Electric vehicles have been the coming thing for quite some time now. Twelve years ago Tesla TSLA-0.1% debuted its first EV, the Roadster. Ever since, EV enthusiasts have been predicting that the U.S. market for electron-powered personal transportation would soon bloom.
In the intervening years a number of promising electric cars—some from major manufacturers not named Tesla—have arrived on the market with quite a bit of hype, yet left little impression in the collective memory. EV’s that notably offered such promise, yet failed to energize a transportation revolution include Nissan’s Leaf and BMW’s i3. In large part, the failure was due to their relatively modest driving range. The original Leaf was a practical mass-market design yet good for no more than 75 miles on a charge, inducing range anxiety on any drive more ambitious than the predictable daily commute. Predictably, BMW brought high style and a price to match, but also came up short on endurance.
Yet the EV market is now abruptly shedding its elite, early-adopter appeal. If the high stakes and recent, almost universal rush by manufacturers to bring fleets of wholly practical EVs to market is a meaningful indicator, we’re fast approaching the EV tipping point. What lies beyond is a future where electric cars are the default and gasoline powered cars are relics of a carbon intensive past. The thought is incredibly encouraging to anyone who sees electric vehicles for what they ultimately are, a key element in the larger effort to electrify as much of the economy as possible, and a vital step in lowering carbon emissions from the transportation sector. If this all sounds too bullish, too “drinking of EV Kool-Aid,” then take a close look at the evidence of the EV market’s blooming.
The Big Three U.S. auto manufacturers have abandoned the traditional sedan market, and in turn bet their near term relevance on behemoth SUVs. Ironically, the big vehicles generate large profits that automakers are directing toward projects of existential importance, namely the development of clean, electric vehicle technologies upon which the manufacturers have staked their future survival.
Among domestic car makers, General Motors GM -2.7% is perhaps the most fully committed to such a transition plan. The company has abandoned the traditional sedan market and, in its place, will introduce 20 EVs over the next two years, led by its recent unveiling of the Hummer electric SUV. Meanwhile, the world’s largest automaker, Volkswagen, has announced that it will cease development of new, internal combustion-powered cars in the middle of this decade.
The automakers that have gone all in on EVs have received affirmation of their strategy from the largest U.S. car market. In September, California Governor Gavin Newsom issued an executive order outlawing the sale of gas and diesel-powered vehicles by 2035. Last week, New Jersey’s environmental regulator recommended that state do the same. This momentum is reinforced internationally by China’s requirements that EV’s account for 25% of domestic car sales within five years. In Europe, the UK and France will outlaw the sale of new gas and diesel-powered vehicles by 2040. Holland will implement a similar ban in 2030, and Norway in 2025.
As an added bit of evidence that EVs are the hot thing in the automobile market, EV pioneer Tesla is, no secret, now the most highly valued auto manufacturer in the world. Tesla’s market capitalization of nearly $400 billion is four times the big U.S. auto majors’ combined stock market value. The company has turned a profit in each of the last 5 quarters after a history of losses. True, Tesla’s profits depend on the sale of zero-emissions vehicle credits, but the growing market for these credits only reinforces the fact that the EV maker is in the right market at the right time.
And, while Tesla may not reach its goal of selling 500,000 cars this year, it won’t be far off the target. Think about it: A single, upstart manufacturer is on the cusp of selling half a million electric cars in a single year, in the middle of a pandemic and a secular softening of automotive sales. EVs are no longer niche products, but a growing part of the automotive mainstream.
Complimenting the growth in EV deliveries, the development of fast charging networks is accelerating in China, Europe and the U.S., meeting the need to fuel EVs on the go. In the U.S., residents of California can already rely on their EVs to transport them along popular routes, regardless of distance, with fuel security that matches that of gasoline-powered cars. And sure, California is a universe apart from middle America, but mid-American states are building out their own charging networks that, once in place, will erode the range advantage of gasoline-fueled vehicles and make long-distance drives by EV practical.
What barriers to EV’s remain? They’re still more costly than traditional gasoline powered cars of similar quality. The problem of range anxiety does admittedly persist. Nevertheless, the average range of EVs sold in the United States is forecast to reach 275 miles by 2022. That’s 80% of the distance offered by today’s Jeep Cherokee SUV. So, in October of 2020 naysayers may still say, “EV’s aren’t here yet.” But proponents of electric transportation can counter, without fear of having to eat their words, that EVs are well on their way.