When Will Electric Cars Go Mainstream? It May Be S
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Posted On: 07/09/2017 9:25:14 AM
When Will Electric Cars Go Mainstream? It May Be Sooner Than You Think
https://www.nytimes.com/2017/07/08/climate/el...l?emc=eta1
s the world’s automakers place larger bets on electric vehicle technology, many industry analysts are debating a key question: How quickly can plug-in cars become mainstream?
The conventional view holds that electric cars will remain a niche product for many years, plagued by high sticker prices and heavily dependent on government subsidies.
But a growing number of analysts now argue that this pessimism is becoming outdated. A new report from Bloomberg New Energy Finance, a research group, suggests that the price of plug-in cars is falling much faster than expected, spurred by cheaper batteries and aggressive policies promoting zero-emission vehicles in China and Europe.
Between 2025 and 2030, the group predicts, plug-in vehicles will become cost competitive with traditional petroleum-powered cars, even without subsidies, and even before taking fuel savings into account. Once that happens, mass adoption should quickly follow.
Continue reading the main story
RELATED COVERAGE
Volvo, Betting on Electric, Moves to Phase Out Conventional Engines JULY 5, 2017
France Plans to End Sales of Gas and Diesel Cars by 2040 JULY 6, 2017
Tesla Loses No. 1 Spot in Market Value Among U.S. Automakers JULY 6, 2017
“Our forecast doesn’t hinge on countries adopting stringent new fuel standards or climate policies,” said Colin McKerracher, the head of advanced transport analysis at Bloomberg New Energy Finance. “It’s an economic analysis, looking at what happens when the upfront cost of electric vehicles reaches parity. That’s when the real shift occurs.”
If that prediction pans out, it would have enormous consequences for the auto industry, oil markets and the world’s efforts to slow global warming.
A Boost From Batteries
Last year, plug-in vehicles made up less than 1 percent of new passenger vehicle sales worldwide, held back by high upfront costs. The Chevrolet Bolt, produced by General Motors, sells for about $37,500 before federal tax breaks. With gasoline prices hovering around $2 per gallon, relatively few consumers seem interested.
But there are signs of a shift. Tesla and Volkswagen each have plans to produce more than 1 million electric vehicles per year by 2025. On Wednesday, Volvo announced that it would phase out the traditional combustion engine, and that all of its new models starting in 2019 would be either hybrids or entirely battery-powered.
Skeptics argue that these moves are mostly marginal. Exxon Mobil, which is studying the threat that electric cars could pose to its business model, still expects that plug-in vehicle sales will grow slowly, to just 10 percent of new sales in the United States by 2040, with little impact on global oil use. The federal Energy Information Administration projects a similarly sluggish uptake.
The Bloomberg forecast is far more aggressive, projecting that plug-in hybrids and all-electric vehicles will make up 54 percent of new light-duty sales globally by 2040, outselling their combustion engine counterparts.
The reason? Batteries. Since 2010, the average cost of lithium-ion battery packs has plunged by more than one third, to around $300 per kilowatt-hour. The Bloomberg report sees that falling to $73 by 2030 without any significant technological breakthroughs, as companies like Tesla increase battery production in massive factories, optimize the design of battery packs and improve chemistries.
For the next decade, the report notes, electric cars will remain reliant on government incentives and sales mandates in places like Europe, China and California. But as automakers introduce a greater variety of models and lower costs, electric cars will reach a point where they can stand on their own.
Still, this outcome is hardly guaranteed. Governments could scale back their incentives before plug-in vehicles become fully competitive — many states are already beginning to tax electric cars. Battery manufacturers could face material shortages or production problems that hinder their ability to slash costs. And an unforeseen technology failure, such as widespread battery fires, could halt progress.
“But we tried to be fairly conservative in our estimate of where battery prices are going,” Mr. McKerracher said, “and we don’t see barriers to electric vehicles becoming cost competitive very soon.”
Potential Setbacks
Other experts caution that falling battery costs are not the only factor in determining whether electric cars become widespread. Sam Ori, the executive director of the Energy Policy Institute at the University of Chicago, noted, “People don’t buy cars based solely on the price tag.”
Consumers may remain wary of vehicles with limited range that can take hours to charge. Even though researchers have shown that battery-electric vehicles have sufficient range for many people’s daily commuting habits, consumer psychology is still difficult to predict. The report does not, for instance, expect electric vehicles to catch on widely in the pickup-truck market.
Charging infrastructure is another potential barrier. Although cities are starting to build thousands of public charging stations — and Tesla is working on reducing the time it takes to power a depleted battery — it still takes longer to charge an electric vehicle than it does to refuel a conventional car at the pump.
