The long awaited electric car boom: why the delay?

By Oliver Ward

The advent of the electric car taking the global automotive industry by storm was predicted for 2016, yet at the beginning of 2017 our roads are still swamped by combustion engines and carbon spewing transportation methods. The electric revolution we were promised is still yet to have materialized. The electric car as a concept has been around for almost 100 years yet they are only sold in significant numbers in small pockets of the globe and are by no means seriously competing with their combustion engine counterparts.

The new target for widespread adoption of cleaner electricity powered transportation is 2022. A new report by Bloomberg believes that by 2030 electric vehicles will dominate our streets, with Colin McKerracher, Head of advanced transport at BNEF, predicting that “vehicles and the way they are used will change more in the next two decades than they have in the last 100 years”. But we have heard these predictions before. Why the delay and what makes the coming decades different?

High Costs Have Prevented Electric Cars from Competing.

To understand why electric car sales have fallen short of projections, it is best to start by looking at the places where they have enjoyed success. China has gone from just 2,338 sales in 2011 to having the highest number of electric car sales in the world in 2015 with between 220,000-250,000 units sold, 180,000 more than second place, US. Chinese automakers like BYD and Geely are generating huge growth for the electric car industry as more and more Chinese citizens make the transition to electric. This surge has been driven by government subsidies and incentives. Both consumers and producers have enjoyed government cash injections to make the switch to electric as the Chinese government attempt to bring pollution levels in cities to manageable levels. From 2010 to 2015, BYD, who have 80% of the market share, received a reported 2.9 billion yuan (US$435 million) from the Chinese government. This figure is around 45% of their net profit over the last five years, showing how essential government cash injections have been to the industry.

It is not just the Chinese government who are using incentives to generate growth in the electric car industries. In the United States electric vehicle owners can claim a clean vehicle rebate and qualify for tax credits and Germany are attempting to give the underperforming industry a government funded jump start by promising fully electric buyers €4,000 (US$4,500) and plug-in hybrids €3,000.

An industry reliant on government subsidies to generate sales is not a currently sustainable one. Despite heavy government subsidies, in most countries the industry is still slumping. For example in the UK electric car buyers can claim 5,000 back yet in the first nine months of 2016 only 5,702 people had actually bought an electric vehicle and claimed their money. Even with government subsidies, electric vehicles are not able to compete with combustion models on affordability. The driver of industry growth needs to be the consumer not the government to ensure industry sustainability and with high vehicle costs the industry is having trouble appealing to consumers. Production costs need to be reduced to bring consumer costs down and generate serious interest and this looks like it could take a little longer than 2017 to come into fruition.

One of the main reasons for the high production costs of electric vehicles is the battery costs. Battery costs have plummeted over the last five years. In 2010 the average global cost was $1,000 per kWh and by 2015 it had fallen to $350 kWh. But despite this prices are still not competitive. The Ford Focus is a prime example of this. The starting price for the electric version is $29,170 but the gasoline version starts at $17,170. The battery costs make up 1/3 of the total production costs in electric cars and are the main reason for a price disparity between electric and non-electric models.

Technological advantages mean that this price disadvantage should disappear in the future, but this is unlikely to happen in the next couple of years. A recent Bloomberg report says that the falling prices of lithium-ion batteries will allow electric vehicles to become a cheaper alternative to gasoline and diesel models by 2022, based on the US governments oil price projections and assuming that conventional cars can improve their fuel efficiency by 3.5% annually. This means electric cars won´t be cheaper than their combustion fuelled counterparts for at least another six years. The forecast anticipates that it won´t be until around 2030 when electric vehicles will be a serious player in the automobile industry. In general, a consumer driven market will take off between 5-7 after the regulatory-driven market currently being artificially created by governments around the world. Therefore, we still have a little longer to wait for our promised electric transport boom.

Infrastructure Development and range anxiety

Before the electric vehicle revolution can accelerate there needs to be a widespread coordinated implementation of charging facilities. Even if costs are lowered, There won’t be mass adoption of the cars until there are sufficient charging points and long-term issues with different chargers have been settled. Until the lack of infrastructure aimed at the electric vehicle market problem is addressed, the industry has no opportunity for growth.
In the United States, only seven states currently have installed more than 1,000 charging points and at the time of writing only a meagre 40 have the capabilities of superfast charging which would allow an 80% charge in 30 minutes. Most of these stations are level II stations which require up to six hours to fully charge a battery. Those who have the financial capacity to purchase electric vehicles are simply not able to charge them efficiently and quickly. There is no incentive for the consumer to invest in an electric vehicle until the government or private companies invests in the infrastructure.
There is, however, reason to be hopeful on this front. Several governments are taking measures to address the issue in 2017. For example, EU member states are currently submitting plans for their Alternative Fuels Infrastructure Directive (AFI Directive). The directive aims to tackle the problem by facilitating privately owned recharging points, mandating a minimum number of charging stations available to the public and setting EU standards for charging connectors. By creating uniform charging technology, the EU are able to reduce consumers concerns of whether their car will fit public charging points and hopefully give the industry a jump start across the continent.
The US are also making strides. The Obama administration provided $4.5 billion in loan guarantees for the construction of electric vehicle charging stations and as part of its compensation for selling cars in breach of diesel emissions regulations, Volkswagen will invest $2 billion over the next ten years to develop an electric car infrastructure in the US. These are undoubtedly steps in the right direction, and if investment can pick up throughout 2017 we may begin to see widespread evidence of infrastructural change on our streets by the end of the year, particularly in Europe, where the European government is streamlining the process by removing legal obstacles and promoting private investment in infrastructure.

When all this is said and done however, most electric cars are able fulfill people’s day-to day needs on one charge. This means that people can get by with charging their car overnight – as they would their phone – and then use it during the day.

