Will there be a market for the coming explosion of electric cars?
Electric vehicles still make up only a tiny fraction of total car sales. But in 2017, the industry reached a new milestone, selling more than 1 million cars. In 2018, sales may have more than doubled. By 2022, according to a recent report from Deloitte, electric cars will reach a tipping point: owning an electric vehicle will be as cheap as owning one that runs on fossil fuels, and sales will grow much more quickly.
“By 2022, we believe EVs will reach cost parity with gasoline or diesel vehicles regardless of subsidies,” says Jamie Hamilton, the U.K. automotive strategy lead at Deloitte. In some markets, because of subsidies, electric cars have already reached that point. The numbers consider the total cost of ownership–that is, not just the sticker price, but how much less it costs to charge an electric car each year instead of buying gas or diesel, and how much less the vehicles cost to maintain.
If you live in the U.K., Germany, France, the Netherlands, or Norway, an electric car is already a better deal, according to another recent report from the International Council for Clean Transportation. It compared an electric VW Golf to the Golf’s hybrid, gas, and diesel versions over four years, and found that the electric version was cheapest in each of those countries because of subsidies and tax breaks along with the savings in fuel cost. The difference is biggest in Norway, where the electric Golf is 27% cheaper than one running on diesel.
Still, even as the cost of ownership drops everywhere else, Deloitte predicts that the sales price of electric cars will take more time to fall. “Customers will need to take into account the cost of owning an EV, such as running costs, to qualify the purchase,” Hamilton says. “It will be the job of retailers and manufacturers to help communicate this.” The Deloitte report suggests that electric car sales will start to grow rapidly in 2022, and that by 2024, they’ll make up 10% of total car sales, while fossil-powered cars start to decline. By 2030, as the cost of batteries keeps falling, the report projects that sales could grow to 21 million vehicles for the year. But that’s 14 million fewer electric cars than the industry plans to make; Deloitte’s researchers think that sales won’t match the investments car companies are putting into EVs.
Volkswagen, which is phasing out conventional cars, is spending around $50 billion on electric and autonomous cars over the next five years, and recently announced plans to pour $800 million into a factory in Tennessee to begin producing electric cars in the U.S. Porsche has said that it wants half of its production to be fully electric by 2023; Volvo aims for half of all of its sales to be fully electric by 2025. GM plans to produce 20 new fully electric cars by 2023. Audi is planning for 12 by 2025. Mercedes-Benz plans to offer electric versions of all its cars by 2022. Ford will offer 16 all-electric vehicles by that year.
As car companies ramp up production, many governments are also pushing to phase out conventional cars. Norway wants to ban sales of new gas and diesel cars by 2025. India, Ireland, Israel, and the Netherlands are aiming for 2030. Denmark is proposing a similar ban by 2030, and a ban of hybrid sales by 2035. Both France and the U.K. want to ban the sale of gas and diesel cars by 2040. China said that it wants to take action, but hasn’t set a date. And while these bans have yet to be made law, many governments already offer subsidies, tax exemptions, and other incentives for electric cars.
Despite these transitions, if Deloitte’s predictions are correct, consumers won’t be buying EVs as quickly as they could be in the near future. Beyond the higher sales price, the researchers cite charging infrastructure as another challenge; while that infrastructure is quickly growing, some customers may still be concerned that if they buy an electric car, they might not easily be able to charge it. “To accelerate EV adoption there will need to be much faster and wider deployment of charging points and also for the up-front costs of these vehicles to be made affordable,” says Hamilton. He suggests that manufacturers might also be able to spur sales through different ownership models, such as new options for financing or the ability to swap an electric car for a conventional vehicle for a long trip.
If the transition doesn’t happen quickly, that’s a problem for the planet. By the latest estimates, at the current rate of emissions, we have a little more than a decade before we’ve used up the carbon budget to keep global warming under 1.5 degrees Celsius without relying on a massive scale-up of unproven technology to suck carbon back out of the atmosphere. And if we don’t limit warming to 1.5 degrees, the consequences could be devastating.