Projections by Bloomberg, OPEC, and Exxon show wildly different figures for how much sales of electric vehicles will rise in the future. Bloomberg sees around 548 million electric cars driving around the world in 2040, while Exxon, maybe not surprisingly, is at the other end of the scale with a projection around 162 million in 2040.
What is certain, however, is the growing interest in greener solutions and increased societal demands on companies – particularly in the transport industry – to do something about their environmental footprint. And with billions of dollars invested in electric research and development by the automotive industry, the question isn’t ‘if’ battery electric vehicles will begin dominating the streets – but ‘when.’
That being said, the market is still immature, with car manufacturers, governments and consumers still trying to work out how electrification fits their agenda. Here are just a few of the uncertainties.
1: BATTERY STRATEGY
Car manufacturers are still figuring out their strategy around batteries. Will they build or buy? How will they build their supply chains around batteries? And what are they going to do with the batteries once they reach end-of-life and need recycling?
For a car manufacturer to become a battery-producer would consume large amounts of capital that can be applied to RD in other areas of technical innovation such as autonomous and mobility. The investment would also pose a risk due to the market still being so immature. The risk extends to the availability and price of the, in many cases, hazardous and rare earth elements needed to build the batteries. From a supply chain standpoint, shipping, storing and moving batteries are processes that manufacturers are not doing today on a large scale and would have to be developed.
Tesla has taken the risk and is currently building its second giga factory to produce the batteries they need. Like Henry Ford, who owned all the links in the supply chain right down to the lumber yards supplying the wood for steering wheels, Tesla is very much vertically integrated, building their own batteries and manufacturing most of the components that are in their vehicles, rather than sourcing them from sub-contractors.
Another battery challenge is what to do with them when they are no longer usable. The batteries in battery-powered electric vehicles can’t simply be thrown onto a landfill – they need an end-of-life plan. This plan is still nascent with many of the traditional manufacturers due to the relatively small percentage of the market.
2: GOVERNMENT POLICIES
What can make or break the development of the battery electric vehicle market is how governments choose to regulate it.
The optimistic projections for the market are reliant upon governments deciding to incentivise buying battery electric vehicles instead of traditional vehicles. Tax incentives that make it realistic for the average consumer to buy an electric car are essential for the market to see the critical mass that leads to maturity. We have seen sales skyrocket when new tax incentives for battery electric vehicles have been implemented, and conversely, we have seen sales drop dramatically when incentives have been taken away.
Infrastructure will be another important driver for consumers’ willingness to invest their money in battery electric. Today, if you are going to drive a couple of hundred kilometres in a battery electric vehicle you will need to plan ahead in order not to run out of power along the way. Even in developed infrastructures, battery charging stations are fairly few and far between. That makes it a hassle for consumers – and a purchase demotivator. If governments decide to invest in better infrastructure for battery charging, it could tip the scale in terms of making consumers switch.
3: COMPETING TECHNOLOGIES
What if another technology emerges that make battery-powered electric vehicles old news?
One example of such technology is the breakthrough in hydro-electric vehicles. Hydrogen is a fuel that you have in a tank, and that you fill up like you fill up the tank in an internal combustion engine car today. That means existing infrastructure of gas stations could be repurposed for hydrogen cars. Even the time it takes to fill a hydrogen car and a traditional car are similar, so it would be an easy switch for consumers. The problem with hydrogen, still, is that converting water into hydrogen is a very expensive process. In addition, hydrogen is hazardous, and would people be OK with essentially driving a hydrogen bomb?
Autonomous vehicles are attracting huge investments, research, and attention today, and it is safe to assume that they will be here within the next five to ten years in some way. Among the biggest challenges are the moral decisions that are essentially coded into the vehicles. The code needs to determine what decision the car will make when the choice is continuing forward and hitting a pedestrian or swerving into a bus to the right. How do we prevent bias in the decision-making of the car? But there is no question that when the majority of cars on the streets are electric and communicating with each other without human interference, traffic will be a lot safer.
A plus for battery electric vehicles is that they go hand in hand with the development of autonomous vehicles. The architecture of electric vehicles will be a lot easier to retrofit into autonomous vehicles compared to retrofitting traditional cars. But just how this future is powered up, is yet to be seen.
Insight provided by Greg Slawson - VP Global Vertical Lead, Automotive, DSV Panalpina in DSV Forward Logistics 2019 report.