Why is the electric car market so elusive?

The electric car market is underwhelming. The recession has given more hope and funding to the electric car market than it ever received in the past. In the beginning of the 20th century, electric cars were big in the new automobile market. But then, the Ford T entered mass production, carmakers adopted internal combustion engines (ICE), leaving electric cars no chance. The market started over in the 1990s in Europe and in the USA. The Peugeot 205, the Citroën AX, the Chrysler TEVan were among the rare vehicles to offer an electric variant to the market. The most impressive attempt was the GM EV1. But all programs reached to an end for practical and technical reasons. They offered between 50 to 100 miles with batteries suffering from memory effects.

In the 1990s, charging was already an issue. It required to plug the vehicle for 8 hours on an appropriate charging station to get the full range back. Fast-chargers already existed and offered the possibility to charge up to 80% in 30 minutes. Some cities like the Paris greater area offered almost 400 charging stations in the early 2000s. But it wasn’t sufficient to make a proper break-through. Electric vehicles (EV) could fulfill some specific needs for low-range fleets and some rare suburbanites. It was irrelevant for the masses. The range was an issue even if it was sufficient for most commuters. But cars are expected to provide the freedom of going wherever you want, whenever you want. The electric car failed to deliver the possibility to be used on weekend trips, vacations and other occasional distance drives.

Underwhelming success

In 2008, oil prices soared and demand for gas guzzling vehicles plummeted. It gave a momentary lapse of hope for Electric vehicles as a viable alternative to ICE vehicles. Carmakers, suppliers, consulting firms and legislators saw the opportunity to implement a strategy to move on with electric cars. Forecasts were optimistic. Carlos Ghosn was repeating EVs would be 10% of the worldwide market by 2020. Articles about battery swaps multiplied. Most were enthusiastic and governments funded the R&D on lithium powered vehicles with tax breaks, loans and grants. It attracted all kinds of research and development companies as well automotive newcomers (like Tesla or Faraday Future). You have to understand that the electric car is the cheapest and the simplest way to design and produce a vehicle from scratch on both technical and legal perspectives (regulations, emission controls). At the beginning of the decade, it was raining money on any project labeled “clean-technology”.

As the car market recovered and the oil prices dropped, the public interest for electric vehicles faded away. The car purchasing process for most households is the same: a design and a segment (size, shape) for a given budget. The budget at large is called the Total Cost of Ownership. For the electric car, there are several issues that cripple its market potential. The first one is the price. Batteries are expensive to produce and switching to electric vehicles has a cost for carmakers (R&D, plant technologies). The second issue is the plummeting oil prices; reviving the interest for mainstream gas and Diesel cars. The third issue is the lack of resale value. No one can tell what is the demand and the price for secondhand electric vehicles as it is, more or less, a non-existing market. The fourth issue is the design. Electric cars are, more than ever, sensitive to aerodynamics and carmakers wanted to differentiate those vehicles by providing different styling. It ended up being dividing designs, to say the least. Tesla reconciled people with electric cars by giving a blend design to its cars. One thing is for sure, people buying electric or hybrid cars are activists as they want others to notice the nature of their acquisition. Once hybrids are integrated within the rest of the product portfolio, sales drop. People are not willing to pay the premium without having the recognition (or the fancy).

Since government funded the research, they also imposed regulations to make sure carmakers would stick to the plan and produce the electric vehicles. As production costs were rising, several governments once more offered tax breaks, loans and grants for electric vehicles manufacturing. For a few years now, the electric vehicles are on the market. But the demand remains low. Internal combustion engine technology improved to reduce fuel consumption and oil prices are low, people are buying more crossovers and SUVs. The sympathy for electric cars is limited. Consequently, governments decided to create more demand and implemented incentives to ease the price of electric cars and make them more attractive. If you follow the money, governments paid to the research, then they paid for the production, and finally they are paying populations for buying electric vehicles. When governments give up on the incentives, sales fall. The volatility of the demand and the dependency to tax breaks and incentives are the best proof the electric car market is unsuccessful, so far. In 2016, the electric car market represented 0.85% of the worldwide sales. It’s very unlikely for this market to reach 10% of the total sales 5 to 8 years from now, even with a hike in oil prices or a battery technology breakthrough.

