Intelligent EVs: Sooner or Later?

August 3, 2017

Tesla Model 3 has hit the streets, but it’s only one of a rapidly expanding fleet of EVs, that are aimed at changing how the world moves.
On the horizon, driverless EVs are the true paradigm shifter.

How soon? How big? Pro, and con here.

Tom Price in Medium:

Let’s get right to the punch line: a very strong case can be made, and will be below, that within 15 years virtually all vehicular traffic in the US will be by autonomous electric vehicles (A-EVs). And that in turn will fundamentally change how our society works, largely for the better — if we don’t blow the transition, that is. Because that statement has such profound implications, let’s unpack it bit by bit.

EV’s are cheaper. Period. Which means we’re going to use them. A lot.

The evidence is now overwhelming and conclusive: it’s cheaper to operate an electric vehicle per mile than a regular internal combustion engine (ICE) vehicle. And that trend is only going to accelerate, as EVs get cheaper and have longer ranges. The reason is mostly physical, and it becomes obvious when you look at this slide — 100X fewer moving parts.

Fewer parts means less wearing out. Which means less replacing, and higher use factors. The NTSB says the average ICE will last around 150,000 miles. An EV? At least 500,000, maybe as much as 1,000,000. Or put another way, as much as you will ever drive in your lifetime. Then there’s the fuel — to drive 15,000 miles costs about $1,400 using gas, but only $540 using electricity. At the same time, the cost of electricity from solar is plummeting, dropping 90% in the last ten years with no floor in sight — meaning every mile is just going to get cheaper to drive.

So: cheaper to maintain, cheaper to use. But what about the upfront cost? Previously, EVs were expensive. But there are now more than 143 models of EVs either for sale or on the road by 2022, and in five years a high performing all EV car with at least mid level autonomy will cost less than $20,000. Which means you’ll have to pay MORE to own an ICE ( which has an average price of $33,000). Everyone who will do that, raise your hand. Thought so.

Demand is growing fast, and will only accelerate. Which is fine, because the cars will drive themselves.

That plummeting cost and increased value is driving such strong interest it’s hard to keep up with the predictions of EV growth — this one by OPEC grew 500% in just one year:

Part of the reason is that the ground is changing fast underneath ICEs. Just this month, three major announcements about the future of EVs came out, any one of which could have rattled the industry, but together form a body blow: (1) the release of Tesla’s highly anticipated Model 3 (2) Volvo announcing that after 2019 they won’t even sell any more pure ICE vehicles and (3) France vowing to ban them outright after 2040. Oh wait, look, now England is banning them, too.

The real reason for the incumbents to be worried though is the shift to automation. If a car can drive itself, it can go from sitting in your driveway 90% of the time to being on the road 90% of the time — which means we need a lot less cars. Perhaps surprisingly, with so many fewer parts it’s relatively easy to make an electric car drive themselves, and a plunging cost curve for the LIDAR technology that enables it — from $150,000 per car in 2012 to $250 in 2016 — has removed any price barrier.

Scott Nyquist, Senior Partner at Mckinsey & Co, on LinkedIn:

So, that seems pretty persuasive. But I am not so sure. The enthusiasts, investors, and experts—and these groups overlap considerably—may be exactly right. But I am also struck by how similar what I am hearing now about AVs is to the way people were talking about electric vehicles (EVs) not that long ago.

In late 2010, for example, one expert prediction was that by 2013, 200,000 electric cars would be sold in the US, and in 2015, 280,000; in fact, the figures were 96,600 and 119,000, respectively. Carlos Ghosn, the well-respected CEO of Nissan, said in 2011, that by 2016, there would be1.6 million Renault-Nissan EVs on the road; that forecast was off by more than 80 percent. President Obama saw a million EVs on American roads by 2016; the real figure is fewer than 300,000.

I believe that EVs and AVs will be a big part of the future of the car. Just not so fast. For EVs, the big issues have been cost and technology. Both are improving, as batteries get better and cheaper, but are not there yet. When Georgia’s $5,000 tax credit for EVs expired, for example, sales immediately slumped; ditto for sales in Denmark and Hong Kong when incentives expired. These are signs that people will not pay more upfront for an EV even if the total costs of ownership over time are competitive. “Range anxiety”—the fear of running out of juice and no way to refill—is still a factor. New models, such as the 2017 Chevy Bolt, will go more than 200 miles on a single charge, which should go a long way to help. Ultimately, though, as Ghosn has said, the infrastructure needs to catch up with the hope (and the hype) to build consumer confidence.

For AVs, the challenges are similar in some ways, and very different in others. The differences are that AVs will require new regulatory and legal guidelines, and new forms of logistics. In the litigious United States, figuring out liability in car crashes—and these will, of course, still happen—is going to be a doozy. There are thorny ethical issues, too. Here is just one hideous hypothetical: What should an AV do in a situation in which the choice is to hurt a bystander, the occupants of the car, or another car? What kind of principles should be imbedded into the AV’s algorithms?

Moreover, AVs require sophisticated mapping and data analytics to do their thing. Not to belabor the obvious, but the United States is a really big country. As the CEO of Shift, a used car sales service, put it, “private sector innovators will need to work with legislators and their staffs to secure permission to survey roads and impede on daily lives of the citizenry.” And while mapping, say, North America, will be challenging enough, the obstacles will be much greater in other parts of the world.