Many owners charge their cars overnight in their garages, but that is much harder for people living in cities who park their cars on the street.
As a result, the Bloomberg report warns that plug-in vehicles may have a difficult time making inroads in dense urban areas, and that infrastructure bottlenecks may slow the growth of electric vehicles after 2040.
Another potential hurdle may be the automakers themselves. While most manufacturers are introducing plug-in models in the United States to comply with stricter fuel-economy standards, they don’t always market them aggressively, said Chelsea Sexton, an auto industry consultant who worked on General Motors’ electric vehicle program in the 1990s.
Car dealerships also remain reluctant to display and sell electric models, which often require less maintenance and are less profitable for their service departments. Surveys have found that salespeople are often unprepared to pitch the cars.
“We’ve seen a lot of announcements about electric vehicles, but that doesn’t matter much if automakers are just building these cars for compliance and are unenthusiastic about actually marketing them,” Ms. Sexton said.
Raw economics may help overcome such barriers, Mr. McKerracher said. He pointed to Norway, where heavy taxes on petroleum-powered vehicles and generous subsidies for electric vehicles have created price parity between the two. As a result, plug-in hybrids and fully electric cars in Norway now make up 37 percent of all new sales, up from 6 percent in 2013.
Fighting Climate Change
If Bloomberg’s forecast proves correct, it could have sweeping implications for oil markets. The report projects that a sharp rise in electric vehicles would displace 8 million barrels of transportation fuel each day. (The world currently consumes around 98 million barrels per day.)
A number of oil companies are now grappling with the prospect of an eventual peak in global demand, with billions of dollars in investments at stake in getting the timing right.
Mass adoption of electric cars could also prove a key strategy in fighting climate change — provided the vehicles were increasingly powered by low-carbon electricity, rather than coal. The International Energy Agency has estimated that electric vehicles would have to account for at least 40 percent of passenger vehicle sales by 2040 for the world to have a chance of meeting the climate goals outlined in the Paris agreement, keeping total global warming below 2 degrees Celsius.
Yet the Bloomberg report also shows how much further countries would need to go to cut transportation emissions.
Even with a sharp rise in electric vehicles, the world would still have more traditional petroleum-powered passenger vehicles on the road in 2040 than it does today, and it will take many years to retire existing fleets. And other modes of transportation, like heavy-duty trucking and aviation, will remain stubbornly difficult to electrify without drastic advances in battery technology.
Which means it’s still too soon to write an obituary for the internal combustion engine.
https://www.nytimes.com/2017/07/08/climate/el...l?emc=eta1
s the world’s automakers place larger bets on electric vehicle technology, many industry analysts are debating a key question: How quickly can plug-in cars become mainstream?
The conventional view holds that electric cars will remain a niche product for many years, plagued by high sticker prices and heavily dependent on government subsidies.
But a growing number of analysts now argue that this pessimism is becoming outdated. A new report from Bloomberg New Energy Finance, a research group, suggests that the price of plug-in cars is falling much faster than expected, spurred by cheaper batteries and aggressive policies promoting zero-emission vehicles in China and Europe.
Between 2025 and 2030, the group predicts, plug-in vehicles will become cost competitive with traditional petroleum-powered cars, even without subsidies, and even before taking fuel savings into account. Once that happens, mass adoption should quickly follow.
Continue reading the main story
RELATED COVERAGE
Volvo, Betting on Electric, Moves to Phase Out Conventional Engines JULY 5, 2017
France Plans to End Sales of Gas and Diesel Cars by 2040 JULY 6, 2017
Tesla Loses No. 1 Spot in Market Value Among U.S. Automakers JULY 6, 2017
“Our forecast doesn’t hinge on countries adopting stringent new fuel standards or climate policies,” said Colin McKerracher, the head of advanced transport analysis at Bloomberg New Energy Finance. “It’s an economic analysis, looking at what happens when the upfront cost of electric vehicles reaches parity. That’s when the real shift occurs.”
If that prediction pans out, it would have enormous consequences for the auto industry, oil markets and the world’s efforts to slow global warming.
A Boost From Batteries
Last year, plug-in vehicles made up less than 1 percent of new passenger vehicle sales worldwide, held back by high upfront costs. The Chevrolet Bolt, produced by General Motors, sells for about $37,500 before federal tax breaks. With gasoline prices hovering around $2 per gallon, relatively few consumers seem interested.
But there are signs of a shift. Tesla and Volkswagen each have plans to produce more than 1 million electric vehicles per year by 2025. On Wednesday, Volvo announced that it would phase out the traditional combustion engine, and that all of its new models starting in 2019 would be either hybrids or entirely battery-powered.
