There is no carmaker without an EV plan--usually a costly EV plan. Volkswagen, by far the most ambitious among them, has plans to pour $66 billion (60 billion euro) in EVs and hybrid cars, eyeing 75 EV models and 60 hybrids by 2029.
The question is: who will buy them?
The noise that the media make about electric vehicles is often so loud it is difficult to distinguish between fact and wishful thinking. It is a fact that EV sales are growing and that they are growing fast. It is wishful thinking that within two decades, most cars on the roads will be electric. The discrepancy between fact and wishful thinking could play a bad joke on carmakers.
The likelihood of a bad joke is quite significant, Neil Winton, a former automotive correspondent for Reuters in Europe, warned in a recent article for Forbes. In fact, it is so significant that it could end up costing carmakers quite a lot of money.
Winton has reviewed the data: most industry market forecasts see the portion of EVs as percentage of the global fleet remaining modest well into the future. IHS Markit, for example, sees EVs accounting for a little over a tenth of the car market in 2025 and 14.8 percent in 2030. LMC Automotive puts the percentage of EVs on the roads in 2030 at 17 percent. Fitch has forecast that EVs will make up a measly 7.3 percent of car sales in Europe by 2028.
Meanwhile, Volkswagen plans to get as much as a quarter of its sales from EVs not by 2030, but by 2025. By 2030, according to the auto giant's plans, this percentage should rise to 40 percent. Now, if VW was the only carmaker in Europe, the plan could probably work without a hitch. Yet VW is not the only carmaker in Europe, and all its rivals have their own EV plans. Related: Climate Crusader Sues Pension Fund For Not Being Green Enough
BMW plans on selling 25 EV models by 2023. To this end, the company has sealed a long-term battery supply deal worth more than $11 billion with Chinese CATL and another deal, worth over $3 billion, with Samsung SDI for electric drivetrains. This, by the way, is the same company whose executive Klaus Froelich said earlier this year that EVs were overhyped, adding that there were "regulator requests for [all-electric vehicles], but no customer requests."
Accurate or not about the overhype, Froelich's remark about the discrepancy between regulatory pressures and buyer preferences was spot on. The European Union has extremely ambitious emissions targets and to hit them, it needs less internal combustion engines on European roads. A lot less.
By 2021, according to the EU targets, local carmakers must have a fleet average emission level equivalent to 57.4 miles per U.S. gallon of fuel, Winton notes. This rises to 92 miles per gallon by 2030. Failing to meet these emission targets could cost carmakers as much as $37 billion. No wonder they are racing to make electric cars.
Sales of EVs are surging in Europe. During the first eight months of this year, some 320,000 EVs and hybrids were sold in Europe. That constituted 3 percent of total sales, which does not exactly bode very well for the future of EVs in Europe. Related: U.S. Rig Count Crashes Again: Loses Nearly 100 Rigs In 3 Months
Of course, not all EV sales forecasts are so gloomy. BloombergNEF, for instance, expects that EVs will constitute 57 percent of the global car market by 2040. Yet these forecasts also include electric buses, which are a huge thing in China and likely to become equally huge elsewhere, too. But VW, BMW, and their U.S. rivals with EV plans for Europe don't make buses. They will have to rely on buyers who may be environmentally conscious but also range-conscious.
Range anxiety is the make-or-break factor for the future of EVs. You can tell people your cars are a lot better for the environment than a gasoline SUV, but the buyer will want to know how long they will be able to drive before having to charge it and, not to put too fine a point on it, how long charging will take. These are the issues carmakers had to address before making their megaplans that will cost them billions. These will also be the issues that might turn the EV cart over unless the industry, with the help of the EU, manages to change buyers' thinking in a year or two.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The rush of carmakers towards investing in EVs has far more to do with meeting government regulations being forced upon them and also burnishing their environmental credentials and less to do with any business sense. They know that with evolving motor technology, ICEs can outperform EVs anytime of the day in terms of reliability, range, price and efficiency. They also know that oil and natural gas will continue to be the core business of the global oil industry well into the future.
