EVOLUTION OR REVOLUTION COMING IN AUTO SECTOR
Standing in front of a classic 1932 Auburn sedan and just a few feet from a shiny new Tesla Model X, Larry Burns surveys the past — and future — of the global automobile industry.
Electric, self-driving vehicles will power the future, says the former GM vice-president of research and development who’s now a consultant to Google’s selfdriving car subsidiary, Waymo.
And this aggressive view of transportation’s rapid evolution — or coming revolution — is gaining speed.
By 2025, Burns predicts electric vehicles will start making a significant dent on the traditional auto industry that has been dominated for a century by the internal combustion engine.
“I’ve watched my own industry in denial,” the Detroit-based engineer said Monday during his speech at Heritage Park’s Gasoline Alley.
“I think this could tip fast. I’m not predicting that. What I’m telling you is if you’re not prepared for that ... you’re in big trouble.”
Burns was one of the keynote speakers this week at ARC Energy Research Institute’s forum designed to examine the ongoing battle for the “hearts and wheels” of the transportation market and the ramifications for energy markets, companies and investors.
The former auto executive painted a bullish picture of transformational change that could shake up traditional automakers, buying patterns, consumer habits and, potentially, redefine the current business model.
While the gasoline engine and oil will still dominate transportation over the next eight years, Burns believes alternatives could start having an effect on the marketplace as early as 2020. Beyond 2025, battery and fuel cells could become the best way to design and engineer light-duty vehicles.
“I can see a path to a 10 per cent market share by 2025,” he told reporters after his speech. “Ten per cent is a big deal.”
That would be a huge shift, in a short amount of time.
Electric vehicle sales in Canada last year hit 11,000, up by more than 50 per cent from 2015 levels. Despite the buzz, however, electric vehicles made up less than one per cent of the 1.95 million light vehicles sold across the country last year.
As battery prices fall and technology improves, electric vehicles are in line for exponential growth. Aside from manufactures such as Tesla, these vehicles are also being aggressively developed by many established automakers as they strive to meet lower fuel standards.
But Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, believes there are difficult challenges ahead, from winning broad consumer acceptance and lowering the price tags to overcoming regulatory obstacles.
“We have to be reasonable about what is being said and reasonable about our expectations from the industry,” he said in an interview. “Electric vehicles still have some concerns on the part of consumers … Affordability is one, batteries themselves are still developing. We still have issues with weather.”
Other speakers Monday were cautious about the era of electric and self-driving vehicles arriving en masse, but no one was arguing it wouldn’t happen, only on the pace of change.
Rebecca Lindland, an analyst at Kelley Blue Book, pointed out the industry still doesn’t have the capacity to produce one million electric vehicles a year. It will face resistance getting consumers to buy electric, self-driving cars for use in rural settings or in colder climates.
“It’s not so much the technology isn’t going to be there. We will take flight, we can drive autonomous vehicles by 2025, but the rest of it isn’t going to be there,” she told reporters.
“I love the idea. I love the concept. I love everything about it. But I also love facts.”
Lindland believes a 10 per cent adoption rate for electric vehicles by 2030 is realistic, which is only 13 years away.
There’s no denying electric vehicle sales are setting records, as was seen in Canada last year, and that investors are paying attention. The debate about the future of the transportation sector came on the same day Tesla Inc. saw its market capitalization top venerable Ford. By Tuesday, Tesla moved past General Motors Co., and now has a market cap of US$53 billion.
What happens with the transportation sector will affect not only car and truck sales, but also the energy industry and oil-producing jurisdictions including Alberta.
ARC Energy Research Institute president Peter Tertzakian noted about half of every barrel of oil produced globally goes toward wheeled transportation.
While crude demand is growing and expected to rise for decades, even a small change in a few hundred-thousand barrels of supply is enough to make oil markets gyrate wildly.
Pressure to improve fuel efficiency, notwithstanding the recent review ordered by the Trump administration on incoming U.S. standards, will also affect future oil demand. All this means more pressure on petroleum producers to drive down costs to remain competitive.
“It doesn’t mean it’s the end of oil. It just means that the oil business has to change and adapt in a new competitive environment,” said Tertzakian.
“And those that survive it are going to do very well. Those that don’t are out of business.”