Stranded Asset Write-down

The motor vehicle industry faces moderate-high market obsolescence and substitution risk, driven by the accelerated transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs). Global EV sales are projected to reach 14.1 million in 2023, comprising approximately 18% of the total market share, with forecasts indicating a rise to 33% by 2028. This rapid displacement, coupled with stringent regulatory mandates such as the EU's 2035 phase-out of new ICE car sales, fundamentally alters demand for traditional products, indicating significant structural transformation and product substitution.

The motor vehicle manufacturing industry exhibits 'Moderate-High' market contestability and exit friction. Entry into the industry is exceptionally challenging due to immense capital requirements for R&D, plant construction, and supply chain development, alongside stringent regulatory hurdles.

• Entry Barriers: Establishing a new automotive brand with manufacturing capabilities requires multi-billion dollar investments and overcoming complex safety and emissions standards (e.g., Euro NCAP, CAFE standards).
• Established Advantages: Incumbent players benefit from decades of brand recognition, extensive dealership networks, and deeply integrated global supply chains that are costly and time-consuming for new entrants to replicate.
• Exit Friction: Exit is similarly difficult due to massive sunk costs in specialized assets, long-term labor commitments, and potential environmental liabilities, making asset divestment or business cessation highly costly and complex.

The motor vehicle manufacturing industry exhibits moderate-high structural resource intensity and externalities due to its profound reliance on primary raw materials and energy-intensive processes. The production of a single conventional car can consume over 30,000 liters of water and generate several tons of CO2 equivalent emissions, with manufacturing contributing 15-25% of a vehicle's total lifecycle emissions. The shift towards electric vehicles further intensifies demand for critical minerals like lithium, cobalt, and nickel, whose extraction is associated with significant environmental impacts such as water stress and land disruption.

The motor vehicle manufacturing industry exhibits moderate-high resilience capital intensity, necessitating significant investment for adapting to market shifts. The ongoing transition to electric vehicles (EVs) and advanced technologies requires substantial capital allocation for retooling existing facilities and developing new infrastructure.

• Investment: Volkswagen plans €180 billion ($196 billion USD) over five years (2023-2027) for electrification and digitalization, while Ford is investing $50 billion into EVs by 2026.
• Impact: These investments extend beyond R&D to encompass new production lines, battery gigafactories, and establishing new supply chains, reflecting a high financial commitment to future resilience.