Automakers will pump approximately $225 billion into electrification over the next four years, according to the consulting firm's projections. Those investments will come at the same time that AlixPartners anticipates a decline in overall sales and rising costs that further erode profitability.
"It's creating near-term profit deserts for industry, while regulatory pressure is applied to the supply side," said Wakefield, who spoke at an Automotive Press Association event here last week. "You have to be able to invest through this valley to get to the other side and be capable of weathering a cycle."
Electrification isn't the only major r&d initiative. Investments in automated-driving technology are on pace to reach $85 billion through 2025. Combined, those investments won't do anything to boost bottom lines in the near term, Wakefield said.
Electric vehicle sales volume, Wakefield says, will remain low, averaging just 14,000 units sold per EV model through 2022. That's a far cry from what automakers expect from traditional vehicles.
"It's rare that anyone ever is betting on this low volume," he said. "So even as you see this increase in battery-electric penetration, basically that line doesn't move. There's this pileup of investment going into EVs and the actual returns not being there for this first and second generation. It's a real challenge."
There already are diminishing returns on capital employed. Wakefield said returns "dropped to near-Great Recession levels" last year — 1.5 percent in the Americas and slightly negative in China.
At the same time automakers endure a long-term wait for returns on investments, they may find challenges at the core of the industry. Light-vehicle sales, the firm projects, will shrink to 15.1 million in the U.S. in 2021 before beginning a modest rebound and returning to today's levels in 2025. Meanwhile, the breakeven point will continue a rise from 10 million vehicles in 2010 to 15 million this year, the firm says.
There are some signs consumer acceptance of EVs is rising: In a May survey of more than 1,000 customers across the globe, 17 percent told the consulting firm they'd pay a $10,000 premium for a battery-electric vehicle.
But dealers will join the ranks of the disappointed as EVs grow in popularity, he said. EVs require less service, and dealers stand to lose $1,300 per vehicle in service-and-parts revenue over the first five years of a vehicle's life.
"This doesn't become a big deal in the near term," Wakefield said. "Eventually, it's a big deal."