With the 2022 tally included, the total value of electric vehicles sold to date in the passenger vehicle segment has now crossed $1 trillion. There are a few ways to look at that figure. At the most basic level, if an automaker didn’t have a decent EV strategy, they missed out on their share of a trillion-dollar revenue opportunity over the last decade.

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That sounds like a big number, but global auto sales are worth around $2.5 trillion a year. So, over the last 10 years since EVs first showed up in the modern era, the value of total car sales has been roughly $25 trillion. In that context, the cumulative value of EV sales is relatively modest. Total profits from EVs also are much lower.

Still, growth rates matter, and almost 60% of total EV spending occurred in just the last 18 months. This year will break records again, with passenger EV sales likely to comfortably exceed $500 billion. This is now a very material, very fast-moving part of global auto sales.

The auto industry operates on long product cycles. While it feels like there’s a constant stream of new products, many are just cosmetic updates to existing models — facelifts, in industry parlance. To understand product cycles and what happens next, it’s important to look at vehicle platforms.

High-volume automakers develop new platforms that underpin vehicles over what is usually a six- to 10-year period. The platforms take years to develop, cost billions of dollars and ideally are versatile, allowing automakers to use different body structures catering to a wider variety of consumer preferences. These platforms also allow for component sharing across many models, which is a necessary part of the cutthroat economics of building vehicles at scale around the world.

Long development cycles also mean that if an automaker has been caught wrongfooted, it can take quite a while to realize the full impact of mistakes. The trillion-dollar EV sales mark is probably the point where it becomes clear that some automakers made the wrong bets.

Japanese automakers illustrate this well. All of the Japanese brands combined sold less than 5% of the EVs purchased globally last year, and none were among the top 10 EV brands by volume. This wasn’t a problem in 2019, when plug-in vehicles were just 2.6% of global auto sales, but it’s worrisome when they’ll likely be closer to 18% of sales in 2023.

Read the full article here by Colin McKerracher, Advisor Perspectives.