Are we there yet? No, but we’re definitely on the road. After decades of doubt, the world’s automakers have made up their minds about electric vehicles. The car world was rocked in January by General Motors Co’s pledge to stop selling gas-burning cars by 2035, and industrywide EV investment plans now top US$230 billion, according to AlixPartners, a consultancy. With governments wielding carrots for consumers and sticks for producers, EVs jumped to 11% of new car sales in Europe in 2020 and reached nearly 15% in the first quarter of 2021; in the same period, EV sales in China went from 4.8% to 8%. But there are big obstacles to the breakneck transition scientists say is needed to limit climate change, including plain old inertia. When it comes to cars, said Gina McCarthy, President Joe Biden’s top climate adviser, lots of people “just want ’em to be what they used to be.”
1. What’s ahead for drivers?
According to projections by BloombergNEF, falling battery prices mean that larger electric cars will reach price parity with their fossil-fuel counterparts in the US and Europe in 2022, with parity reached in most other segments and regions by the end of the decade. Improvements in battery technology are set to boost potential driving ranges. More importantly, a global rollout of public fast-charging points should dissipate concerns about being stuck for hours. Analysts predict that EVs will prove more reliable, since they have many fewer parts.
2. Why are Europe and China ahead?
Governments there have made ambitious climate pledges and put in place a range of measures to force the auto market to meet them:
In the European Union, carmakers are reacting to the prospect of stiff fines if they don’t cut the average carbon emissions per kilometre of the vehicles they sell by 50% from 2021 to 2030. For consumers, Germany offers rebates of as much as 9,000 euros for a fully battery-powered car and Norway’s EV owners don’t pay 25% value-added tax or road taxes. In the UK, there are government grants of as much as 8,000 pounds for plug-in hybrid vans; fully electric cars are exempt from London’s daily 15-pound congestion charge. London, Rome and Amsterdam plan to deny gas-powered cars entrance by the end of the decade, while the UK plans to ban their sales entirely in 2030.
China has a credit system, similar to cap-and- trade carbon schemes, meant to force manufacturers to increase production of low or no-emission vehicles. Subsidies to buyers can reach 18,000 yuan. In some cities, getting a parking permit for a conventional car has become nearly impossible. And the country had 1.68 million charging points at the end of 2020, compared with 72,000 at the end of 2019 in the US.
See also: Taking a closer look at the Taycan, Porsche's new electric car
3. What’s happening in the US?
Biden wants to speed up a stalled transition to EVs. He rejoined the Paris Agreement on climate change, which his predecessor, Donald Trump, rejected. Biden also reversed Trump’s efforts to weaken gas mileage requirements for vehicles. He’s also proposed spending US$174 billion to support EV production and purchases, plus charging stations.
4. What’s convinced carmakers?
There’s fear of regulators who have grown more serious about meeting Paris Agreement pledges on carbon reductions. And there’s fear of being punished by investors who sent EV-maker Tesla’s stock price soaring and are bankrolling an ever-growing swarm of EV startups. Volkswagen’s dramatic humbling by a 2014 scandal over its cheating on diesel emissions tests led to its headlong charge into electric cars, with the goal of becoming the global leader by 2025.
5. Who’s joining the field?
China’s Nio isn’t a newcomer, but its market value swelled in 2020 and now is greater than that of Ford Motor Co. A host of electric-vehicle startups like Fisker and Lordstown Motor Corp were launched with the help of a flood of money from special purpose acquisition companies (SPACs), though some, including Lordstown, saw their shares drop sharply later. Among tech companies, Apple has long been working on a car project and Alphabet has its autonomous-driving unit, Waymo. Amazon.com is backing Rivian Automotive, which plans to debut its R1T pickup and R1S SUV in 2021. In China, Baidu is spending US$7.7 billion over five years on developing innovative cars and Huawei Technologies is spending US$1 billion this year on developing components for such vehicles.
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6. What are the hurdles to EV growth?
They include the challenge of building out charging infrastructure, the possibility that governments might roll back costly incentives, and the potential for shortages of critical battery minerals. Outside of Europe, China and the US, EVs are barely registering so far, including in India. Inertia remains the biggest threat, in the form of potential consumer resistance. That’s why ad campaigns by some legacy carmakers focus on electric versions of iconic vehicles like Ford’s F-150 pickup and Mustang Mach-E and GM’s Chevrolet Silverado and Hummer. – Bloomberg Quicktake
