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Last month, the electric-car industry passed a small but important milestone. There are now more than 100,000 electric cars on America's roads, including those that operate as plug-in hybrids. That's happened in just two and a half years, as electric-vehicle sales have only been tallied independently since the last month of 2010, when a mere 345 were first parked in customer garages.
Despite this milestone, there's plenty of pessimism to go around regarding the adoption rate of the plug-in EV, which have thus far made up only half of 1% of all cars sold in the U.S. this year. My fellow Fool -- and resident Foolish auto expert -- John Rosevear offered a succinct overview of that pessimism a couple of months ago, which I'll sum up as this: There's no charging infrastructure, and the batteries make EVs cost more than is justifiable.
Does that mean EVs are a failure?
From the perspective of the broader auto market, and when compared to the ambitious one-million-EV goal set by President Obama for 2015, EV hype seems destined for the junkyard. However, from a historical perspective, EVs aren't doing so badly at all. In fact, most of the common complaints about EVs are simply short-sighted or downright wrong when viewed through either a historical lens or one with a longer time horizon for the future. Let's take a look now.
Historical perspective on the auto industry
The American auto industry effectively began in 1896 with a 13-vehicle production run at the Duryea Motor Wagon plant (or garage, as the case might well be). Three years later, just before the start of the 20th century, there were roughly 8,000 cars on what passed for American roads -- virtually nothing was paved for vehicle travel. There were 8,000 EVs on the road after eight months of tracking. That's not really fair, though, because there are more than three times as many people in the U.S. as there were at the turn of the 20th century. Adjusted for population growth, there should have been 33,000 EVs on the roads after three years. That happened after 19 months, and we're now approaching three times that number midway through the third year of tracking. In fact, EVs are outperforming hybrids at the same point after adoption as well. Here's what that looks like:
I included battery-only EVs on the chart to prove I wasn't fudging the numbers on EV adoption by using plug-in hybrids -- battery-only EVs surpassed the population-adjusted sales pace of the earliest cars with eight months to go in their third year of tracking. It's also worth pointing out that battery-only EVs have outsold plug-in hybrids by more than 1,000 vehicles for each of the past three months and are on track to reach a cumulative total of roughly 68,000 sales at the end of the year.
Why compare EVs with the earliest cars? The "motor wagons" of the late 1800s faced similar challenges to those often attributed to EVs: minimal supporting infrastructure and a high price tag relative to the dominant (horse-drawn) transportation of the day.
The first gas stations wouldn't even be built until almost a decade after the Duryeas built the first 13 cars in America, and they had no drive-up pumps -- that innovation didn't arrive until 1913. There are already more than 6,000 publicly accessible EV charging stations in the country. This doesn't count interesting infrastructure developments such as Tesla's (NASDAQ: TSLA ) battery-swap stations or its growing network of "superchargers" scattered across the United States. It's also worth noting that EVs, unlike early internal-combustion vehicles, can get recharged in most owners' garages.
A comparison between the price of cars at the start of the 20th century and the price of EVs today shows another advantage in electricity's favor: the average car in 1900 cost nearly twice the typical household income, while the average base price of the top three EVs on the market today -- Nissan's (NASDAQOTH: NSANY ) Leaf, Tesla's Model S, and General Motors' (NYSE: GM ) Chevrolet Volt -- is about 90% of the median national income.
However, EVs have a hurdle that the motor wagons didn't -- the competition is already mechanical, and it has a century-plus head start. The earliest autos simply had to be better than a horse, which is limited by biology to a certain speed and a certain work capacity. A horse doesn't have an R&D budget or an assembly line, and you have to clean up after it, which is pretty gross. Its obsolescence was inevitable. EVs have to beat a competitor that's benefited from tens of billions of dollars in global research and development spending each year for decades , and which is a significant part of a worldwide oil-and-manufacturing infrastructure that creates trillions of dollars in annual revenue.
EVs have to overcome an entrenched culture, just as early motor wagons did -- but today's car culture is far more deeply embedded in the national psyche than horses ever were. There's one automobile on American roads for every 2.3 Americans today, compared with one horse for every 3.5 Americans in 1900. The average person traveled about 340 miles per year in 1900, compared with 16,000 miles per year in cars and airplanes today. Despite facing one of the most entrenched opponents in the history of capitalism, EVs are already outperforming the puttering internal-combustion pioneers in terms of market penetration, price, and infrastructure deployment at a similar point after introduction.
Let's sum some of that up visually:
Hard to hold a charge
Of course, with all of that said, we come back to perhaps the biggest roadblock between EVs and mass adoption: Battery technology just isn't as good as gas. "A full tank of gasoline," according to American Physical Society Fellow Alfred Schlachter, "contains as much energy as 1,000 sticks of dynamite." It's accessible, portable, and (despite protestations over $5 gallons of gas) quite affordable. The New York Times' Green blog quoted IBM battery researcher Winfried Wilcke on the charging-efficiency problem three years ago:
[Wilcke] illustrated the challenge of building a battery with the energy density of gasoline by recounting that it took 47 seconds to put 13.6 gallons of gas in his car when he stopped to fill up on the way to San Francisco. That's delivering power at the rate of 36,000 kilowatts, he said. An electric car would need to pump 6,000 kilowatts to charge its battery in that period.
"The dream that we have today to have exactly the same car charge up in minutes and drive off hundreds of miles cannot happen," Mr. Wilcke said. "Or at least not for 50 years."
Schlachter points out that battery technology is not subject to Moore's Law-like efficiency gains, because "significant improvement in battery capacity can only be made by changing to a different chemistry." Computing hardware has improved on the same substrate by investing in miniaturization technology since the 1960s, but the energy density of a given chemical compound is essentially fixed -- it's only improvements in the surrounding machinery using that compound (whether engines or batteries) that makes more use of the same material.
However, it may not be necessary for EVs to charge in 20 seconds to make them a compelling alternative. Most people simply never drive far enough in a given day to need a quick charge -- 95% of all people tracked in 2009 by the National Household Travel Survey had a commute of less than 40 miles, and the average commute was less than 14 miles. The average total daily driving of urban dwellers was 37 miles, and that of rural drivers was 49 miles. The Nissan Leaf, which is the cheapest of the three best-selling EVs on the market, can drive at least 73 miles on a single charge. Battery quick-swap stations go a long way toward solving the problem of charging delays on the other 5% of those commutes, and the high cost of batteries -- widely seen as the biggest drawback to EV adoption and a roadblock to quick-swap ubiquity -- is not something that will persist forever.
The lithium-ion batteries used in modern EVs have more than doubled in energy density and have declined in price per kilowatt-hour of capacity by a factor of 10 since the early 1990s, when the modern EV movement began to gestate. A McKinsey research paper published last year projects that lithium-ion batteries will continue to decline in price from roughly $600 per kWh today to about $200 per kWh in 2020. Gas prices aren't likely to decline any time soon, so a two-thirds reduction in battery costs would make EVs a better value on balance than internal-combustion vehicles, according to the McKinsey analysis. None of this would account for another battery breakthrough that would make lithium-ion obsolete, and as the commercial impetus to sell EVs continues to gain steam, it only becomes more likely that intensified research will find something better.
Will EVs continue to outperform the original auto pioneers in the face of stiffer competition? I can't say. However, early results are indeed more promising than many pessimistic commentators would you like to believe. Just as autos replaced horses en masse once their technological superiority was undeniable, EVs will have to be objectively better than internal-combustion vehicles to justify widespread adoption. There are bound to be some bumps and bankruptcies along the way. After all, more than 1,000 automakers of all sizes were founded between 1896 and the mid-1920s. How many of them are still around?
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