#738 – Researchers have no idea when electric cars are going to take overMay 28, 2019
We have discussed is previous Agurbans about the impending rise in electric vehicles (EVs) and how that technology will require significant changes in the manufacturing process of automobiles. We are particularly interested in how this disruption will affect our tenants who manufacture components of internal combustion engines. When EVs will take over gasoline automobiles seems to depend on who you ask…
Researchers have no idea when electric cars are going to take over
By Michael J. Coren | May 18, 2019
The only thing sure about electric cars is they will eclipse the internal combustion engine—one day. The timing, however, is the topic of fierce and wildly divergent speculation. At the moment, only one in 250 cars on the road is electric. Battery electric cars comprise 2.1% of new global auto sales (about 2 million passenger vehicles). Electric vehicle (EV) sales should hit 2.7 million in 2019 even as the broader auto market declines (paywall).
But guesses about the timing of gas guzzlers’ eclipse are all over the map. Quartz assembled several of the top projections to gauge the size of the discrepancy. Optimists such as Bloomberg New Energy Finance (BNEF) in its 2019 Electric Vehicle Outlook report see the total EV stock soaring to 548 million by 2040, or about 32% of the world’s passenger vehicles. Bears, such as ExxonMobil and the oil cartel OPEC, put that day far into the future. Exxon’s most recent predictions, the most pessimistic (or optimistic?), show the global stock of EVs reaching only 162 million by 2040. That’s 70% lower than BNEF’s base case.
How can these predictions be so divergent?
Two assumptions make all the difference in EV adoption models, says Colin McKerracher, head of advanced transport for BNEF. The first is price parity. EV’s sticker price is expected to exceed conventional cars until the mid-2020s. Right now, electric vehicles are more expensive than conventional counterparts thanks to their pricey batteries and relatively small EV manufacturing capacity. No one is sure how far battery costs, the biggest expense in making EVs, can fall (they’ve already dropped 85% since 2010), and when EVs will achieve the same economies of scale as combustion engines have secured over the past century. The price of oil changes the total cost of ownership as well (New York City says EVs lower fuel and maintenance costs already makes them the cheapest option for its fleet).
The second factor is the demographics of demand. The market for electric vehicles is highly segmented. Early adopters tend to be wealthy homeowners, and often own a second (or third) car. After demand in this demographic is saturated, it’s unclear how fast it will move down the income ladders. For EVs to go mainstream, a combination of new infrastructure (chargers), public education, and cost savings is needed. Many of these are only partially in automakers’ control. The nightmare scenario for EVs is that the appeal won’t spread fast enough beyond “techies and greenies” to sustain the growth of the early market, says David Keith, an engineer and professor at the MIT Sloan School of Management.
Time will tell whether that’s true for EVs, too. Cheerleaders are seeing their predictions vindicated for now. But the uncertainty around the industry means it’s still anyone’s guess. So far in 2019, predictions of massive growth have yet to materialize.
Car companies are moving ahead anyway. Huge investments in electrification have already been announced. Volkswagen has committed $50 billion. Daimler placed a $23 billion order for EV batteries last year. GM and Ford are restructuring their business around electric cars. Whatever energy analysts predict, automakers are preparing for an electric future today.