07/03/2018 – Mobility / Sustainability / Electric Vehicles / EV
Since Tesla’s stocks overtook Ford and GM for the first time last year, it has become ever more apparent that investors are betting on a bright future for electric vehicles. Helena Haimes examines the huge potential of this burgeoning market, alongside the countries and companies leading the charge.
The inevitability of electric vehicles’ eventual market dominance seems more assured by the day. Until a few years ago, electric cars (otherwise known as EVs or plug-in vehicles) were seen as decidedly niche. However, as governmental pressures to reduce global emissions mount, manufacturers perfect ever more efficient and affordable battery technology, and investments keep pouring in to radically improve EV infrastructure, the worldwide market for green vehicles is really starting to take off.
Until relatively recently, consumers around the world have been put off by high running costs, meaning EVs largely remained the preserve of only the most determinedly green-minded and moneyed of car buyers. Yet a 2016 Bloomberg New Energy Finance survey indicated just how fast the market’s landscape is changing – it forecast that the total cost of EV ownership (covering running costs and initial purchase price) would fall below diesel and petrol vehicles by 2022. The consensus is that this will be electric vehicles’ ‘lift off’ moment in terms of sales, constituting a paradigm shift in the ways vehicles are bought and sold, as well as sharply reducing urban pollution and fundamentally altering the way manufacturers and consumers think about energy production and consumption.
China takes the high road
With 43 per cent of the 873,000 EVs produced in 2016, China leads the charge in both production and demand, at least in terms of sheer numbers of electric cars on the road. In 2016 Chinese domestic EV uptake overtook the US for the first time, with its cumulative EV sales reaching 650,000 and new registrations increasing by 70 percent annually. Chinese consumers now have roughly 75 EV models to choose from – the highest number globally. And Chinese OEMs have made huge inroads into every aspect of the EV manufacturing process too – from lithium-ion battery cells to electric motor production.
The US has also seen a sizeable increase in domestic demand, with a 37 per cent growth in domestic sales between 2015 and 2016. However, European market expansion has slowed to sluggish levels by comparison – it only experienced seven per cent growth in the 2015-2016 period, a factor that can in large part be attributed to the fall-off in Dutch registrations after changes to the country’s incentive scheme for plug-in vehicles.
In terms of EV share per capita though, no other nation comes close to Norway. Thanks to generous subsidies and a massive range of EV-specific perks (free or heavily subsidised parking, road tolls and ferries, for example), sales of hybrid and electric cars have skyrocketed in the Scandinavian country over the last few years. Pure electric and hybrid vehicles accounted for 52 per cent of all new Norwegian car sales in 2017, representing the first time Norway’s fossil-fuel market share has dropped below 50 per cent.
Regulation and subsidies
It’s not difficult to identify the common denominator among those countries experiencing steep upticks in EV adoption. The Chinese, Norwegian and US markets have all been exponentially boosted thanks to substantial regulatory and often direct financial support from their respective governments. China’s state planners, for instance, have strong reasons to do everything possible to ensure EVs continue their march to dominance. The combustion engine is detested by the Chinese government due to its sizeable contribution to the country’s choking levels of air pollution, and its reliance on huge quantities of imported oil (a major strategic vulnerability).
As a result, the Chinese government has introduced a raft of legislative measures to hasten petrol and diesel vehicles’ demise: in September 2017, it announced new quotas rewarding car manufacturers who focus on EV production, while penalising them for each traditional vehicle they produce through a system of mandatory ‘EV credit’ purchasing. China’s policymakers are also considering following in the footsteps of many European countries including Germany, France, the Netherlands and the UK, who have all proposed bans on conventionally fuelled vehicles to be introduced between 2025 and 2040. Overall, it has poured billions in state investment and subsidies into the Chinese plug-in vehicle industry, while showing itself unafraid to use the might of its enormous centralised planning system to ensure pro-EV policy takes ultimate precedence, even over consumer preference and short term profitability.
Elsewhere, the US offers tax incentives, infrastructure and vehicle rebates, vehicle registration fee reductions, low-cost charging rates, loans and high occupancy vehicle lane exemptions to EV manufacturers and consumers on both federal and state levels. California is miles ahead of other states in terms of both total and per capita EV sales. From 2011-2016 the state sold nearly 258,000 plug-in vehicles, translating to 0.7 per cent per capita – easily topping the next most EV-heavy state per capita (Hawaii, at 0.2 per cent).
Historically, wider EV adoption has been stalled by the unweildy, expensive and limited-range batteries used to power them. Yet seismic improvements made by manufacturers in the last few years have resulted in far more efficient battery manufacturing processes. Economies of scale have also meant that batteries are now much cheaper to produce, with cost per unit now typically 65 per cent lower than in 2010. A normal-sized, contemporary EV can also realistically travel 80-100 miles on a single charge – more than enough range for many regular consumers – as opposed to the 30 or so miles, as was the standard just a few years ago.
