to the weight and cost of lithium ion batteries and the charging time and range anxieties that negatively impact EV ownership.

A Toyota Mirai hydrogen fuel cell car can add about 5.6kg of hydrogen (at a cost of £10-15 per kg) to its tank in 5 minutes, and that is enough to drive for nearly 850 miles. The Mirai is no featherweight (nearly 2 tonnes) but otherwise is just an electric car in the way it drives, except that it has a compressed tank of gas rather than a big battery. Like Toyota, Honda has been working on hydrogen vehicles for years (including building a joint-venture fuel cell with GM, as used in the hydrogen powered CR-V).

Apart from its tendency for blowing up, the problem with hydrogen for fuelling automobiles is one of the chicken and egg – there are a handful of hydrogen stations in the UK, and the number has been falling, though the UK Gov has put in a bit of funding to add a few more. Without places to fuel up, hydrogen cars are not usable, yet without enough of them to drive demand for a refuelling network, the infrastructure is not viable.

Industrial power

The near-term future for hydrogen power is probably better suited for industrial applications, since the battery electric model is too hard to make work. As it happens, diesel has pretty good energy density – about 100x that of lithium-ion batteries by weight. So, to power an extremely large machine like the Liebherr T284 mining truck (which weighs 242 tonnes dry and has a fuel tank of 5,300L), would need about 500 tonnes of lithium ion batteries.

If you’ve got farm equipment, earth moving machinery or big diggers out in the field, you need them to be running all the time you can – meaning not only would batteries would need to be huge to power those machines on a 12-hour cycle, they would take days and days to recharge.

JCB has been working to build a variant of its diesel engine to run on combusting hydrogen instead. Driving a hydrogen bowser out to the field, connecting it to the fuel tank and filling it up on site makes more sense. Even with the machines burning hydrogen instead of using a fuel cell, it can be a near zero emissions model if the hydrogen was separated using green energy in the first place.

Eco-fuels then?

Another option being pushed by the automotive industry is the use of sustainable fuels. Some mix biofuel with existing fossil fuels to reduce the impact. Some are similar to the hydrogen combustion story with JCB, where if we could manufacture a purely synthetic fuel, then it could arguably be low or even zero emissions in total.

Porsche is investing in “eFuel” which uses hydrogen extracted using renewable energy and combined with atmospheric CO2. When it’s burnt in use later, any CO2 produced is only putting back the CO2 extracted during manufacture.

In motorsport, Goodwood is already using 70% sustainable fuel at the Revival event held in September. Formula 1 aims to be running on 100% sustainable fuel in 2026 – laudable if a little bit greenwashy, given the amount of air travel and freight required to get all their equipment to races…

To some degree, encouraging the continued use of existing fossil-fuelled cars by running them on (more) synthetic fuels is net-better for the environment than replacing everything with EVs. Manufacturing a new EV will add 20-odd tonnes of CO2 to the atmosphere – about the same as driving an average petrol car for 100,000 miles.

What does the future hold?

It’s difficult to be sure, but for now the car industry is still backing BEVs as the answer for domestic transportation. Mass transit like buses or for use in industrial settings, hydrogen looks like a much better option if they can deal with the distribution challenge. It seems unlikely that we’ll be running around in hydrogen-powered cars any time soon.

But there are very real charging challenges with BEVs that make it very difficult to imagine 100% usage. Even if pretty much all new cars are BEVs within the next few years, the average age of cars on the road is already growing – up to (in the UK) 9.5 years, up from about 8 before Covid. If you can charge your BEV at home, it’s great – every time you set off, your car is full of fuel. If you can’t charge at home, though, it’s going to be more hassle than if you’d had an equivalent petrol car.

Perhaps PHEVs or EREVs give us the best compromise, especially if they could be run on synthetic fuel. With a 10 year+ lifespan even PHEVs bought now could still be going strong well into the next decade.

The motor industry – especially in Germany, where it’s about 20% of all manufacturing – is lobbying the EU hard to dilute or even remove targets for transitioning to EVs, citing the relative lack of consumer demand and the huge costs they have incurred in engineering as being an existential threat.

Mercedes’ CEO Ola Kallenius recently said, “We need a reality check. Otherwise we are heading at full speed against a wall.”

The closer we get to the end of this decade, the more likely it is that governments will capitulate and extend the potential lifecycle of petrol/electric hybrid cars.

Final part – Government interference in the car industry; rarely a good thing

#779: Is the car industry doomed?

Posted on October 8, 2025 (Updated February 10, 2026) by ewand

The global automotive industry is at a crossroads. Worldwide population growth and demand for cars means some cities are so choked with traffic, you’d be quicker walking. Environmental concerns are driving shifts to electrification while technology intended to improve safety is at risk of distracting and even causing accidents.

Meanwhile, costs have skyrocketed amid worries of slowing consumer demand for brand new cars, leaving industry titans in something of a quandary – they have to invest fortunes to build cars fit for the future. But have they developed vehicles which are too big, heavy and expensive, overburdened with technology that end users don’t want?

