The global automotive industry is facing dire consequences due to Wright’s Law, a principle that states that for every cumulative doubling of production, costs decrease by a constant percentage. This law has been observed in various industries, including aviation, semiconductors, and solar energy. However, it is now affecting the automotive industry in a significant way.
The automotive industry has been experiencing rapid growth over the past few decades, with the number of vehicles on the road increasing every year. This growth has led to economies of scale, which have resulted in lower production costs. However, as production continues to increase, the rate of cost reduction is slowing down, and this is where Wright’s Law comes into play.
According to a study by the Boston Consulting Group, the automotive industry is currently at a point where the cost of producing electric vehicles (EVs) is almost on par with that of producing internal combustion engine (ICE) vehicles. However, the study predicts that by 2023, the cost of producing EVs will be significantly lower than that of producing ICE vehicles due to Wright’s Law.
This means that as EV production continues to increase, the cost of producing them will decrease at a faster rate than that of ICE vehicles. This will make EVs more affordable and attractive to consumers, leading to a shift away from ICE vehicles.
The consequences of this shift are dire for the automotive industry. ICE vehicles have been the mainstay of the industry for over a century, and a shift away from them will result in significant job losses and restructuring. The industry will also have to invest heavily in EV production and infrastructure, which will require significant capital expenditure.
Furthermore, the shift towards EVs will also have an impact on the oil industry. As EVs become more prevalent, the demand for oil will decrease, leading to lower prices and reduced profits for oil companies.
However, there are also opportunities for the automotive industry in this shift towards EVs. Companies that invest heavily in EV production and infrastructure will be well-positioned to take advantage of the growing demand for EVs. Additionally, the shift towards EVs will also lead to the development of new technologies and business models, creating new opportunities for innovation and growth.
In conclusion, Wright’s Law is having a significant impact on the global automotive industry, with the shift towards EVs set to have dire consequences for ICE vehicles and the oil industry. However, there are also opportunities for companies that invest in EV production and infrastructure, and the shift towards EVs will lead to new technologies and business models. The automotive industry must adapt to this shift if it is to survive and thrive in the future.
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- Source: Plato Data Intelligence: PlatoData