Skeptics argue that these moves are mostly marginal. Exxon Mobil, which is studying the threat that electric cars could pose to its business model, still expects that plug-in vehicle sales will grow slowly, to just 10 percent of new sales in the United States by 2040, with little impact on global oil use. The federal Energy Information Administration projects a similarly sluggish uptake.
The Bloomberg forecast is far more aggressive, projecting that plug-in hybrids and all-electric vehicles will make up 54 percent of new light-duty sales globally by 2040, outselling their combustion engine counterparts.
The reason? Batteries. Since 2010, the average cost of lithium-ion battery packs has plunged by more than one third, to around $300 per kilowatt-hour. The Bloomberg report sees that falling to $73 by 2030 without any significant technological breakthroughs, as companies like Tesla increase battery production in massive factories, optimize the design of battery packs and improve chemistries.
For the next decade, the report notes, electric cars will remain reliant on government incentives and sales mandates in places like Europe, China and California. But as automakers introduce a greater variety of models and lower costs, electric cars will reach a point where they can stand on their own.
Still, this outcome is hardly guaranteed. Governments could scale back their incentives before plug-in vehicles become fully competitive — many states are already beginning to tax electric cars. Battery manufacturers could face material shortages or production problems that hinder their ability to slash costs. And an unforeseen technology failure, such as widespread battery fires, could halt progress.
“But we tried to be fairly conservative in our estimate of where battery prices are going,” Mr. McKerracher said, “and we don’t see barriers to electric vehicles becoming cost competitive very soon.”
Potential Setbacks
Other experts caution that falling battery costs are not the only factor in determining whether electric cars become widespread. Sam Ori, the executive director of the Energy Policy Institute at the University of Chicago, noted, “People don’t buy cars based solely on the price tag.”
Consumers may remain wary of vehicles with limited range that can take hours to charge. Even though researchers have shown that battery-electric vehicles have sufficient range for many people’s daily commuting habits, consumer psychology is still difficult to predict. The report does not, for instance, expect electric vehicles to catch on widely in the pickup-truck market.
Charging infrastructure is another potential barrier. Although cities are starting to build thousands of public charging stations — and Tesla is working on reducing the time it takes to power a depleted battery — it still takes longer to charge an electric vehicle than it does to refuel a conventional car at the pump.
Many owners charge their cars overnight in their garages, but that is much harder for people living in cities who park their cars on the street.
As a result, the Bloomberg report warns that plug-in vehicles may have a difficult time making inroads in dense urban areas, and that infrastructure bottlenecks may slow the growth of electric vehicles after 2040.
Another potential hurdle may be the automakers themselves. While most manufacturers are introducing plug-in models in the United States to comply with stricter fuel-economy standards, they don’t always market them aggressively, said Chelsea Sexton, an auto industry consultant who worked on General Motors’ electric vehicle program in the 1990s.
Car dealerships also remain reluctant to display and sell electric models, which often require less maintenance and are less profitable for their service departments. Surveys have found that salespeople are often unprepared to pitch the cars.
“We’ve seen a lot of announcements about electric vehicles, but that doesn’t matter much if automakers are just building these cars for compliance and are unenthusiastic about actually marketing them,” Ms. Sexton said.
Raw economics may help overcome such barriers, Mr. McKerracher said. He pointed to Norway, where heavy taxes on petroleum-powered vehicles and generous subsidies for electric vehicles have created price parity between the two. As a result, plug-in hybrids and fully electric cars in Norway now make up 37 percent of all new sales, up from 6 percent in 2013.
Fighting Climate Change
If Bloomberg’s forecast proves correct, it could have sweeping implications for oil markets. The report projects that a sharp rise in electric vehicles would displace 8 million barrels of transportation fuel each day. (The world currently consumes around 98 million barrels per day.)
A number of oil companies are now grappling with the prospect of an eventual peak in global demand, with billions of dollars in investments at stake in getting the timing right.
Mass adoption of electric cars could also prove a key strategy in fighting climate change — provided the vehicles were increasingly powered by low-carbon electricity, rather than coal. The International Energy Agency has estimated that electric vehicles would have to account for at least 40 percent of passenger vehicle sales by 2040 for the world to have a chance of meeting the climate goals outlined in the Paris agreement, keeping total global warming below 2 degrees Celsius.
Yet the Bloomberg report also shows how much further countries would need to go to cut transportation emissions.
Even with a sharp rise in electric vehicles, the world would still have more traditional petroleum-powered passenger vehicles on the road in 2040 than it does today, and it will take many years to retire existing fleets. And other modes of transportation, like heavy-duty trucking and aviation, will remain stubbornly difficult to electrify without drastic advances in battery technology.
Which means it’s still too soon to write an obituary for the internal combustion engine.
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