In that context, we can understand the frustration for both carmakers and governments while the latter seem to defy the industry on the emission regulations loopholes. The question to ask is which one of the them has been tricked first in this complex game.

technical issues and CO2 IMPACT

Most carmakers talk about range anxiety. This is a misdirection, just like the absence of engine noise from electric cars was. Some years ago, carmakers were talking about faking the engine sound to avert pedestrians. It was a nonsense and it led to nothing as it was only a rhetorical way to avoid questions on silence of the battery powered engines. Electric cars solve part of the urban noise pollution problem.

The range anxiety is more real. But it remains a manoeuvre to prevent people and journalists from getting to the largest unsolved issue of the electric cars: charging time. Even with an improved range, charging an electric car requires 6 to 8 hours compared to 3 to 5 minutes for a gas of Diesel car. The fast-chargers are no solution since they stress the batteries and negatively impact their lifecycle. The range anxiety will be solved the day we can charge an electric car in a few minutes. Unfortunately, this issue won’t be solved anytime soon. Power companies, battery companies and energy providers all work on the question and the solution remains to be found.

Charging time is not the only one issue to tackle at this point. The entire electricity supply is also facing issues. Depending on the source of electricity (coal, nuclear, solar, etc.) and the total mileage a car over its entire life, electric vehicles’ emissions can become far less environmentally friendly than advertised. Producing an electric can emit up to 17.5 tons of CO2 while producing a gas car is about 5 tons of CO2. According to Transport and environment, a gas car emits 39 tons of CO2 on a total distance of 108,740mi (175 000 km), including gasoline from well to wheel. On the same distance, an electric vehicle with a 75kWh battery emits a very comparable total of 38.9 tons of CO2 considering an average emission of 17.5 tons of CO2 for the vehicle production, then 220 miles per charge for an average emission of 0.0005925 tons of CO2 to produce each kWh (average value estimated by Carbonfund). And this doesn’t consider any replacement of the battery and the fact that battery recycling includes copper, cobalt, aluminum and many more elements but lithium (as described by the IVL study). And this is all we already know at this point. We have not been far enough in the vehicles lifecycle to measure the real impact for tomorrow.

For the time being the charging time goes along with the issue of sourcing the electricity especially in emerging economies where electricity is dirty and in insufficient quantities to be used for mobility as well. Installing charging stations and managing them is a disruption but it remains less of a burden then fuel cell electric cars which would require a network of hydrogen stations including the risks and environmental impact it may then create. Electric cars are not the safest too, especially lithium-based EVs. Lithium requires a tight management and an efficient cooling system to secure the battery and prevent fire or malfunction. It adds to the already heavy weight of the batteries. The technology must improve on several aspects for the EV market to soar in a near future.

Don’t give up on electricity

Replacing all the vehicles in operation with electric vehicles is a nonsense. There are not enough materials for the batteries, especially the graphite and the lithium as most of the current technologies require those two elements. The more we reduce the price of the batteries, the higher is the price of materials. We can improve by using less materials as the technology improves. But it won’t be sufficient to replace over 1 billion vehicles worldwide. In the meantime, we don’t produce enough electricity to charge a large fleet of electric cars. And we won’t be able to in the years to come.

The electric car market is not doomed. It’s here to stay. But the potential is far from being the one described by many carmakers, automotive industry newcomers, governments and other business or institution involved. According to the promises made, the electric car market is underachieving. We must tackle many more technological challenges to prove EV viability. On the long run other engine technologies could rise and threaten electric cars. Engines like the Achates Power solution or other technologies under development could be able to offer comparable performances to current ICE while reducing fuel consumption, environmental impact and production costs. Those technologies would reduce the use of resources and the vehicle gross weight while using the current energy charging network (i.e.: at a low cost). If these solutions becomes reality in the next 15 to 25 years, it doesn’t mean they will overshadow the future of electric cars as the proper answer to specific segments of mobility.

This reveals the importance of driving a proper market intelligence with external and unbiased insight. The key to success is to measure the known and unknown competitors, to understand the right time to make a shift in technology and to avoid betting on the wrong horse. Carmakers, suppliers, newcomers should be careful as the automotive industry food chain is complex. Remember how Kodak underestimated the importance of the digital market or why Blockbuster forgot to become Netflix. Those mistakes started with a lack of market intelligence blinded by influential corporate culture.

 

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