Plugging electrics
We are in the early stages of a revolution in automobiles. The widespread adoption of all-electric vehicles and of driverless, or autonomous cars, is much closer on the horizon than it appears.
Until last year, the consensus forecast was for electric vehicles (EVs) to account for about one-third of vehicles on the road by 2040. But breakthroughs in the technology of EVs and the batteries that power them; stepped-up government advocacy of them; and automakers’ bet-the-company commitments to them have sharply altered that forecast. In May, researchers at the International Monetary Fund (IMF) forecast that as much as 90 per cent of vehicle production worldwide will be EVs by 2040.
Yes, that’s 23 years off. But the transition is well underway, and market saturation by EVs could come much sooner.
This month, Tesla Inc. is rolling out its first mass-market EV, the Model 3. It’s generally thought in the industry that if the Model 3 succeeds, electrification of all vehicles is a sure thing.
And the Model 3 should succeed. Elon Musk may not achieve his goal of producing 20,000 Model 3s per month by December, but it’s the Tesla signature to miss deadlines yet ultimately deliver a superb product.
The Model 3 is a game-changer, a quasi-luxury sedan disguised as a midpriced green vehicle. It’s priced at $44,000 before generous government rebates, gets more than twice as much range between recharges as its nearest rival, and is best-in-class in acceleration. (All figures in Canadian dollars.)
But the widely held view that much depends on Tesla is overdone. The tradition-bound auto business does have Tesla cofounder Musk to curse for being pushed into EVs. But Tesla’s offerings have since been embellished with many other factors spurring the industry’s now-hectic EV development.
Global EV sales reached 1.5 million last year. First-quarter Canadian sales of them were up 68 per cent over the yearearlier period. Norway leads the world in EV market penetration, with EVs accounting for 37 per cent of new-vehicle sales in January. And China boasts the largest EV fleet, with 2016 sales of 507,000 electric vehicles, a 68 per cent jump over 2015.
And the transition to EVs is gaining momentum despite a paucity of recharging stations; a relatively limited number of models to choose from (that’s quickly changing as new models proliferate); and the human trait of resistance to change.
The coming age of EVs will require a sweeping rethink of the entire motorized-mobility infrastructure. Power plants will have to expand their capacity to power a Canadian fleet of EVs equal in size to the country’s current 24.3 million registered vehicles, almost all powered by internal combustion engines. Canada’s 5,378 EV recharging stations are an impressive start, but that leaves close to 12,000 traditional gasoline filling stations in need of retrofitting.
The needed urgency in making this transition is highlighted by the 4,000 Chinese who die each day from conventional air pollution, to which the internal combustion engine is a major contributor.
Society has awakened to the fact that the EV is our best hope to quickly diminish the threat to human existence from climate change. Between them, the Canadian oil and gas production industry and the transportation sector account for about half of Canada’s greenhouse gas emissions, or 350 megatonnes of CO2 equivalent.
And driverless vehicles might be our only means of achieving significant gains in safety for everyone who uses our roads, at a time when the number of casualties of accidents involving vehicles, pedestrians and cyclists is at crisis levels.
Why will the EV era be upon us sooner than most think? Consider some of the factors powering this transition.
The forces promoting electric cars are so powerful as to make them inevitable. EVs are championed by the $2.5-trillion global auto sector, one of the biggest industries on Earth; and by governments, Wall Street, vehicle insurers, Silicon Valley, environmentalists and public- health advocates. They all see electric vehicles as the future of mobility, and are pulling out all the stops to make that happen.
Seldom in history has such a diverse and powerful coalition of forces backed a “new new thing,” to borrow author Michael Lewis’s term for computing breakthroughs.
Governments are pushing hard for driverless EVs. To encourage electric vehicle purchases, Ottawa offers a rebate of $7,000; and Ontario’s rebates run between $6,000 and $10,000, depending on the vehicle’s range between recharges and passenger capacity. The rebates will cease once they’ve achieved their purpose of getting a large fleet of electric vehicles on the road.
Municipal governments, allied with environmentalists and publichealth advocates, seed river less EVs as a solution to conventional air pollution and the casualty toll from road accidents. It is an axiom that most motorists are not the good drivers they believe themselves to be. The horrid phenomenon of cars mounting sidewalks and crashing into storefronts ends with widespread adoption of autonomous vehicles.
All levels of government are rewriting regulations to accommodate EVs. The feds have already established uniform standards for recharging stations. Tesla was pretty much alone in building recharging stations to support its cars, but municipalities have since joined in. By late last year, Vancouver, for instance, had 78 charging stations in operation.
Governments have also been mandating ever more stringent emissions-reduction targets for internal combustion engine-powered vehicles. That’s how the Obama administration gave vehicle electrification a push. Now the Europeans are in the lead in making the world hostile to the internal combustion engine.
Autos are headed for pariah status. Last month, France said it will ban the sale of gasoline- and dieselfueled vehicles by 2040, and Britain soon followed. Norway wants to be free of them in just seven years’ time.
Among the municipalities that this year said they’ll banish diesel vehicles from city centres by 2040 are Athens, Mexico City, Madrid and Paris. Each cited not climate change, but conventional air pollution that kills thousands of people afflicted with respiratory ailments and the elderly each year.