Public Attitudes have to go electric

Often in the technological world, the technology develops at a faster rate than public interest and the motoring industry is no different. Car consumers don’t purchase on rational and logical thought, otherwise nobody would own sports cars and we would all drive incredibly practical and economic Honda Civics. For this reason, electric cars still don’t enter many consumers psyche when choosing a new car, but this looks set to change.

Interest in electric cars is growing. A recent survey found that when they asked consumers if they would consider selecting an electric car for their next car if costs were the same as petrol and diesel vehicles and charging could be completed in under an hour and they found 57% of consumers would, amongst the younger population this rose to 70%. Attitudes are changing as electric gets more publicity and begins to enter consumer´s mind. In China, where the electric vehicle industry has achieved relative success through government promotion, community driven marketing and even the adoption of stars like Leonardo DiCaprio as a brand ambassador for Chinese electric car firm, BYD Auto.

To replicate the Chinese market success globally the marketing needs to begin occurring this year. The technology is likely to develop at a faster rate than attitudes will shift. Making technological breakthroughs is far easier than changing public spending patterns and to ensure the public are ready for the electric generation of vehicles they will need some time to adapt to the new technology.

Germany´s government have taken matters into their own hands and the Bundesrat voted unanimously to ban the combustion engine on German streets by 2030. This kind of forward thinking legislation paves the way for public attitudes to change, particularly from the country which invented the internal combustion engine. Europe may currently be behind the US in terms of vehicles sold, but the continent, driven by Germany, are making steady progress on changing the attitudes of ordinary citizens to ensure when the switch to electric vehicles comes, their public will welcome it with open arms.

Are they actually good for the environment?

The electric car revolution has long been predicted, but once it arrives and we all trade in our gas-guzzling petrol and diesel models for a greener, electrical model, will our environment actually be better off?

Throughout the twentieth century we watched oil companies scour the planet for black gold, sucking it out of some of the most picturesque places on the planet and leaving a trail of environmental destruction in its wake. Given the necessity for lithium in the production of electric vehicle batteries and the scarcity of the precious metal, it is possible we will see a similar trend. One of the biggest lithium deposits on the planet is located in the Salar de Atacama salt flats in Chile. Already one of the driest locations on the planet, the process of extracting the lithium involves removing all the water and moisture from the soil to leave the metal exposed. Experts have warned of the effect of depriving these delicate eco-systems of their much-needed water and of the effects on the local flora and fauna. In Chile satellite images show that some lagoons are drying up as a result of the process and the local flamingo population who rely on the lagoons for water and food are being affected.

The positive environmental impacts of electric vehicles depend almost entirely on how the consumer´s energy is provided. Because the vehicle relies on the local electricity grid for power the electric vehicle revolution is only as green as the renewable energy revolution. “If you use coal-fired power plants to produce the electricity then all-electrics don´t even look that much better than a traditional vehicle in terms of greenhouse gases”, says environmental economist Virginia McConnell. While this is certainly true, studies have been conducted on the environmental impact of electric vehicles against their petrol and diesel counterparts from production to end-of life and they have deemed electric vehicles to have a less carbon intensive life. Despite the higher environmental impact of the production of electric vehicles, and even if the grid used to charge it relies on coal, the electric vehicles still emit less carbon into the atmosphere over the course of their lifetime than their traditional fossil fuel counterparts.

The environmental benefits of electric cars will only continue to be reaped and improved upon as our sources of electricity become greener and the world turns to renewables. The combustion engine becomes more fuel efficient as developments are made, but nowhere near at the same rate as the electric engine can once the global energy industry goes green. The fact of the matter is that combustion engines can’t compete with electrical vehicles in terms of environmental impact, even in the current fossil fuelled grid systems, so the chasm between the two technologies is only going to get wider in the near future.

The future

As the world sets its new targets for the electrical transport boom to reach our doorsteps around 2022 we are expectantly eyeing up the companies that will get us there. The long-awaited Tesla Model 3 is due for release in 2017 and for the first time the company is looking to introduce an electric vehicle which can compete with petrol and diesel cars in terms of both price and performance. At $35,000 dollars, it certainly competes in terms of price and based on the pre-orders which have totaled more the 400,000 it would seem this could be the start of the widespread adoption of electric vehicles when it hits our roads in late 2017 and early 2018. CEO Elon Musk has set the bar high and said he wants to be producing half a million cars a year by 2020. This shows the confidence Tesla have that they will usher in a new era of personal transportation and they believe we are right on the cusp of this era.

Given the complexity of releasing a new model and then increasing sales tenfold in three years, this date for our electric vehicle revolution seems a little premature. The previous model, the Model X, was eventually released two years late and was not widely bought due to a number of production and performance issues. While Tesla have kept the Model 3 far simpler, there is no guarantee that they would even be able to create half a million cars a year or that their supplies would be up to the challenge.

We know that when conditions are perfect, electric vehicles sell. In California, where infrastructure investment has brought more charging stations and public attitudes are greener than elsewhere, electric vehicles are taking off and several companies like Mercedes and MINI are testing their electric vehicles through lease programs in the sunshine state. But this only demonstrates the necessity for the right conditions.

The future for electric vehicles looks bright. The new era of personal transportation awaits in the not too distant future and although 2017 or 2018 may not be the years which see our roads taken over by sleek humming electric vehicles, if public attitudes begin to change and the industry can become more self-sufficient and end reliance of government subsidies it may be possible to replicate California´s conditions globally. The change won´t happen overnight and there is still a long way to go in terms of infrastructure development and persuading people that electric cars are a viable alternative, but steps are being made in the right direction, and Rome wasn´t built in a day after all.

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