Finally, as cool and as positive as AVs could be, there are always downsides, and if there is mobilization against them, things could slow down sharply. For example, there are about 3.5 million truck drivers in the United States, and they regard AVs with great suspicion, for obvious reasons. Finn Murphy, a long-haul trucker and author of The Long Haul: A Trucker’s Tales of Life on the Road, notes that the topic of AVs is cropping up in truck stops all over the country.

The similarities, however, could be even more important and of these, the most important is that when it comes to their wheels, Americans kind of like them the way they are. They’re used to the internal combustion engine, and not that eager to change. That was the message at a recent Energy Information Administration conference. The results of a national survey last year by Kelley Blue Book found that—perhaps unsurprisingly—American consumers are not nearly as excited about the car of the future as the experts are.

For EVs, the survey saw growth, but still less than 4 percent of the market by 2023 (or about where it was supposed to have been in 2013). Even among EV owners, the enthusiasm is underwhelming; only 53 percent said they would buy one again (compared to 82 percent for traditional cars); the figure was 31 percent for plug-in electric owners. With prices at the gas pump in the United States still comparatively low, one of the major reasons to go hybrid or electric is less relevant. Considering that the Chevy Bolt is priced at almost $40,000 and Tesla’s forthcoming Model 3 around $35,000—about $10,000 more than a comparable conventional car—there is a ways to go. According to the EIA’s own forecasts, in 2040, gasoline-only vehicles will still account for the vast majority of light-duty passenger car and truck sales.

People would look more closely at EVs if the sticker price came down—52 percent said so. And here’s something that is genuinely surprising: For all the coverage EVs have been getting, when asked to name one, the first two models that the respondents named—the Prius and the Volt—are not, in fact, EVs. My McKinsey colleagues anticipate that uptake of EVs will be faster in richer, denser cities, with strict emissions standards and generous incentives. That sounds right—and that also sounds like a limited market.


When the boss of Europe’s biggest listed oil company says his next car will be electric, it says a lot about the future of fossil fuels.

Royal Dutch Shell Plc responded to the worst oil-price crash in a generation with its $54 billion takeover of BG Group Ltd., betting that demand for natural gas will rise as the world shifts to cleaner-burning fuels. Now Chief Executive Officer Ben Van Beurden says the next thing he’ll buy is a car that doesn’t depend on either oil or gas to run.

Van Beurden will switch from a diesel car to a plug-in Mercedes-Benz S500e in September, a company spokesman said. Chief Financial Officer Jessica Uhl already drives a BMW i3 electric car.

“The whole move to electrify the economy, electrify mobility in places like northwest Europe, in the U.S., even in China, is a good thing,” Van Beurden said in an interview on Bloomberg TV Tuesday. “We need to be at a much higher degree of electric vehicle penetration — or hydrogen vehicles or gas vehicles — if we want to stay within the 2-degrees Celsius outcome.”

The U.K. said Monday it will ban sales of diesel- and gasoline-fueled cars by 2040, two weeks after France announced a similar plan to reduce air pollution and meet targets to keep global warming below 2 degrees Celsius (3.6 degrees Fahrenheit). Carmaker Volvo AB said this month it will manufacture only electric or hybrid vehicles from 2019 onwards.

Peak Demand

Shell reported results Tuesday that beat expectations after cutting costs to adapt to a world of $50-a-barrel oil. The company has adopted “what we call a lower-forever mindset,” Van Beurden said on an earnings conference call.

Changes in automotive technology, the fight against climate change and slowing economic growth in China are dampening the world’s once boundless appetite for crude. Speculation in the energy industry has shifted from so-called peak oil — the idea that consumption will keep rising until the supply of fossil fuels dries up — to peak demand, when reserves considered valuable assets today wind up being left in the ground.

“If policies and innovation really work well, I can see liquids peaking in demand in the early 2030s and maybe oil will peak a little bit earlier if there’s a lot of biofuels coming into the mix as well,” Van Beurden said.





3 Responses to “Intelligent EVs: Sooner or Later?”

  1. Can not wait.

    The only thing I really question re Miller’s article is this:

    So: cheaper to maintain, cheaper to use. But what about the upfront cost? Previously, EVs were expensive. But there are now more than 143 models of EVs either for sale or on the road by 2022, and in five years a high performing all EV car with at least mid level autonomy will cost less than $20,000. Which means you’ll have to pay MORE to own an ICE ( which has an average price of $33,000). Everyone who will do that, raise your hand. Thought so.

    I think [please correct me if I’m wrong] that we are also moving more and more toward cities and multi-unit housing. If this is true, we will be retro-fitting an awful lot of apartment buildings in order for this to happen. [not to mention all the single tenant homes currently without the capacity to retrofit without large bills to increase elec. capacity for this purpose]

    But, maybe this is more of a minor thing that I think it is.

  2. Tom Bates Says:

    Where are you going to get the lithium and cobalt to name two materials for all these electric cars? Cobalt production is under a 100 tons a year and comes from a single area in South America. Lithium production comes from similar restricted areas. You may be able to scale up production and that would most likely raise the price a lot. Without the batteries you cannot build EV’s.

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