What next? Will self-driving autonomous cars become a reality any more than the flying cars vision from the 1950s?

This series looks into some trends, data and perhaps a gaze into the crystal ball on what it all might mean for cars we drive (if we do at all), and the industry which employs 2.6 million people and is valued at $2-3 Trillion annually.

There’s so much to cover, I’ll break it into three parts over the next few weeks.

Part i: “Give the people what they want!”

“Some people say, ‘Give the customers what they want’, but that’s not my approach. Our job is to figure out what they’re going to want before they do.” — Steve Jobs

Steve Jobs is famously attributed as saying this, even though no definitive source has been found. Jobs supposedly went on to repeat the Henry Ford quote that if he asked people what they wanted, they’d say “a faster horse” (which is almost certainly made up).

Jobs was right, at least when new technology is concerned – show them a Mac when all they’ve used is a command line, or an iPhone when they had a Nokia 2110 and you’ll have them hooked. In the car industry, though, things are a little more complex. One thing’s for sure – if you’d asked people in 1996 what they really want, not many would say “an electric car”.

Changing buying patterns

Rewind a generation or two, and consumer habits for buying cars were radically different than today. Every few years, people would change cars by going to the same dealer they always used and probably bought the same brand they always bought. Loyalty was almost cemented in – you were a Ford family because Dad always bought Fords, or a GM/Open/Vauxhall family as Uncle Ted worked in the nearby factory. Switching car brands would be like changing football team you support.

That started to change when established brands like BMW and Mercedes became more attainable and upwardly aspirational. New entrants came into the market offering arguably superior products, possibly cheaper and/or more reliable. Long warranties tempted people to try out otherwise unproven makes. The biggest shakeup, however, came about due to easy availability of finance.

For years, getting a new car on some kind of PCP deal has been the default (for UK buyers at least) – it’s estimated that ~90% of all new and used car acquisitions are financed, though that may be changing. The premise of PCP is that at the end of the agreement, you could walk away, buy the car outright for an agreed fee or, as happens most often, enter a new PCP for a different car. Historically, this last option has been most likely but is softening as higher interest rates bite and the uncertain future residual value of new cars (especially electric vehicles) puts the costs up more.

More people are leasing or taking a new car on a subscription. City dwellers might rely more on public transport and use Uber or a pay-per-use club like Zipcar. Whatever, the traditional demand and supply models are changing.

Long cycles

Cars take a long time to design and build. From early concepts through to figuring out how they could manufacture and later service the thing, to testing for performance in all climates and crash-worthiness, it takes years and costs millions if not billions of dollars.

Add to that the trend in the last 30 years of “platform sharing” – where a car company will build a modular platform that can be more easily adapted to fit different sizes or types of cars in its own range, or even across brands (looking at you, VW, Audi, SEAT, Porsche, Bentley, Lamborghini…). Having to radically update a whole platform let alone the models that it underpins is a very significant undertaking.

Sometimes, car manufacturers try a new model out and it really takes off, so everyone else jumps on the bandwagon. In the 1980s, Chrysler downsized the A-Team sized van to be more of a family run around, and came up with the “minivan” concept, a few months ahead of Renault launching the Espace in Europe. For years, MPVs were wildly popular, before “crossover” vehicles and SUVs started taking over.

Sports Utility Vehicles (SUVs) account for nearly half of all new car sales worldwide and, according to the International Energy Authority, are responsible for a rapid growth in worldwide CO2 emissions. The IEA said if SUVs emissions were measured like a country, they’d be the 5th largest CO2 polluter in the world.

Both MPVs and SUVs are examples of users gravitating towards a new format, compared to their old saloons, hatchbacks, estate cars/station wagons etc. What’s the car industry to do? Make more of those, and less traditional cars, if that’s what people want to buy instead. Volvo recently announced that its XC60 is the most popular model ever, supplanting the iconic boxy 240 estates from the 70s. They’ve been threatening the demise of regular saloon/wagons for a few years.

A handy side-effect for the car makers is that they can jack up not just the ride height, but the margins of these larger cars, and that sometimes means others in their range get dumped due to low demand and/or low profitability. Ford cancelled the Fiesta, a small hatchback that was the best-selling car in the UK for years, for these very reasons.

So, the car industry needs to guess what people want a decade before they’ll be in a position to deliver it. They have to deal with legislature demanding better emissions (hence the journey to EVs) and improving safety.

For the most part, great – cars are way more comfortable and safer now for their occupants (though maybe less so if you’re on the outside; research says that if the US replaced all SUVs with regular-sized cars, 17% fewer pedestrians and cyclists would be killed each year). The trouble is all the extra impact protection, safety systems, airbags, screens, cameras, electric seats, 17-speaker surround sound stereo… they all add weight and cost. Cars are on average around 1/3 heavier now than they were 40 years ago, and there are many which are well over 2 tonnes. The largest electric SUVs are knocking on 3t.

Screens and buttons

As well as changing shape of cars and the way people acquire them, another significant trend over recent years has been the prevalence of in-car tech.

