For some time now I have been watching the rise and rise of electric car sales, with the caveat that their supply is heavily constrained by bottlenecks.
(These bottlenecks being those very things that make them better, more reliable and less polluting than internal combustion engine (ICE) vehicles: the batteries, motor/gearboxes and charging systems).
After all, it took 100 years or more to create the finely tuned, high volume production system of petrol/diesel/LPG motors and their associated gearboxes (along with the bodies and interiors) plus the ubiquitous fuel delivery and dispensing system that we have today.
EV motors, ‘gearboxes’, ‘fuel tanks’ and ‘fuel delivery systems’ are a whole new ball-game, and whilst they are developing fast, it has not yet been fast enough to rival ICE vehicles in terms of their technological maturity, scale of production and installation of the charging systems to power them.
Hence supply and recharging constraints are currently preventing EV sales taking over from ICE overnight.
This is also seen as a bonus by the legacy manufacturers of ICE vehicles, for they have massive investments in production systems (and labour forces) that produce the highly complex motors and automated gearboxes that propel the ICE vehicle.
Not to mention the entirely dependent fossil fuel extraction, distribution and sales network.
Throwing away/replacing the manufacturing machinery (as well as retraining/laying off a significant part of the labour force) will be a very costly exercise.
Electrification of the transport industry also ends the jobs of most workers in the oil extraction, refining, distribution and sales network too. (Let alone see the closure of the vast majority of service stations).
The word ‘disruption’ is kind: for the auto manufacturing industry, the line ‘instil terror in the heart’ comes to mind. For the oil industry: the term ‘impending doom’ may be closer.
As a consequence, the build-up of EV production capacity and the (to be frank) deliberate heel dragging by the legacy ICE vehicle manufacturers has led to the happy situation (for them) of EVs creating a buzz of interest, but not affecting the continuing sales of new ICE vehicles to business and the general public.
Meanwhile, the oil industry continues to make confident predictions of ‘business as usual’ forecasting a gently decline in sales starting sometime in future decades.
Unfortunately for the legacy ICE auto manufacturers, they have missed a key point driving new car sales: that most new car sales are driven by reasons other than need.
Think about it: how many times have you or your business changed vehicles simply at a predetermined age or distance travelled, and not as a result of it wearing out beyond repair/having a catastrophic failure or crash that is not worth fixing?
With the ever increasing interest in EVs by the general public comes an understanding that EVs are the future of automobiles and transport.
Alongside that is a growing understanding of the advantages of EVs over ICE vehicles. (These being that EVs are a better vehicle to drive, more reliable, cheaper to run, plus way better for the environment AND public health).
I would argue that taken together, these strands of thought may result in a perfect storm for the legacy auto manufacturers: a steadily decreasing number of new car sales as the general public delay their new car purchases and hang onto their current (perfectly serviceable) ICE cars in anticipation of new EVs coming onto to the market.
So why am I suggesting this right now rather than in a few years’ time when EVs are a bigger part of the market?
Well, it could be argued that the world figures for total new ICE sales and EV sales in 2018 suggest that the tipping point for that ‘perfect storm’ might just have been reached.
In 2018, European ICE sales fell by 0.23%, China by 6% and Australia by 3%, whilst EV sales around the world rose by a staggering 75%. (By the way – if you delete Tesla’s US sales, in particular the Model 3 – the overall US market fell in 2018 too).
This means EVs are currently rolling off the showroom floor at a pace that the salespeople of ICE vehicles could only wish for.
Add to this the clamour of pre-orders for EVs that meet consumer demand: remember the hype around Tesla Model 3 reservations opening in March 2016? (They reached 450,000 or more, and are now rolling out of Tesla’s Freemont factory at a rate of around 5000 plus per week).
Well that clamour is being repeated with the Nissan 3.ZERO, Mercedes IQ, Porche Taycan, Audi e-tron, Hyundai Kona and Jaguar I-Pace: people are putting down significant deposits for vehicles that, in some cases, may not be delivered till 2020 or beyond.
So have we reached the tipping point?
Will we see an acceleration of the fall of ICE new sales from here?
In which case, could the automobile industry withstand such a shock to their bottom lines before EVs are fully profitable to them?
Maybe ‘Peak oil’ may never happen: (as oil will simply gently decline in inverse proportion to the growing percentage of the EV fleet on the road) – it is ‘Peak ICE’ that the auto industry may really need to worry about.