The uncertain future of electric cars

There are more electric
cars now than ever — but will we ever see them dominate the roads? Here are the
barriers such a reality faces. 

By: /
6 July, 2016
The Tesla logo of a parked vehicle is pictured as people wait in line near a Tesla Motors store to place deposits on the electric car company's mid-priced Model 3 in Pasadena, California, March 31, 2016. REUTERS/Mario Anzuoni
By: Stephen Blank

 Senior fellow, University of Ottawa 

With the release of its 2016 global report on electric vehicles (EVs), the International Energy Agency announced last month that more than one million electric cars (actually 1.26 million) hit the world’s roads in 2015. 

The global growth in the stock of electric cars topped 77 percent in 2015 and 84 percent in 2014 – with China as the fastest growing market. This was a slight decline from 2011-13, when the number more than doubled every year. Still, the number of electric vehicles has tripled since 2013. The IEA Global EV Outlook reports that EVs are spread roughly equally among North America (mostly the United States), Europe and Asia (mainly China). 

The poster child of the EV movement is U.S.-based Tesla Motors. On March 31, Tesla took what auto experts called a giant step to bring EVs to the masses. It announced a new Tesla Model 3, offering more range (345 kilometres, or 200 miles) and a price of US$35,000 — its most affordable EV yet. Orders for the new car (which has not yet been seen and will roll out in 2017) are said to be pouring in.

There was a rush to open more EV charging stations in North America around 2010. More Tesla charging stations are found today in Manhattan than gas stations, and there are more EV charging stations than gas stations in Japan. The number of public EV charging stations in the U.S. has increased to 14,000 (according to the Department of Energy) — up from 8,000 in 2012 — and no doubt demand for more is increasing.

This is impressive, of course, but it does not signal the opening of a new era of the dominance of electric vehicles.

It’s not Ford. Not yet.

A machine that changed the world

The Model T was a different story, defining the auto as a mass consumption industry. Henry Ford wasn’t the first person who thought this way, but by creating a new organization to build autos based on achieving dramatic economies of scale, Ford made it happen. In 1909, Ford produced 12,000 Model Ts and sold them for US$950. This wasn’t cheap when a dentist might make US$2,500 a year. But this was just the beginning: The four millionth Model T, in 1920, cost US$440. By the early 1920s, Ford was producing more than half of all automobiles manufactured in the world. “The ten millionth Model T, produced in 1925, sold at the remarkably low price of US$290, and it was a much better car than the earlier versions,” Thomas K. McCraw wrote in American Business, 1920-2000: How It Worked.

No one could have foreseen that by 1920, a new American industry would manufacture almost 2 million cars and commercial vehicles, and that some 4.8 million motor vehicles would already be already registered on the road. The Model T was accessible to a wide range of buyers. It was reliable, adaptable and easy to repair. (Indeed, Ford supplied a tool kit with each car and encouraged people to do their own repairs.) The Model T accounted for half of the U.S. auto market until 1924. In 1927, the last of 15 million Model Ts rolled off the line.   

The Model T infrastructure requirements were pretty modest. There were few paved roads in 1910, but the Ford managed on almost any surface. It was light enough that two guys could lift it out of the mud. The rapidly growing ranks of auto owners pushed for more and better roads. (It’s true that bicyclists initiated the good roads campaign, but that start was quickly overwhelmed by auto supporters.) More important, in 1916, the Federal Aid Road Act appropriated US$75 million to be spent over five years mainly to match state funding for roads. (In 1919, Oregon was the first state to adopt a gasoline tax designed to finance highways.) The automobile put America on the road. 

At the same time, a new industry emerged to market branded gasoline, drawing on recently discovered petroleum sources in Texas. In the early days, generic gasoline was purchased in a variety of stores and auto owners carried reserve fuel in portable containers. But by 1913 more gasoline was sold in new “filling stations” and in garages and auto repair shops.

What had emerged with remarkable rapidity was a deeply integrated mass production system which reshaped almost every dimension of American life. This was, indeed, the machine that changed the world.

Electric’s different path

The electric vehicle will not reshape society the way Ford’s Motel T did. But it could have a profound impact on the environment. The EV exhaust is pollution free and it emits no greenhouse gases. (That is, assuming that the source of electricity is decarbonized.)

The recent IEA report underlines that “industry, governments and early adopters have succeeded in demonstrating that electric cars can deliver the practicality, sustainability, safety and affordability characteristics expected from them.” Many would like to see this as another grand beginning.

But EVs account today for only about 0.1 percent of the global car stock, and a minuscule share in other transport modes – except two-wheelers (electric two-wheelers are about one fifth the global total.) The number of EVs on the road is not large enough to affect fuel consumption or transport sector GHG emissions. And the EV market still requires support from governments to achieve widespread adoption and deployment.  

The EV industry in North America focuses primarily on cars. The assumption – hope – is that one day, in the not too distant future, electric cars will replace the gasoline-powered car. But this brave assumption floats in a wider sea of uncertainty about the future direction of the EV.