Surveys of intending purchasers shows increasing demand for more safety and comfort systems – in 2023, the top requested thing was a wireless charging pad for your phone but by 2025, it’s more advanced cruise control and automatic-braking protection from reversing into things.

Most cars now offer one or more screens to control in-car systems. Consumers now expect Apple CarPlay or Android Auto on new cars (even on relatively budget-friendly ones), though car makers have been dragged somewhat into making them standard fitment – even a few years ago, Ferrari wanted over $4K as an optional extra to enable the tech, even though it was already fitted in the car and it was just a matter of turning it on.

Other manufacturers have tried monetising enabling features that are there already – as the guts of what the car does are increasingly software controlled, it’s easier to just build all the hardware into every car. BMW floated the idea of users paying monthly subscriptions to use certain features, like heated seats – but rightly got some robust end user feedback that they felt they were being ripped off buying a car with functionality present, then having to pay again to use it.

Other vendors have mooted charging subscriptions for more advanced functionality – like if self-driving becomes a reality, users might be expected to pay per journey to use it. Unsurprisingly, not all users are excited about this business model.

As well as trying to find creative new ways to extract more cash from the end user, car companies have been on a charge to cut costs of manufacture as well – by pushing everything into menus on a screen, they save money from having physical buttons to control stuff like ventilation and heating. They also have a trend for having touch-sensitive “buttons” with haptic feedback, though user feedback is forcing a switch back to actual buttons that enable the user to interact without having to look at the control.

“Simplify, then add lightness”

This quote was attributed – though like all good quotes, it’s difficult to pin down if and when he actually said it – to the mercurial Colin Chapman, boss of Lotus. It’s the distillation of a philosophy that a light car (at least a light racing car) is better. Keeping this simple is also a worthy goal – though in modern cars, it’s more likely that simplicity is a veneer of usability over a hugely complex system underneath. Chapman sailed too close to the wind on occasion when it came to the Lotus racing cars of the 1960s – they were light and simple, but a bit too fragile.

Lightness, however, is a virtuous circle.

In contrast, look what happens when a regular car gets bigger and heavier (because the maker is required to, or if the buyer expects lots of space and bells and whistles inside). It needs a more powerful engine to give it the same relative performance; that in turn might add even more weight and complexity. It will need bigger brakes to stop it, and the wheels will need to be bigger to accommodate them. The tyres will need to be wider to maximise grip, further adding weight and creating more resistance, thus reducing the impact of performance and reducing fuel economy.

This additional “unsprung” weight on each corner makes the car handle less well, so in order to deal with that and all the extra flab onboard, the suspension components need to be thicker and heavier. And so on…

Battery Electric Vehicles (BEVs) face a similar problem – people want a long range (measured in hundreds of miles between charges), meaning they need to fit a large battery (the Tesla Model Y’s battery is apparently over 750kg; that’s more than the total weight of a first generation Lotus Elise).

Because people want big, safe, comfortable vehicles (which are heavier) then either the effective range goes down or the battery size goes up. And when the latter happens, it takes longer to charge the car fully, even if only to cover the same distance. The battery is also the most expensive component in a BEV, so the price rises too. Trying to offset that extra mass by making the rest of the car lighter using exotic materials (carbon fibre and stuff)? Price goes up even more.

What we really need is a small, safe, lightweight (1 tonne), efficient (getting 5miles/kWh) EV with plenty of space inside and a 400-mile range. The downside? If that was possible today, it would cost a million pounds.

Some car companies have tried to make lightweight EVs but with limited success; Honda released the “Honda e” following rave reviews of their 2017 concept car, and it hit the brief – drove really well, not too heavy (around 1,500kgs) and packed full of style and cool tech.

Cool tech does date quickly, though (Top Gear’s Chris Harris once said that buying an electric car is like buying a laptop in the 1990s … you just know that a better, faster, cheaper one will be just around the corner).

Also, small EVs tend to have low range – 100 mile maximum is not bad if you’re shuttling to and from your house and the shops or doing an average commute, but not so good if you have long journeys in mind. Honda dropped the £37K “e” after only 4 years; there are a couple of thousand in the UK so there’s at least some hope that when all that tech starts going flaky in 5-7 years’ time, that parts to repair them might be available.

So, what do we want?

As borne out by survey data, new car buyers increasingly want well-integrated technology in aspirational, safe and usable cars that are environmentally conscious and don’t cost too much. Sadly, these things are not usually complementary. Buyers are increasingly brassed off by massive slab screens in place of any buttons or proper controls, especially in supposed premium cars where the minimalist screen-forward feel looks a bit utilitarian.

The trend for large SUVs in place of regular family cars is getting some lawmakers’ attention too. The joke of the “Chelsea Tractor” is a problem in cities where space is at a premium. Paris tripled parking fees for vehicles weighing over 1.6 tonnes. Some campaigners in London are agitating for similar, and there’s pressure on the UK chancellor to overhaul vehicle taxation away from just emissions-based and focus as well on weight and/or size.

If these measures change what consumers demand from car makers, how long will it take them to design the cars that people want in future..? Is it too late?

Next part – the shift to EVs