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Legacy Automakers Should Think Twice Before Abandoning ICE Technology

Remember the last factory-built American convertible? I do. It was a white 1976 Cadillac Eldorado, which rolled off the assembly line in April 21 of that year. Because of various safety regulations, conventional wisdom held that automakers would no longer be able to build open top vehicles.
Flash forward nearly half-a-century. According to iSeeCars, last year saw convertibles account for nearly two percent of 15 million car sales. That works out to roughly 300,000 units.

History seems to be repeating itself with all the “last call” V8 models and the emerging consensus that internal combustion engines, if not dead, are about to be swiftly ushered off the stage. Manufacturers are lining up to announce plans to be totally electric (well, at least offer EVs and plug-in hybrids) before the end of the decade and some promise to offer no ICE vehicles by 2035.

These legacy makes have been building these engines for more than a century. The high cost of engineering, manufacturing, testing and certifying these increasing complex devices have served them well by insulating them from start-up competitors. Automotive history is littered with the remains of companies like Kaiser-Frazier, Tucker and DeLorean that sought to upset the status quo.

Even established brands with long histories like Packard, Pierce-Arrow, Studebaker, couldn’t keep up. And divisions with long histories like Oldsmobile, Pontiac, Mercury and Plymouth have come and gone, victims of the high cost of competition.

That is until the electric age. Tesla has shown that a newcomer can succeed against the legacy makes. It’s not handicapped by the high startup costs of engineering, developing, certifying and manufacturing internal combustion engines. Rather, EV technology has opened the door, allowing newcomers to take on the legacy makes. We now see companies like Rivian, Lucid and Vinfast taking advantage of this once in a lifetime opportunity.

To be sure, established automakers see that the future is moving toward electric vehicles as a result of government policy. And while they enjoy advantages in scale and experience in building car bodies, interiors, and electronics along with meeting strict safety standards, when it comes to battery and electric motor technology, the playing field is wide open.

While it makes sense for existing makes to take on this new competition, jettisoning its internal combustion engine expertise could be a big mistake. For smaller luxury brands, especially those with the bulk of their sales in Europe and China, areas with dense urban populations, plenty of public transport and stringent EV mandates, giving up internal combustion technology may make sense.

But for large manufacturers who sell cars globally, especially in those markets with large land masses and less dense urban areas that rely on the automobile for mass transportation, hanging onto ICE expertise may be a good idea.

Remember when just about everyone built a minivan? With the rise of SUVs, minivans were no longer cool and the sales just couldn’t support the production volume. That didn’t mean minivans were necessarily obsolete. The market itself found equilibrium at about a million units a year. The four brands left in the segment have found that it’s quite profitable to still make them.

The same holds true for internal combustion. With zero emission requirements like those imposed by the California Air Resources Board, ICE technology will see a decrease. But that’s not to say these engines will be eliminated. The technology will still be incorporated in PHEVs, which are allowed under the standards. Other states will simply not follow the rules and unless there is a national requirement for ZEVs in America, one of the largest car markets on the planet, ICE technology will live on for the foreseeable future.

And because the requirements are for zero emissions and not an outright ban on internal combustion, there could be some ICE developments like sequestering emissions onboard or using some sort of non-polluting fuel like hydrogen or Porsche’s eFuel that could be interpreted as meeting the spirit if not the actual intent of the law.

Watch carefully what the major manufacturers do in the years ahead if EV technology doesn’t come through with improved and lower-cost batteries. If EVs aren’t cost competitive with ICE alternatives and the projected volumes fail to materialize, we may see some backtracking on earlier pronouncements of an all-electric future by several manufacturers who today say they’re committed to it.

We already are seeing some slight shifting in this stance. Herbert Diess, a proponent of an all-electric future for VW Group has been replaced by Porsche’s Oliver Blume. While embracing EV technology, Blume also believes eFuels as a way to make existing cars more carbon neutral while allowing the continued production of ICE icons like the 911.

Taking biggest shot across the bow of proponents of an all-electric future was none other than Ford CEO Jim Farley, who said at the launch of the seventh generation Mustang that “Investing in another generation of Mustang is a big statement at a time when many of our competitors are exiting the business of internal combustion vehicles. Ford, however, is turbocharging its ICE growth plan, adding connected technology, opinionated derivatives, and hybrid options to our most profitable and popular cars – all in the Ford Blue family – on top of investing $50 billion in electric vehicles through 2026.”

While there is speculation that this new Mustang will be the last ICE version we’ll see, the company has not unequivocally confirmed that’s the case. Other manufacturers are likewise keeping their ICE options open, particularly the volume Japanese makes like Toyota and Honda, which call for as much use of hybrid as pure EV technology in the years ahead.

So, that’s why I take with a grain of salt manufacturers with their last calls on traditional ICE technology, like Dodge for its V8 Hemi-powered Charger and Challenger. It makes for great copy, but like the last convertible Eldorado that rolled off Cadillac’s assembly line nearly 50 years ago, it ain’t over for internal combustion until it’s over.

 
 
 
 
 

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