The electric car boom is gathering pace, with sales doubling in 2017 to exceed one million for the first time last year. Despite the uncertainty of diffusion rate of the electric vehicles (EVs), the global demand for electric cars is expected to hit new highs in 2018, as China, India and Norway take the lead with new government initiatives. In spite of scepticism, the government of India has been steadfast in its vision of all-electric cars by 2030. On the other hand, as reported by the Bloomberg technology, China has set the target to be the Detroit of electric cars. China accounted for more than half of the one million EVs sold in 2017. To proceed with the ambition, the government of China is targeting seven million vehicles by 2025. Along with the ramping up of wind farms to offer clean energy to power electric cars, China has also secured the possession of key metal deposits in Africa to build batteries. On the backdrop of India's attempt to get relief from highly toxic air pollution in major cities, China's bid to electric car has been the entry opportunity to lead global automobile industry. On the other hand, some developing countries are still busy in planning mega projects starting from establishing mammoth refineries and constructing nationwide oil transmission pipeline for ramping up oil consumption.
Technology progresses as successive waves of ocean, often creating discontinuity. Successive generations of technologies promise better means to get the job done at lower cost than ever before. Taking the advantage of technology progression by making smart investment is the key to accelerate the creation of wealth. But the discontinuity created at the meeting point of the falling edge of incumbent technology wave and ramping up stage of the emerging one, often poses risk in making investment. Such discontinuity also opens the opportunity for aspiring new entrants. The internal combustion engine technology grew over the last century in providing propulsion to many machines, primarily to automobiles. The growth of internal combustion engine has been the driver in creating the demand for petroleum products like octane or diesel. But the growth of electrical drive to power the vehicles from stored energy of battery has been growing as better alternative to this century old workhorse. On the backdrop of continued growth of battery-powered electric vehicles in 2017, The Economist predicted the death of internal combustion engine. Instead of establishing mega facilities to feed this decaying horse over the next 30 to 40 years, smarter option could have been to install electric charging infrastructure to welcome the entry of diffusion of better alternative around the next generation technology-electric vehicles.
As reported by the Economist in 2017, UBS, a bank, reckons the "total cost of ownership" of an electric car will reach parity with that of one run by petrol next year-albeit, at a loss to its manufacturer. It's being reported that today's electric cars, powered by lithium-ion batteries, can do much better. For example, the Chevy Bolt has a range of 383km; on the other hand, Tesla fans recently drove a Model S more than 1,000km on a single charge. There is no denying that there have been many issues starting from charging time of electric batteries to the availability of adequate raw materials to build batteries to power the global fleet of automobiles, but the possibility of the emerging electric car technology has reached an inflection point. At this inflection point, instead of making long-term investment for oil infrastructure having a life span of over 40 to 50 years, the smarter option is to embrace emerging alternatives.
According to a report by Fobres, increasing adoption of electric vehicles threatens oil demand which could plausibly peak before 2030. Although due to Cobalt crisis, there has been some scepticism around such prediction, but the electric vehicle (EV) technology has already crossed the infancy stage. At the ramp-up stage, barriers faced are usually addressed through aggressive R&D investment. To overcome the barrier caused by Cobalt supply, battery and automobile makers alike are already looking for alternate options, requiring far less cobalt than the existing lithium ion batteries. As a result, despite such barriers being faced, technological advances such as the continued decline in battery costs, consumer preferences and environmental policy are driving EV product announcements and R&D commitment. For example, as reported by the Financial Times, German automaker Volkswagen pledged to spend €70bn to electrify 300 car models by 2030. Similarly, General Motors has set out to launch 20 electric car models by 2023. Even Japanese automakers, which are behind the Hydrogen Fuel Cell powered electric vehicles, are also rolling out electric vehicles. According to CNBC reporting, Toyota Motors expanded EV activities with a plan to market more than 10 all-electric vehicle models globally by the early 2020s; and more importantly, the investment to develop their batteries is likely to exceed $13 billion.
Like many other emerging technologies, electric vehicle technology is also facing issues to scale up production, primarily due to cobalt shortage and limited number of charging stations. But, the thrust being given by major automakers and also by some governments is believed to be strong enough to overcome them. Still there may be the question of charging time. If this factor remains the major barrier to the growth of EVs, Japanese makers are developing the alternate technology of hydrogen powered fuel cell technology. Whether the world drives automobiles using battery or fuel cell, the days of internal combustion engine along with oil economy are virtually numbered. Scepticism could still be out there about the net effect of EVs or Hydrogen fuel cells on environment, as mostly burning fossil fuel generates the electricity used to power batteries or to produce hydrogen. But the growth of renewable energy, particularly the progression of wind technology, is opening the opportunity to make electric vehicles be completely powered by clean energy.
There could also be a question of innovation diffusion lead-time. Often it takes decades for innovation around advanced technologies to reach developing or least developed countries. But, automobiles, whether powered by electric energy or oil, are all produced by automakers of advanced countries. Once they ease the production of gasoline-powered vehicles, only option for developing countries will be to import electric vehicles, reducing lead-time to virtually zero.
In developing countries, often mega oil infrastructure is financed by the state-owned companies or large private sector groups having significant bearing on public policy. At this inflection point of technology change, multi-billion dollar investment made for developing infrastructure to meet domestic oil consumption runs the risk of running out of demand before the expiry of the life span of these facilities. The development of those facilities by the government and also by powerful private investors also poses the threat of policy twisting in slowing down the diffusion of cleaner as well as cheaper technology alternatives--throttling the growth of those countries.
M. Rokonuzzaman is an academic, researcher and activist: Technology, Innovation and Policy.
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