We can all agree that the global auto industry is 100 per cent committed to electric or electrified vehicles, seeing them as eventually supplanting the traditional internal combustion engine. No one, however, can offer definitive answers to three critical questions: When? How many? And how much?
The answers aren’t there because there are so many variables in play, among them:
- consumer behaviour and preferences;
- government regulations and support, or lack of it – perhaps even barriers to adoption (see the Ford and Trump administrations);
- the broad business interests of the petroleum industry, related businesses and powerful forces, including governments, that oppose a quick and wholesale shift to EVs or plug-ins of any sort;
- the role and even survival of disruptors like Tesla and other EV manufactures, emerging and established (such a BYD and Geely);
- the role of companies committed to hydrogen fuel cell technology, such as Toyota and Hyundai Motor;
- the actual and real commitment of established car companies that have no interest in surrendering to the Teslas of the world;
- actual EV technology, including storage technology (batteries);
- a realistic endgame for the world’s one billion ICE vehicles on the road today;
- and more…
Most will concede that a wholesale shift to electrified vehicles – hybrids, plug-in electric hybrids (PHEV) and pure battery electric vehicles (BEV) – is not imminent. I would like to see this change happen quickly, but it won’t. Indeed, it cannot. A gradual shift, sure. But electrification will be a long process.
BP’s annual energy outlook report forecasts that electric cars will form around 15 per cent of global car sales in 2040, but because EVs will be used more intensely, they will account for about 30 per cent of passenger vehicle kilometres driven. BP is, of course, a big oil producer, so who knows the accuracy or bias of that forecast. Still, that number is in line with others I’ve seen. Well, a lot can and will happen in the next two decades.
Still, true optimists argue that the plug-in trend will intensify dramatically, once the adoption ball starts rolling – once a critical mass is reached. And we’re seeing progress there.
In Canada, Green Car Reports notes that plug-in sales as a share of the market have more than doubled this year, up to 2.16 per cent of market share in 2018, versus 0.92 per cent in 2017.
And we do have the non-stop drumbeat of electrification announcements from carmakers around the world. Volkswagen, for instance, has just announced plans to sell an EV for about $23,000 (US) without subsidies, reports Reuters.
VW CEO Herbert Diess told Automotive News that his company could build up to 50 million electric cars on its new EV platform. VW expects its strong presence in China — where the government is aggressively mandating EV sales — to provide the economies of scale necessary to make electric cars affordable for the mass market.
VW is one of several automakers to have committed $10 billion (US) or more to EV research and development.
“It is hard to get a precise estimate of the dollars committed globally by the industry (to EV development), but it is probably, give or take, upwards of a hundred billion dollars,” writes auto analyst Dennis DesRosiers in a note to clients. DesRosiers argues that we are in the early stages of an “exciting” technological revolution.
DesRosiers, an economist by trade, has an interesting and practical take on the very practical barriers to wholesale EV adoption, from the quality and longevity of vehicles that slows the turnover in the marketplace, to consumer preferences for ever-larger and more powerful vehicles that underpin the spectacular growth in light trucks sales.
DesRosiers also brings up fuel taxes, and they are no small matter. As he notes, “fuel taxes alone filled the coffers of our governments with over $25 billion last year and this is expected to increase in the next decade. EVs would seriously downsize these tax revenues so Governments will have no choice but to target other means of generating tax revenue from vehicles.”
In other words, how and how much will governments tax EVs to offset the loss of fuel tax revenue? That’s not an issue now, but it’s coming and it’s a huge issue that has the greatest potential to affect the quick and efficient shift to EVs.