Combustion engines are toxic items of carmakers

Combustion engines are toxic items of carmakers ...

New York, Dec 22, 2008 - The gastric motors are a toxic asset of the electric vehicle revolution. During the 2008 financial crisis, the industrials are shifting to battery powered cars, while the demand for a diesel-engine engine is dying. The bank cleaned itself up by transferring loans into so-called bad banks. Carmakers could do the same thing.

With bad banking, lenders cut their exposure to undisputed assets and present better picture to shareholders. Carmakers are a bribe of profiting, but their years are numbered. In Europe, more than three quarters of new cars will be electric by 2030, according to Jefferies analyst. That could limit the risk of the aging capital of Tesla-like power businesses.

What do we call the "electric cars"? A fifth of the German carmakers sales by 2025 - generates 55 billion euros, according to Refinitiv data? Put this multix and three times (the third of Elon Musks groups equivalent valuation in early December) and the business could now be around 160 billion euros today. Thats about VWs entire worth, including debt.

To protect their own debts, their suppliers were resuscitated by the resuscending assets, whereas their rivals sold the two-ox and sold a fraction of this unit to a financial investment investment. The new entity could cut costs, helping it to keep profitability even as sales of combustion engines shrink. And because the carmakers' relying on only a small stake, they wouldn't completely consolidate their legacy business.

Volvo Cars offers a prototype. The $24 billion Swedish carmaker has transferred its fossil fuel operations to a new group controlled by Zhejiang Geely, allowing it to consolidate the business by locking in a supply of hybrid engines.

It will not be easy for bigger carmakers to explore risky spinoffs, which might take long time and put much money in their hands. Without sacrificing more expensive work, the industry will be better able to make a quick change.

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This is a Breakingviews prediction for 2022. To view some of our predictions, click here.


- Electric vehicles represent 35 % of the total car sold by 2030, and 47 % by 2035, according to forecasts by Jefferies analysts. In Europe, battery vehicles penetration will reach 77% when 2030.

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