The future is electric, but why’s it taking so long?

Posted Thursday, 6 September 2018, 15:23

As clean energy policy and business leaders convene in San Francisco for the September 12-14 Global Climate Action Summit, few topics of discussion are as hot as how to transition to electric vehicles. There are literally dozens of events to explore the leading actions to accelerate the shift to electric (for example: here, here, here, and here).

This is a good occasion to take stock, including specifically how quickly the industry might make the transition and how it compares to existing public policy goals. Most of largest automakers—including Audi, BMW, General Motors, Mercedes Benz, Mitsubishi, Nissan, Porsche, Renault, Škoda, Tesla (off course), Toyota, Volkswagen, and Volvo—are saying the future is electric. Yet, the same automakers lobby to ensure that emissions and efficiency standards in China, Europe, and the U.S. are as lax as possible—and that they don’t specifically require electric vehicles.

So, the auto industry asserts to the world that they are on the path toward zero emissions, but also that they can’t be rushed into it with standards that make cars 3-4% more efficient each year. You might be tempted to cynically conclude that auto executives are exuding confidence to investors, while their lobbyists call for the leniency, so they can have their cake and eat it too. That’s just seems too glib, though. As we do at the ICCT, let’s take a closer look at the numbers.

Many automakers have shared details on their plans for an electric future, including targets and a timetable. The table below sums up the automakers’ announcements for electric vehicles and reflects only investments and intended sales of plug-in (and a few fuel cell) vehicles – announcements for hybrids without plug-in capability are not included. These total $200 billion in electric vehicle investments and over 15 million electric vehicle sales per year by 2025.

Automaker electric vehicle announced investments and future year sales
Automaker Group Announced Investment Global Sales (shares)
Nissan-Renault-Mitsubishi $9.5 billion 3 million (30%) by 2022
Volkswagen  $40 billion+$60 billion (battery) 2-3 million (20-25%) by 2025
Toyota (not available) 2 million (25%) by 2025
Chonqing Changan $15.9 billion 1.7 million (100%) by 2025
BAIC $3.4 billion 1.3 million (100%) by 2025
Geely $3.3 billion 1.1 million (90%) by 2020
General Motors (not available) 1 million (12%) by 2026
Tesla  $4-5 billion 1 million (100%) by 2020
Mercedes $13 billion 0.4-0.6 million (15-25%) by 2025 
BMW $2.4-3.6 billion 0.4-0.6 million (15-25%) by 2025
Ford $11 billion (not available)
Dongfeng (not available) 0.4 million (30%) by 2022
Hyundai $22 billion  (not available)
Fiat-Chrysler $10.5 billion (not available)
SAIC $2.9 billion (not available)
Great Wall $2-8 billion (not available)

Fifteen million electric vehicles a year by 2025 is not enough for a wholesale market disruption, considering total global vehicles sales in 2017 were about 97 million. But that’s obviously a lot of vehicles. Considering there were about 1.2 million electric vehicle sales in 2017, we’re talking about an order of magnitude jump in 8 years. These announcements signal the timing to cross proverbial "valley of death” to where electric vehicles ultimately reach significant production volume and achieve economies of scale needed for profitability (on this, see UBS’s great engineering teardown analysis of the Chevrolet Bolt).

But a critical question in all of this is how strong are the long-term policies steering the fleet? Many governments are signaling the need for all zero-emission vehicles, some as early as 2025-2030 others in the 2040-2050 timeframe, and they’re beginning to translate these goals into enforceable policy. Three markets make up 90% of world electric vehicle sales and play key roles in electric vehicles demand globally. These are China, with its New Energy Vehicle requirements; Europe, with its CO2 standards and proposed zero and low emission vehicle targets; and the U.S., where state-level Zero Emission Vehicle regulations led by California are accelerating electric uptake. The figure below shows the expected electric vehicle sales for 2020-2025 from the strongest public policy under consideration in these three dominant electric markets, and it compares these with the automaker announcements.

Electric vehicles required by 2020-2025 policy and announced auto industry 2025 deployment

Electric vehicles required by 2020-2025 policy and announced auto industry 2025 deployment.

As shown in the figure, automaker announcements are in line with—and even outpacing—the global policy requirements by 2025. From this, I take it that automakers clearly see the future is all-electric, but they face great uncertainty about which markets are most ripe right now and where they can rely on strong policy and charging infrastructure to pave the way. Certainly, as federal U.S. policy is wavering, there’s an opportunity for states, cities, and business leaders to step up and ensure that transport is headed toward zero emissions. We’re seeing exactly what happens when they do, with many major markets in China, Europe, and California above 6% electric market share and growing.

So, the electric future appears bright, indeed, but we’ve all got work to do. Governments, an entire industry, and the rest of us can all face these issues together regarding how quickly we can transition to all zero-emission vehicles. These are some of the topics we at the ICCT will be paying closest attention to at the Global Climate Action Summit. We hope to see many colleagues in San Francisco to examine these tough questions!