Despite generous government subsidies and media hype, electric and hybrid cars combined currently number under 5 million cars out of 1.5 bn ICEs on the roads worldwide, or a negligible 0.33%. The total number of ICEs is projected to reach 2.0 bn by 2025 rising to 2.79 bn by 2040 according to US Research.
By 2025 the world could be using 38.33 bn barrels of oil (bb) of which 73% or 28 bb will be used to power 2.0 bn ICEs. Bringing 50 million EVs on the roads by 2025 will reduce the global oil demand by only 0.7 bb, or 2.5%. This will neither be the end of oil as some experts are suggesting nor a tipping point.
A tipping point for oil could only be reached once 1.0 bn EVs (50% of global ICEs number in 2025) are on the roads. This is impossible to achieve within that time frame. One then can only guess how many decades will have to pass before the entire global car fleet of ICEs is replaced by EVs.
Furthermore, there will be a need for trillions of dollars of investment to expand the global electricity generation capacity in order to accommodate the extra electricity needed to recharge 50 million EVs. How could such expansion be sourced: nuclear, hydrocarbons or solar?
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
While the goal of 500 mile battery is attractive now because we have the fuelling station paradigm, when parking your car and plugging in becomes no more difficult than putting money in a parking meter people will save on capital by buying cars with 100-250 km range.
Of course the big challenge is that car sharing and more and more restrictions on cars in cities with increasing costs of parking will mean that for 60-70% of the population car ownership will become more trouble than it is worth.
Even in rural areas a very small % of the population lives more than 60 miles from town and by definition on farms they have plenty of space for solar and/or small wind, so they will leave for town at almost full state of charge. When they go to the shops the vehicle will spend 20 minutes to two hours being topped up at 0.5-5 miles/minute so they will have plenty of range to go home or the next town. When they realise they don't have to run into town to fuel up or pay for tanker deliveries to their place, rural people will embrace EVs with gusto
People are looking forward to the time when more ev's are sold then the old smokers, not entire fleet turnover.
That would be around 15 years after more ev's are sold the gassers. As gassers last about 12 years on average.
Once charging on the farm, at work, at the shopping centre becomes ubiquitous the majority of people will not need more than 100 mile range and a 100 mile BEV will be cheaper to build and own than any equivalent ICE vehicle. For example Volkswagen claims the ID3 is 40% cheaper to build than the E Golf.
We have this fascination for 500 mile range when almost no-one drives 500 miles without a break. Driving for 2-3 hours and a 15 minute break for a snack and a call of nature while charging at 200 kW will allow a 250 mile range vehicle to add another 180-200 miles of range. So London to Edinburgh in one stop, Paris to the Mediterranean in two stops, Boston Washington one stop. LA to San Fran 1 stop San Fran to Seattle 3 stops, Sydney to Melbourne two stops
and with restrictions on diesels entering some cities
Adopting battery swapping technology would make refueling an EV slightly better then refueling a gas burner. One wouldn't have to get out of their vehicle. Swapping batteries would also save the investment needed to provide high power charging infrastructure everywhere people park.
Charging, taking place during off-peak times, will reduce the need for additional powerplants. Wind and solar power are at their best charging a nation's electric vehicles. Whenever there is electricity produced it is immediately in demand and used. Less storage of renewable energy needed.
I also believe the experts are not considering the popularity these vehicles will have with the public. There is no tune-up, no oil, coolant, power steering fluid, transmission fluid to leak, be replaced and cause problems. No emission systems, catalytic converters, fan belts, or explosive gas tanks, and no deadly exhaust emissions. No stupid lead-acid battery, and a ton of money to be saved. People will basically be driving a smartphone on wheels. As much as they love their smartphones, they will love these cars.
The customization automakers will build into these EV's will make gas burners look antiquated. Changing the color and looks in an EV electronically will make these vehicles customizable for the whole family.
I believe the tipping point will happen when people realize the huge advantages EV's will have over gas burners. With the internet's help, this may happen very quickly. Then I expect to see these new electric vehicles sweep through the market.
Elon's building his new EV factory in China, where the most EV's are made. I think Elon, the Chinese, and the other auto manufacturers have this one nailed.
I truly hope the experts are wrong because we are going to have so much fun with these new toys.