The Day the Market Turned
December 2017, the last date for which updated aggregate data is available from the U.S. Department of Energy, marked a turning point: over 86 million vehicles with internal combustion engines were introduced to the global market. This figure – confirmed by independent sources such as Bloomberg New Energy Finance and the International Energy Agency – represents an all-time high in sales, not just a cyclical peak. Analysis of production flows indicates that demand for these vehicles was already saturated: in 2017, new assembly plant installations in Europe and Asia had stabilized after a period of accelerated expansion in the previous decade. In fact, any further increase in production capacity was no longer supported by real growth in primary demand but by maintaining supply to cover contractual obligations and investments already made.
It follows that the industrial structure of the automotive sector was in transition, not expansion. The operating mechanism is clear: after 2017, every increase in sales of electric or plug-in hybrid vehicles had a direct impact on the residual share of the ICE market, without any significant recovery in thermal demand. This dynamic is not related to isolated climate policies but to changes in the operating conditions of production and logistics systems. The production capacity of ICE engines was already consolidated in an architecture that did not foresee progressive reductions in operational scale, but a complete replacement of the technological model.
The Production Network: From Support to Congestion Factor
The global production infrastructure for thermal vehicles consists of an interconnected network of plants, secondary suppliers, and specialized logistics centers. The main bottleneck does not lie in the production capacity of individual components – such as pistons or injectors – but in the time required to restore the supply chain after a critical node is shut down. For example, the Italian network of suppliers for internal combustion engine parts has an average repair time of 42 days in the event of disruption due to structural failures or unplanned maintenance.
The technological transition has transformed this network from a factor of operational efficiency into an area of systemic risk. While factories dedicated to electric vehicles can be designed for rapid integration of new models, those producing thermal vehicles require significant structural changes – often taking over 18 months – to switch to hybrid or fully electric configurations. This means that every investment decision in ICE capacity after 2017 has been characterized by a high opportunity cost, as capital could not be reinvested in technologies with shorter payback periods.
Operationally, this has generated a dynamic of reduced flexibility: companies that have maintained ICE production after 2017 have been forced to manage declining revenue streams on an underutilized physical infrastructure. The average repair time for key components such as direct injection systems related to the internal combustion engine has increased by 30% compared to previous models, due to a shortage of original spare parts and the abandonment of production lines. Consequently, the operational resilience of the industry began to depend not only on production capacity but also on the flexibility in converting assets.
Who Pays: Companies Supporting the Transition
The economic effects of the transition have manifested differently among market players. The Italian company Autotecnica SpA, based in Bologna and active in the field of internal combustion engines for over 40 years, recorded a decrease in revenue of 27% in the first six months of 2024 compared to the same period in 2023. This decline is attributed not only to the decrease in demand but also to the increase in costs for managing obsolete inventory, which exceeded 18 million euros in the first quarter of the year.
Conversely, companies such as ElectraDrive Technologies – specializing in electrical systems for commercial vehicles – saw a revenue increase of 63% during the same period. This expansion was not only linked to the growing demand but also to access to state incentives that reduced the cost of entering the market: in Italy, the support measure for electric commercial transport increased the net profit margin of companies operating in the sector by 12%. This difference was amplified by the presence of a group of suppliers who quickly converted to components for hybrid and fully electric vehicles, creating a virtuous dynamic in the value chain.
The cost of the transition has not only been economic but also organizational. Companies that maintained the internal combustion engine model had to face a 40% increase in technical training expenses, as mechanics specializing in internal combustion engines became a rare resource. In addition, the maintenance of existing structures required an additional investment of 35 million euros for compliance with European environmental regulations regarding CO2 emissions, even in the absence of significant production.
Closure: The System Reorganizes Itself
The analysis of the ICE sales peak in 2017 reveals a mechanism no longer subject to reversal. The global energy transition is not a political choice, but an inevitable effect of saturation in production systems and the structural obsolescence of thermal infrastructures. The crucial data that measures the deviation from the status quo is the 2.3% decrease in market share for internal combustion engine vehicles in the first six months of 2024 – an unstoppable trend that has already exceeded the critical threshold of irreversibility.
In the next three months, two key indicators must be monitored: the volume of electric vehicle registrations recorded at European import ports – currently growing by 15% compared to 2023 – and the average variation in prices for components for thermal engines, which has already decreased by 28%. These signals confirm that the system is reorganizing around a new energy architecture. The future is not an option: it is the operational outcome of a transition that began eight years ago, and is now accelerated by the physical decline of existing infrastructures.
Photo by Wong cn on Unsplash
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