And across Europe, drivers of gas- and diesel-powered vehicles now face a wide range of state penalties, including restrictions on where they can drive and park.
Automakers are going all-in on EVs. Almost every major global automaker already has them in its showrooms, and most are also developing driverless vehicles. Automakers are striving for “first-mover advantage,” since only a few among the world’s overabundance of automakers will achieve dominance in 21st-century automaking. (China and India each have about 20 automakers.) The rest will fall by the wayside.
Even the holdouts have gotten with the program. Volkswagen AG, the world’s No. 1 automaker, was so wedded to diesel that to protect the engine’s status it spent a decade faking its U.S. diesel-emissions data. But VW’s new post-“Dieselgate” CEO has vowed to develop no fewer than 30 electric models by 2025, accounting for about 25 per cent of total production.
A Toyota Motor Co. long resistant to all-electric cars (instead dedicated to the gas-electric hybrids it pioneered) has relented. The world’s No. 2 automaker now plans a new range of “pure” all-electric autos.
And Fiat Chrysler Automobiles NV, the No. 7 automaker, plans electric models for its Maserati sports cars and gas-electric (hybrid) engines for its Jeep SUVs. Only a few months ago, the company’s CEO was publicly discouraging sales of its sole EV, the Fiat 500e, saying the company lost money on every one it sold.
What those firms have in common is enormous production volumes. They have the most market share to lose if they botch the electric revolution. The gains of a rival automaker’s well-received models will come at the expense of high-volume automakers with EVs that fail to click with buyers.
No one expects the advent of electric cars to expand the auto market. Instead, EVs and autonomous vehicles will take market share from gas and diesel models in what amounts to a zero-sum game. With gargantuan amounts of capital tied up in factories worldwide, the biggest automakers can’t afford to lose a point of market share. Which means every automaker has to strive to make the most appealing electric models.
To do that, automakers are allowing themselves to be guided by Silicon Valley thinking. Traditionally, automakers have been painfully slow to develop new products. Tesla, Apple Inc. and the Google branch of Alphabet Inc., all based in the Valley and all at work on prototype autonomous vehicles embrace risk and failure; invent and go to market quickly; and are convinced that their latest products already are obsolete. Which keeps them constantly reinventing, a world view that has taken hold in Detroit, Stuttgart and Toyota City.
“Dieselgate” was a turning point in the revolution, prompting every automaker to wholly commit to EVs.
Another was the sacking earlier this year of Mark Fields as CEO of Ford Motor Co. The young CEO presided over rising sales and profits during his three-year tenure, but Wall Street badmouthed him for being behind the curve on electric and autonomous vehicles. Never mind that Fields had bought about half a dozen Silicon Valley startups specializing in EV and driverless tech. The Street wouldn’t be swayed from its view that Ford was behind the curve. Investors drove down the value of Ford stock to the point where the firm’s board felt it had no choice but to cashier one of the best presidents in the company’s history.
At crosstown rival General Motors Co., by contrast, CEO Mary Barra has presided over mediocre financial performance. But GM gained first-mover advantage with its Chevy Bolt, launched a year ahead of Tesla’s Model 3.
That the Street is well-pleased with Barra is a message to industry CEOs that they’re flirting with a pink slip if they don’t maintain a hectic pace of EV and driverlessvehicle development.
Having committed tens of billions of dollars to EVs and driverless EVs, the automakers will market these non-traditional products with unaccustomed zeal in order to recoup their costs and retain market share. That will put enormous pressure on consumers to make the switch from traditionally powered automobiles.
And sooner than later, suppliers like Magna International Inc. and Robert Bosch GmbH, necessarily preoccupied with the coming dominance of EVs and autonomous vehicles, will stop inventing parts to improve gas and diesel performance, furthering the decline of the internal combustion engine.
Mass-market adoption of new technologies is accelerating. The elapsed time from advent to wide- spread adoption of the conventionally powered automobile was about 70 years. The transition to passenger air travel took about 40 years. Only about a decade passed before use of the internet was widespread, dating from the 1989 invention of the World Wide Web. And the first mass-market smartphone, the iPhone, introduced in 2006, was an instantly a mass-market hit.
The EV doesn’t satisfy a new need, it merely improves on satisfying an existing one. Widespread adoption of global travel, with the 1970s advent of the 747 jumbo jet, was an additional good, an additional cost and an unfamiliar experience.
By contrast, an EV is a car that replaces an existing car. It is not an additional household good, and is not an additional expense. It is a familiar good, whose uses and functionality are similar and in many respects identical to those of the traditionally powered cars and light trucks they replace. And the transition brings no additional expense for the motorist who is poised to replace a vehicle anyway.
To be sure, the EV era holds no promise of reducing traffic congestion. And millennials, the first generation in modern times to reject house-buying as a good investment and who soured early on cars, as well, aren’t likely to embrace EVs, either.
For them, mobility increasingly means electric bicycles, e-scooters and even e-skateboards. Sales of e-bikes have skyrocketed, hitting 35 million worldwide last year. Across Canada, e-bike sales are jumping between 100 and 500 per cent per year, depending on the jurisdiction.
And oddly enough, none of these new forms of personal mobility have cupholders.
Society has awakened to the fact that the EV is our best hope in war on climate change and maybe our only means of bettering safety for everyone who uses our roads