The world has begun a rapid switch to electric vehicles. In the first half of this year, worldwide sales were up 57 per cent to 285,000, despite low oil prices, and there are now more than 1m electric cars on the world’s roads for the first time ever.
Last February, Bloomberg New Energy Finance (BNEF) forecast that electric vehicles would account for 35 per cent of new car sales by 2040, and perhaps more under certain scenarios.
The reason for this bullishness is not just that battery costs are plummeting – down 65 per cent in the past five years – it is also that electric vehicles outperform internal combustion cars in so many key areas. They drive more smoothly and accelerate better; they can be charged without a trip to the petrol station; they require less maintenance; they help solve air quality problems; and they increase the autonomy of oil-importing countries.
The rapid uptake of electric vehicles has given established car companies a huge shock. Tesla, the upstart technological leader, expected to produce 85,000 vehicles this year, has a market value of $32bn.
The incumbent car companies are racing to adjust their strategies, putting electric vehicles at their heart. Volkswagen, still reeling from the “Dieselgate” scandal, is intending to invest $11.2bn over the next decade to push electric vehicles to 25 per cent of its sales.
But it’s not only the car companies which will feel the brunt of the electric vehicle earthquake. Here are 10 other sectors which will be profoundly affected:
1. Switching from internal combustion to electric drive chains will have dramatic implications for the entire supply chain, which employs 12m people in Europe alone. Manufacturers of gearboxes, and fuel management and exhaust systems will be hard hit, as will thousands of subcontractors, while producers of batteries, software and sensors will benefit.
2. Demand for battery chemicals – in particular lithium for the foreseeable future – will soar, as will demand for rare earths, needed in modern motors and electrical components. The use of steel will decline, as manufacturers strive to counteract battery weight, while the use of resins, composite materials and aerogels will increase.
3. Electric vehicles have vastly reduced maintenance needs and most tuning can be done via software updates. Meanwhile, autonomous driving software will dramatically reduce accidents. With workshop time almost eliminated, dealerships will be replaced by city-centre showrooms.
4. Electric vehicles will add to global annual electricity demand. But it’s not just about megawatt hours: vehicles can be charged when solar and wind energy are generating strongly, and discharge back into the grid when the network is short of capacity. Second-hand electric vehicle batteries could be used for stationary storage, further improving the economics of intermittent renewables.
5. With oil investment down in the aftermath of the 2014 oil price crash, the orthodox view is that prices will eventually soar again. Electric vehicles will reduce the growth in oil demand, however, and may even reverse it, suppressing prices for the long term. Expect more downsizing and consolidation in the oil sector and more pain among oil-exporting nations.
6. Electric vehicle owners want to be able to charge their cars on-street, at home, at the office, at the shopping centre or on any major road or motorway. That’s a lot of charging stations that need building. The construction industry will be a big beneficiary, as will the power equipment sector. Meanwhile, conventional urban petrol stations will continue to shut.
7. Many formerly fashionable boulevards in older cities are blighted by fast traffic, road noise and air pollution. Could car-sharing, electric vehicles and digital transport services help us to reclaim our high streets, unlocking vast real estate value? Or will driverless vehicles let us make even longer commutes?
8. There are 200m electric bikes in China, and their use is spreading. We are already seeing electric mopeds, motor cycles, delivery vans, motor boats, lawnmowers, snowmobiles, even ferries. Tesla, Mercedes and others are working on designs for heavy-duty trucks. Bertrand Piccard, who has just flown around the world in an experimental solar airplane, thinks we’ll see 50-seater electric aircraft.
9. The transportation sector is producing more and more data, whether from vehicle telematics and sensors, or service data released by public transport providers (a trend led by TfL). All of it needs to be moved around, stored, secured from hackers and mined – a huge opportunity for software and telecoms companies.
10. Treasuries too will feel the pain, and not just in oil-producing nations. In Europe, petrol and diesel provide up to 7 per cent of government tax receipts. In addition, clean energy and transportation require much more up-front investment than conventional technologies, so any major shift in their direction will require new pools of long-term capital at a scale which may drive up interest rates.
No one knows for sure how quickly the shift to electric and digital transportation will play out. Two things appear to be clear: it is happening, and no part of the global economy will remain unaffected.