Of course, all these clean vehicles are useless without the right infrastructure to support them. And until very recently, EV drivers would be forced to plan long journeys in excruciating detail, making regular diversions to disparate charging points along the way. This too is changing in countries with committed EV policies, who are scrambling to ensure they have adequate charging stations in place. The UK, for instance, now has 4,100 stations, with more in the pipeline, while the number of conventional fuelling points in the country has dropped 75 per cent in the last 40 years – if such a pace is maintained, by 2020 there will be more electrical charging facilities than traditional fuel stations. A recent EU directive is also set to have an enormous impact – it will mean every new house built in the bloc from 2019 will need to have an EV charging point, and 10-per-cent of parking spaces in new buildings must have one by 2023.
Awareness is key
While incentives, subsidies, infrastructural investment and other supportive regulatory measures have obviously played a core role in pushing EV sales and manufacturing to increasingly impressive heights, these are far from the only forces at play. Norway and California, for instance, both have a high proportion of wealthy, left-leaning residents who are generally much more open to clean technologies, while China uses its combination of putative measures and state support to achieve similar results. Another crucial, yet often overlooked aspect – highlighted by a Nissan EV executive in a conference back in 2013 – is arguably the biggest of all: awareness. In a presentation focusing on the reasons for Norway’s pre-eminence in EV adoption, ‘soft’ factors were identified as equally important as financial incentives and other regulatory perks. For decades, the country has implemented an exceptionally broad range of approaches and initiatives designed to raise awareness of electric vehicles, ensuring that the Norwegian population view the idea of owning and running an EV as a realistic, if aspirational, possibility. This has led to a kind of virtuous circle – as the market burgeons, word gets about among consumers that EVs are worth investing in, and this in turn leads to yet more growth.
California has taken a comparable path. As well as taking active measures to boost EV businesses and infrastructure to encourage its rich, avidly green consumers to invest in EVs, the state also has what it calls ‘ZEV mandates’. These mandates require that for every conventionally fuelled car a manufacturer sells in the state, it must also offer a zero-emissions model. Although Elon Musk and others have criticised the measure for being ineffective and loophole-ridden, when additionally combined with his green innovation giant Tesla’s manufacturing presence in the state, the policy’s overall effect is usually cited as one of the most important reasons for California’s EV dominance in the US.
Phasing out the combustion engine
Inevitably, where national governments have gone, car manufacturers are swiftly following suit – in theory if not yet too convincingly in practice. Many major automobile industry players have announced plans to phase out the manufacture of conventionally-powered vehicles and start focusing their resources on electrification. The level of commitment and ambition varies from company to company: while some are dedicated to developing pure battery electric vehicles (BEVs), others are concentrating on gas-electric and plug-in gas electric hybrids rather than fully-fledged electric models.
In 2016, Volkswagen announced a target of 30 plus BEV models to be brought to market and two to three million cumulative EVs sold by 2025, equivalent to 25 per cent of its total sales. By 2017, the auto manufacturer had raised the stakes again, with a plan to come up with electric versions of all of its 300 conventional models. BMW announced a plan for 12 new pure plug-in vehicles and 13 new hybrids in its range by 2025, yet its executives have expressed deep reservations about driving bans and quotas that ‘force’ drivers of conventional vehicles from the road. Mercedes-Benz owners Daimler declared it was expediting its EV programme and now plans to have 10 new EV models in showrooms by 2022. The strongest commitments, however, have come from Volvo and Jaguar Land Rover, who have announced that 100 per cent of their models will be hybrid or electric from 2019 and 2020. Top of the pack, of course, is Tesla, which has a firm plan to produce and sell only pure BEVs, currently and in the future.
The big American auto giants – Chrysler, GM and Ford – are currently lagging far behind their global counterparts, offering just three BEV and five hybrid models between them. They have, however, been persuaded to establish crucial R&D partnerships in China thanks to the country’s EV incentives, as well as the Asian nation’s sizeable investment in charging stations.
The road ahead
While most auto experts broadly acknowledge that EVs will eventually eclipse conventionally-powered vehicles, there are still serious roadblocks to swifter, more sustainable adoption. Plug-in vehicles need to become truly commercially viable, and while relying on state subsidies is essential to consumer uptake in the short term, there is a very real risk that, as sales increase, direct incentives could become unsustainable for governments in the long run. Such measures will need to be carefully monitored and managed to ensure they are phased out sensitively as the market grows, and without negating any progress already fostered.
Infrastructure remains another core concern. While many progressive countries are installing public charging stations at a rapid pace, there are still not enough to make widespread EV adoption a viable prospect in many regions of the world. Bloomberg predicts that, at current rates, even early adopters such as China and the US will reach an ‘infrastructure roadblock’ by the 2030s, thus slowing sales and hampering progress. There is still, then, a bumpy path ahead in the battle for EV dominance. But with such widespread governmental and corporate determination, it seems not a case of whether but when we finally bid farewell to the combustion engine for good.