Even in the IEA report, the distinction between electric vehicles and electric cars is blurry. The report mentions “the electrification of road transport modes other than cars, namely two-wheelers, buses and freight delivery vehicles.” But it has little to say about these developments, other than two- and three-wheeled EVs and electric buses. The report states that “EVs of all types lie at the heart of future sustainable transport systems, alongside the optimization of urban structures to reduce trip distances and shift mobility towards public transportation. The wide global deployment of EVs across all modes is necessary to meet sustainability targets.” But it speaks mainly of cars.

That electric cars will widely replace gasoline-powered cars seems highly unlikely, certainly for the foreseeable future. Low gas pump prices, additives that reduce pollution and tougher emissions and mileage requirements make the transition to electric less pressing. A recent Canadian report suggests that a lack of consumer understanding and awareness of electric vehicles inhibits the expansion of EV markets. Finally, EV production has a long way to go to achieve economies of scale that will drive down costs to compete with gasoline-powered vehicles without subsidies.

Moving beyond the car

The EV vision may be a key problem. One wonders if the electric car is really just a shined up version of the old school Ford or Chevy. The Model T gave owners a personal independence and sense of self-expression without historical precedent. Is the personal car still the polar star guiding the EV industry? If so, it may be a poor guide to the future. Indeed, in our increasingly urbanized society, as cities push more public transportation to alleviate congestion and pollution, and as many young people do not get driver’s licenses and as car sharing services abound, the world of personal transportation may be undergoing fundamental change.

It is surprising that the EV world has not focused more intensively on the commercial side of the industry – trucks and similar vehicles. Environment 360, an online publication of the Yale School of Forestry & Environmental Studies, notes that while the adoption of electric cars has been slower than many expected, “heavier-duty models are undergoing rapid innovation for applications like battery-powered city buses, delivery trucks, freight loaders, and ferries.”

“These electric workhorses can play an important role in decarbonizing transport, and could spin off technologies that benefit electric cars, a far larger — and, from a carbon perspective, more important — market.”

Ian Wright, one of Tesla’s founders, says that the economics of electric trucks are far more favourable than electric cars. His firm, Wrightspeed, builds electric powertrains that can be retrofitted to gas powered trucks. “Consumer automobiles don’t burn enough fuel,” he says. “Family cars burn about 600 gallons a year. If you make that [car] electric you are going to add US$15,000, at least, to the cost of that car and maybe only save US$1,500 [in fuel]. So maybe a 10-year payback. If you go to garbage trucks they are burning maybe 14,000 gallons a year, so you can save US$35,000 in fuel and US$20,000 in maintenance.”

Do the numbers add up?

A trend toward commercial electric vehicles seemed obvious. Experts anticipated that sales of electric-drive vans and light-duty trucks would increase sharply. Commercial EV sales would be driven by the bottom line: commercial vehicle operators keep their trucks and vans longer and put more miles on them and those miles will cost less based on the lower cost of electricity, and lower maintenance costs associated with electric vehicles. The case for going electric would get stronger as batteries get cheaper and vehicles gain longer range.

But the supply side has been a problem. Old-line auto manufacturers have been reluctant to get involved. GM and Ford both made electric pickups in the late 1990s. Modified versions of the Chevrolet S10 and Ford Ranger were built almost exclusively for fleet use. Both were shortly discontinued. GM produced hybrid versions of the Chevy Silverado and GMC Sierra in 2009, but discontinued them in 2012 due to low sales. Ford and Toyota considered producing hybrid pickup powertrains in 2011 but dropped the idea, and the pure electric pickup market has been dormant ever since.

Start-ups have not been more successful in developing a sustainable commercial electric vehicle business. The new players face very large upfront costs and have not secured large commitments to purchase their vehicles. Cost remains the major issue. The author of an article on Boulder Electric’s decision to cease production of its van notes, “the Boulder Electric van could go up to 100 miles per charge and could haul up to 6,500-lbs of payload, but at US$70,000 you could literally buy two conventional vans with just as much capacity. Even at an estimated US$20,000 in saved fuel costs spread out across years of use, the numbers still don’t add up.”

Bottom line.

The focus on the new personal car – the 21st century electric Model T – may be leading the EV industry, at least in North America, in the wrong direction. Mass adoption of electric personal vehicles is inhibited by incumbent improvements and the inability to obtain economies of scale that will bring costs to competitive levels and reduce the need for subsidization.

Meanwhile, the EV industry has not moved aggressively into market segments – commercial trucks for example – that seem to offer significant advantages. Others, China in particular, are moving much more rapidly in these areas and may well capture market scale and technological leadership.

The number of cars produced in the U.S. may not decline. But we are likely to see a wider variety of cars and other vehicles on the road at the same time – personal and multiple-use cars, privately owned cars and more car services and types of public transportation. We’ll see hydrocarbon-powered vehicles with different kinds of engines and different kinds of fuel, as well as all sorts of electric and plug-in vehicles.

In fact, the vehicle world of tomorrow may resemble less the Ford era than the decades before, in the early days of the auto, when steam, electric and internal combustion vehicles of many types, size and purpose all shared roads with a vast array of horse-drawn vehicles. 

*Note from the author: Thanks to Riadh Habash and University of Ottawa students in PAP6101 who encouraged my electric vehicles enthusiasm.

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