Electric cars can’t keep up with fast changing lifestyles
By BMW AG’s high standards, 2016 wasn’t great. While it was a record year in terms of sales, the profit margin of its car business was the lowest since 2010 at 8.9 per cent. The company missed analysts’ estimates, and the share price dropped. So chief executive Harald Krueger’s decision to reaffirm the firm’s “Automated, Connected, Electrified and Shared” strategy raised more than a few questions: It was the reason for the drop in profitability, after all.
The hyped-up electric vehicle revolution, driven by a fear of being left behind and overzealous regulation, may be forcing car companies to make expensive mistakes. The modern electric vehicle is conceptually inconsistent with how people want to use cars, and in many countries the environmental effect of switching to EVs is negligible.
BMW wants electric vehicles to make up 15 to 25 per cent of its sales by 2025. But the Bavarian firm has only sold 70,000 i-series plugin cars since 2013. That didn’t go a long way toward covering the €4 billion ($6.2b) research and development cost.
Despite all the subsidies and tax breaks, EVs only make up about 1.2 per cent of the global market. In relative terms, the market is growing fast — the EV share was just 0.1 per cent in 2011 — but in absolute terms, there are too few EVs on the road to justify the attention they’re getting.
To spend heavily on electrification, companies have to believe forecasts from experts who don’t have skin in the game. McKinsey, for example, recently put out a report arguing that consumer interest in electric cars is growing. All car makers need to do is keep up incremental improvements and advertising more to increase awareness.
That could turn out to be wishful thinking, because the modern EV caters to a specific-use scenario that increasingly doesn’t work for today’s consumers.
The most long-range electric cars can go is 400km on a charge under perfect conditions. They take hours to charge and even the minimum of 30 minutes one needs to spend at a Tesla Supercharger is a nuisance on long journeys. The cars, however, are fine for someone who lives in the suburbs (in a single-family home, so charging at night isn’t a problem) and works nine to five in the city, where the car can be hooked up to a charging pole during an office shift.
The existing infrastructure is sufficient to support that kind of lifestyle. The problem is that this is an increasingly outdated scenario. People use public transport more often. They drive less in cities, and the cities themselves are trying to make residents use bicycles. Younger professionals choose housing to shorten the commute. They use ridesharing and car-sharing schemes.
Even if carmakers can incrementally improve the driving range, it won’t catch up with that of gasoline-powered vehicles without an engineering breakthrough. Nor will fast charging be possible at most stations with the current battery tech. “Range anxiety” is not an accurate term: It’s a technological problem, not a psychological one. It’s not enough to drive down battery cost: Producers have been good at that, but the flexibility that comes with a long range and immediate refuelling is at least as important to consumers.