I am firmly convinced that the electrification of the automobile will happen faster than most people expect. However, I also realize that over the next few years the market will probably grow slower than more ambitious projections, which will of course fuel the doubters. In fact, we are seeing this right now as many delight in criticising the ongoing production issues at Tesla.
This is exactly how most new technologies are adopted. Case in point: Amazon, which in the dotcom bust lost over a 12-month period nearly 90% of its market value, only to come back even stronger and not only revolutionise the book industry and the entire retail industry. What Amazon did was apply new technologies (internet, databases, etc) and business models (ability to buy with a click of a button from our homes). When you have this combination, you have a revolution. And that is what I see coming with electric vehicles (EVs), exciting new technologies and business models.
However, we are not there yet. For a start, there are only a handful of truly competitive electric cars to choose from, and apart from Tesla with its direct selling model to the end customer and its free software upgrades and fast charging, we have not seen any new business models. There are also significant challenges around overcoming customer ‘range anxiety’ concerns. The result of this is that EV penetration is likely to stay small and niche until 2020. However, this will change and my own view is that the global market for battery powered or fuel cell powered EVs will grow from 2m out of 85m cars sold globally in 2020, to 50m in 2030. Far-fetched you may think, but this is exactly how every exponential technology happens.
Three factors, which all be in place by 2020, will give EVs the momentum needed to kick off exponential growth:
1.Broad selection of exciting electric cars from traditional car companies such as Volvo and Porsche as well as companies like Tesla, to a whole host of new players such as Dyson and Chinese start-ups like Nio. These cars will be fun to own and drive, as well as being reasonably priced.
2. The total cost of ownership of an EV will be lower than an ICE (internal combustion engine), in turn pushing three business new models:
All-in-packages. Car buyers will be offered financial packages for purchasing the car which will have the cost of the car, servicing, insurance and charging costs built in.
Fleet management services. Companies, starting with city delivery such as DHL and local bus companies, will be offered full service packages for electrifying and managing their fleets as costs effectively as possible.
Car-sharing services. Due to the lower cost of ownership, companies offering car sharing and limousine services will move electric.
3. Range anxiety issue will be solved. One of the biggest risks to the mass adoption of EVs is range anxiety, the fear that people will run out of power, as well as the inconvenience around charging. Batteries and power electronics will improve to the point that the average EV has a range of 500km, with a path to 1,000 km by 2025. At the same time, a vast range of EV charging infrastructure will be built, initially at homes and in our places of work. In addition, a whole range of commercial charging infrastructure will be added. Car companies like Tesla may build their own fast charging infrastructure, especially for their customers, while others such as shops and railways will use “charging” as a means to entice customers to use their other services.
