Our natural assumption is to think of electric cars and vehicles (EVs) as a recent technology development. In fact, that is far from the case. The first cars invented in the early to mid-1800s were actually electric. By the early 1900s, 38% of the cars sold in the USA were electric. 40% were steam powered and just 22% ran on gasoline.
Electric Car From The Early 1900s
It wasn’t until the Texan oil rush that began in 1901 that gasoline-running internal combustion engines took over. The cheapness and convenience of the petrol pump catalysed the mass automobile industry, leading to the last few decades when almost everyone in the developed world has had a car of some kind and many families more than one.
Of course, we now know the consequences of the chosen route towards gasoline and away from electrical batteries has been a mass pollution of the Earth’s atmosphere and the environmental consequences of global warming. Of course, mass car ownership and use is not the only source of harmful emissions but is certainly one of the biggest. The consequences are felt most in large cities and densely populated areas, where the build-up of car fumes is noticeable in the quality of the air we breath.
The Electric Car Market In 2019
So we’ve come full circle and returned to the solution of electric-powered vehicles, which can also now be charged from cleaner renewable energy sources. Except the year 1900 is still considerably ahead when it comes to the percentage of new cars sold running on electricity. According to data published by industry EV sales figures database EV-Volumes.com, in 2018, EVs accounted for just 2.2% of new ‘light vehicle’ sales, or 2.1 million units in total. Of those 2.1 million sales, 69% were ‘all-electric’ (BEV) vehicles and 31% hybrid vehicles.
Oft maligned for its environmental record, China is leading the EV charge, a trend in keeping with its massive investments into renewable energies capacity and infrastructure. The huge country’s emissions are still showing net growth but the pace of that growth is dropping and serious efforts being made to tackle the huge problem of air pollution. 1.2 million, over half, of all EV sales internationally in 2018 were made in China. In 2017, 700,000 EVs were sold in China.
The popularity of Tesla’s Model-3 saw plug-in sales grow by 79% in the USA, with the car the single biggest seller globally across all EV categories. 138,000 units were sold, most of them over the second half of 2018.
In Europe market growth was a slower 34%. The popular Tesla Model-3 was mainly shipped to U.S. and Canada-based buyers with inventories elsewhere almost non-existent. The first shipments didn’t arrive in Europe until early this year and there was an estimated 14,000-strong European waiting list for the vehicle as of the beginning of the year. The Nissan Leaf was the most sold model in Europe, followed by Renault’s Zoe and the Volkswagen e-Golf a distant third.
While overall EV sales numbers in Europe are lower than in China and the U.S., Norway is the country in the world where electric vehicles have the largest market share. And by some distance. The Norwegian Road Foundation reported that a stunning 58.4% of all new vehicles sold in the Scandinavian country in March 2019 were EVs. That stands in contrast to 1.2% in the USA and 2.2% in China. The Norwegian Electric Vehicle Association believes that total 2019 market share will come out at around 50% and the country’s government wants only EVs to be available on the market by 2025.
The success of EVs in Norway has been driven by heavy financial incentives offered by the government and are exempt from different taxes. More generally, the falling but still higher cost of EVs is one of the bottlenecks to increased adoption.
The Future Of The Electric Car Market
The electric car market and industry is, however, thought to be nearing a tipping point. The most significant catalyst is heightened focus, and investment, by the biggest global manufacturers. General Motors, Toyota, Ford, Volkswagen, BMW and China’s Geely are starting to prepare themselves for new legislation expected to come into force over the next couple of decades which will punish petrol and diesel vehicles in favour of EV alternatives. They need to figure out how to manufacture mass market EVs that sell in their millions at a price point roughly equivalent to today’s most popular petrol models and for a profit.
A battery-powered engine can still cost a car manufacturer up to three times more than an internal combustion engine. But the technology is improving, driven by eye watering R&D budgets and will continue to do so. Greater manufacturing scale will, soon, lead to a point where EVs start to edge closer to petrol cars in terms of production cost.
For now, the luxury segment is setting the pace. The better margins that more expensive models offer manufacturers makes absorbing the cost of more expensive electric-powered engines less of a problem. Jaguar and Audi are already competing with Tesla in this market and Daimler-owned Mercedes has set aside 10 billion euros for the development of its EV range of models. Its target is for 20% of its entire range to be EVs by 2025.
Mass market car manufacturers like Renault, Fiat, Hyundai and Opel are hedging their bets by focusing R&D efforts on ‘platforms’ (car frames) that can support both electric and traditional engines. This involves compromises on electric battery size and layout which will have an impact on range and interior space, raising question marks over whether it represents a sustainable answer.
The biggest breakthrough into the mass market is expected to come from Toyota and Volkswagen, the two biggest manufacturers in the world. Toyota bet on hydrogen power cell technology but has now come to the conclusion that at least for now the market wants electric. And it has little choice with progress on hydrogen fuel alternatives failing to reach a breakthrough.
Volkswagen’s planned investment in its EVs range is by far the biggest in the world. The German manufacturer of 10 million vehicles a year has economies of scale that only Toyota can come close to and has committed 80 billion euros to developing 70 new EV models over the next 10 years. It plans to manufacture 22 million EVs by 2028 and is converting an entire plant to the endeavour. Volkswagen is targeting 2022 for its EV-dedicated Netherlands plant to be at full capacity and 25% of its fleet to be electric by 2025. If it achieves that scale, the company thinks EVs will have become as profitable for it as petrol engine vehicles.
Several new players are also expected to add competition to the market. In some ways it will be easier for dedicated new EV manufacturers. They don’t have complex existing supply chains built for traditional internal combustion engines to contend with. EVs have fewer parts and are easier to assemble than petrol-engine vehicles, which is encouraging several ‘Chinese Teslas’ to enter the market. The UK’s Dyson has also stated its ambition to enter the EV market and is staking the company’s financial future in its efforts to do so.
Investing In the Electric Car Market
For shareholders in car manufacturers the transition to EVs is likely to mean the next decade is challenging. The huge sums being invested in R&D, tighter margins that will exist while supply chains and manufacturing facilities are converted, as well as the expense of doing so, will undoubtedly put pressure on finances. Such a big market shift undoubtedly means there will be winners and losers.
Financial markets are likely to remain cautious and withhold judgement to an extent while the new order asserts itself. In the meanwhile, share prices are likely to come under increasing pressure.