Have electric cars finally hit a tipping point? Are they now inevitable?
The last week has seen some very big electric-vehicle announcements from some very big auto-industry players, mostly around the International Motor Show in Frankfurt, Germany. Some of those announcements were probably motivated by the aftermath of Volkswagen's diesel-emissions cheating scandal, a hot topic in Germany at the moment.
But there are good reasons to think that electric vehicles finally have momentum, that more automakers will announce broader commitments to electric vehicles in the coming weeks, and that the long-awaited shift toward electric vehicles is finally underway.
Here's where things stand.
There are now a huge number of electric vehicles in the works
Most of the focus on electric vehicles so far has been on the exciting luxury-sports models from investor darling Tesla (NASDAQ:TSLA). But investors, take note: Tesla is going to have a whole lot of competition before long. Here's a partial list of the commitments made by big automakers recently:
- Volkswagen AG (NASDAQOTH:VLKAY) announced a sweeping plan to build electric versions of every one of its roughly 300 global models by 2030. The company will spend about 20 billion euros ($24 billion) to develop the vehicles, and another roughly 50 billion euros to buy the battery cells needed to power them. In the near term, VW's EV plans center on a new series of high-volume electric VW models to be sold under the new I.D. sub-brand.
- Daimler AG plans to launch an electric version of every Mercedes-Benz model by 2022. It's also preparing electric versions of its medium and heavy trucks. One is already shipping: Daimler delivered the first examples of its new Fuso eCanter, an electric urban delivery truck, this past week.
- BMW AG (NASDAQOTH:BAMXF) plans to be ready to mass-produce electric vehicles starting in 2020 and to have 12 new fully electric models in its lineup by 2025. BMW's plan is to build electric, hybrid, and internal-combustion versions of all of its core models on shared assembly lines so that it can move quickly to meet shifting demand.
- Nissan and Renault, which operate as an "alliance" under CEO Carlos Ghosn, plan to introduce 12 new fully electric vehicles by 2022. Nissan is in the process of launching an all-new version of its compact electric Leaf, the best-selling electric car of all time (so far).
- Honda has been less revealing about its plans. However, it confirmed this past week that it has an all-new electric-vehicle platform and said that several new models based on that platform are under development. Honda showed a concept version of the first of those new models, a small car with styling inspired by Honda's early Civics from the 1970s. It will go into production in 2019.
Other automakers will almost certainly join this list over the next few months. Next up may be Ford Motor Company (NYSE:F). It's widely expected that Ford's new CEO, Jim Hackett, will expand and accelerate Ford's existing electric-vehicle program. Hackett is scheduled to present his overall strategy for Ford to investors in a few weeks; we'll learn more then.
Not all of the big automakers will join this list by making announcements, but it's important to remember that a company's silence doesn't mean that nothing is happening. Two of the biggest global automakers, General Motors (NYSE:GM) and Toyota (NYSE:TM), tend to keep their future plans (on most fronts) quiet until they have specific products ready to launch. But anyone who thinks GM or Toyota won't be major players in electric vehicles is almost certainly making a big mistake.
A long-anticipated historic shift is finally underway
Tesla CEO Elon Musk has long maintained that one part of his company's "mission" has been to show the big automakers how it's done -- how to make electric vehicles that consumers will find compelling. The idea was that once enough automakers were on board, electric cars would become the global standard, largely or entirely replacing internal-combustion-powered vehicles.
So far, the big automakers haven't quite hit the magic formula. Even when their technology is roughly competitive with Tesla's (as it is in GM's Chevrolet Bolt EV), the legions of devoted fans haven't appeared. For a while, the seeming lack of consumer interest in electric vehicles made by anyone other than Tesla seemed to discourage the major automakers from investing in the technology.
But in recent months, something has shifted. Between increasing regulatory pressures on emissions in China, the repercussions of VW's diesel scandal in Europe, and the huge, hard-to-miss excitement around Tesla's new Model 3, more and more automakers seem to be finally getting serious about electric vehicles.
None are quite ready to give up gasoline, of course, though most say that they expect to produce a greater and greater percentage of gasoline-electric hybrids over time. But with few exceptions, most of the world's major automakers are putting significant time and money into developing new models powered by batteries.
And more and more, it looks like the biggest thing holding back electric vehicles is their batteries -- specifically, supplies of the materials needed to make them.
Why you'll have to wait: Not enough minerals to go around yet
It's hard to miss that most of the plans that have been announced don't anticipate many new products before 2020 (or later). That's noteworthy: It doesn't usually take three years for an internal-combustion vehicle to go from a production-intent concept like the one VW showed this week (which suggests that most of the design and engineering work is done) to production. Is there something specific about electric vehicles that takes longer?
The answer is both yes and no. In time, fully electric vehicles will be simpler to engineer and put into production than their internal-combustion counterparts. But right now, the supply chain doesn't exist to build electric vehicles in the huge quantities that VW is planning. Simply put, there aren't enough batteries yet.
VW -- and all of the other companies on our list -- needs to produce (or source) millions and millions of battery cells. (The exception is Tesla, which has had a few years' head start in confronting this issue.) VW and its rivals will need to build facilities to turn those cells into vehicle battery packs, and they will need to revamp some of the tooling in their assembly plants to build electric vehicles in high quantities.
But the real sticking point is probably around sourcing the raw materials needed to make all of those batteries, specifically lithium, cobalt, and graphite. There's plenty of all three in the earth to be mined, but miners are still in the process of ramping up to extract those minerals in the quantities that will be needed by the global automakers as they shift more of their production to electric vehicles.
Lithium-ion supply-chain expert Simon Moores of Benchmark Mineral Intelligence summed up the challenge in a tweet this past week:
VW will need >160,000 tonnes of cobalt chemical. Much more than the entire 96k market in 2016.— Simon Moores (@sdmoores) September 12, 2017
Long story short: In a few years, mineral supplies won't be an issue. But right now, demand exceeds supply to the point that it's simply not possible to mass-produce electric vehicles by the millions. Given that giants like VW will require enormous supplies, the world will have to wait a few more years before mainstream mass-produced electric vehicles become reality.
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