In the era of gasoline cars, the FMC cycle of passenger cars roughly ranges between 6 and 8 years. It is the result of a comprehensive analysis conducted by carmakers after years of development expense amortization, consumer car replacement cycle, new technology development process, and competitive market environment assessment. All the operations of a carmaker are based on and develop from its long-range product planning. Once the FMC cycle has been generally determined, warranty policies have been formulated and used cars have been priced accordingly. The car market has been playing this game for decades without much change, but the rules could be subverted now that the era of electric cars and new technologies has arrived.
When it comes to FMC, we inevitably think of four areas: change in body design/styling and even in car dimensions, improved powertrain performance, interior arrangement adjustment, and features enrichment ; but for smart electric cars, the definition of "FMC" is not quite the same…
- Battery types and performance will continue to change considerably for the better over the next 10 years. A new engine takes about four years to develop, and it can normally be applied in mass production for more than 20 years. But what about the battery, the component of an electric car that costs the most? The Tesla 2170 battery went into mass production in 2017, whereas the next generation, 4680, entered mass production in 2021. The development time of batteries seems similar to that of engines, but the threshold of technology is much lower for batteries than for engines. Take the battery factories in China, their production reached 75% of the global lithium battery production capacity (calculated in GWh) in 2020. This completely overturned the structure of the engine industry in the gasoline car era. In other words, the battery industry is booming with a broad range of technologies in full swing. The fact that a carmaker can use multiple brands of batteries at the same time will naturally speed up battery revisions and shorten the model change cycle.
- EV charging is the mainstream at present, but as the concept of battery swapping is rising, the consumption model where cars and batteries are separated will accelerate facelifts. When batteries are no longer included in the price of a car (they are leased), carmakers have less space for product differentiation, so it will be necessary to shorten the mid-generational refresh cycle to offer newly designed cars to consumers and keep the novelty alive.
- OTA download services allow old cars to enjoy the latest features developed by carmakers, which will limit the definition of "FMC" to the exterior and interior design of a car and reduce the "novelty" of overhauled models.
- Self-driving technology will take over the control of the car from human drivers after 2030, giving the car a new definition: mobile space. The idea of using cars will gradually shift from "car ownership" to "car sharing", at which point, "FMC" will no longer be an incentive for car users to buy cars, as all new models will be available through sharing.
Because technology advances much faster for smart electric cars than for gasoline cars, the FMC cycle for the former will no doubt become shorter. I estimate 4 years, give or take. As a result, the residual value of used electric cars will decrease for sure, and the battery recycling industry will emerge. Young people are likely to have used electric cars as their first cars (because the cars are still in good condition and the batteries usually have a warranty of 8 years or more). Meanwhile, the new car market will be stagnant or even declining after 2035 due to the foregoing factor and shared consumption.