Low gasoline prices, falling sales of EV’s in 2015, a new U.S. President who does not believe in climate change. In light of these factors observers can be forgiven for thinking that any significant penetration by electric vehicles (xEV) of the light vehicle market is decades away at best.
But a funny thing has been happening in the xEV market. Despite headwinds that might have killed the entire sector, the outlook for vehicle electrification is looking brighter than ever. Thank improving battery technology and the long-term and surprisingly resilient dedication to environmental protection of both government and private industry.
An article in this week’s The Economist titled “Electric cars are set to arrive far more speedily than anticipated” summarizes the surprising turn-around of vehicle electrification.
The change of gear is recent. One car in a hundred sold today is powered by electricity. The proportion of EVs on the world’s roads is still well below 1%. Most forecasters had reckoned that by 2025 that would rise to around 4%. Those estimates are undergoing a big overhaul as carmakers announce huge expansions in their production of EVs. Morgan Stanley, a bank, now says that by 2025 EV sales will hit 7m a year and make up 7% of vehicles on the road. Exane BNP Paribas, another bank, reckons that it could be more like 11%. But as carmakers plan for ever more battery power, even these figures could quickly seem too low.
These projections are not coming from environmentalists but from the automobile makers themselves. Mark Fields, the CEO of Ford, recently predicted that Ford would be manufacturing more models of xEV’s than pure ICE’s within 15 years. Daimler has stated that it expects xEV’s to account for about 20% of its sales by 2025. Its larger rival, Volkswagen, has topped that, predicting that xEV’s will account for 25% of Volkswagen’s sales in the same year.
These predictions mark a sea change from what many of these same companies were saying, publicly and even more emphatically privately, just two or three years ago.
Improving battery technology can claim credit for much of this change. The energy density of lithium-ion batteries is rising rapidly, even in the absence of any major developments in their electrochemical composition. And major developments in the electrochemical composition of lithium-based batteries are coming. Battery prices are falling and, along with them, the prices of xEV’s.
On the environmental policy front, despite the results of the U.S. election, governments in the EU, China and many U.S. states, including California, are not easing up on automobile emission limits; they are doubling down. ICE’s, not xEV’s, may soon be vehicle technology facing price pressure.
What is clear at this point is that many have been underestimating the impact of the one-two punch of battery technology and emissions regulation on the automobile industry. Those working in the electric vehicle and advanced battery industries may not be working in such a backwater after all.