At the BloombergNEF Summit in San Francisco, California last week, BNEF’s Colin McKerracher made a case for electric vehicles finally reaching the “end of the beginning” as businesses and consumers recognize and begin to embrace electric vehicles en masse.
McKerracher closed out his talk with a summary of the five “killer apps” that will usher in the age of electrified transit. These market segments represent the most lucrative, low-hanging fruit for electric vehicle adoption around the world. Many of these five trends are already playing out in select geographies around the world, but looking ahead, they are primed to usher in the mass adoption of electric vehicles.
Two- & Three-Wheeled Vehicles
The lower capital cost and more accessible economics have helped two- and three-wheeled vehicles to transition to electric much faster than their four-wheeled counterparts. Of the 70 million two- and three-wheeled vehicles sold around the world each year, 30% are already electric. When in Shenzhen in 2018, I found the change to be in full effect. The silence was deafening as fleets of fully electric scooters zipped around the city streets with the sole combustion scooter in our 3-day adventure standing out like a sore thumb. It was a stark contrast to the streets of Bali in Indonesia, where combustion scooters flood the otherwise placid jungle paradise with obnoxious sound and pollution.
The rapid transition is being driven by regulation aimed at phasing out the noisy combustion scooters, motorcycles, and tuk tuks that have flooded streets across southeast Asia in the last few decades as fleets of bicyclists sought newer, faster ways of getting around. Cities like Shenzhen have already achieved nearly a complete transition to electrified transit, including with two- and three-wheeled vehicles.
Battery swapping is also more practical with two-wheeled electric vehicles as smaller, lower cost batteries make swapping more practical and affordable. A scooter battery can easily be swapped out or removed for recharging by a single person, enabling battery swap stations that take about as much time as ordering a latte at the local coffee shop.
Municipal Electric Buses
The electric bus market is taking off in areas, with new transit installations with China again leading the way. Driven by a massive push into establishing new public transit routes, China’s leadership in electric bus adoption has been fueled by a healthy local team of electric bus manufacturers. Shenzhen, China-based BYD led the push to fully electrify Shenzhen’s more than 16,000 buses and numerous other cities in China have followed suit. The rapid conversion of the bus fleet was followed close behind by a rapid transition to a fully electric taxi fleet, and more.
China is leading the globe in adoption of electric buses followed by a recent uptick of adoption in Europe as transit authorities move beyond early pilots into full scale deployments. The US is seriously lagging with dismal adoption rates of electric vehicles to date, but BNEF expects this to change in the coming months.
Digital Ride Hailing
Services like Uber, Didi, and Lyft have disrupted traffic patterns in cities around the world as travelers increasingly lean on the services to get around instead of more traditional taxis. The massive surge in digital ride-hailing pins the resulting congestion and emissions onto the global brands, commanding a response to clean up the emissions of fleets not owned by the companies themselves.
Uber has created additional incentives for drivers of hybrid and fully electric vehicles, even launching the hybrid/plug-in hybrid/fully electric uberGREEN service in Paris and Lisbon. The company is also running 9 additional pilots in select US cities to explore additional options for reducing its carbon footprint through increased ride-pooling (more than 1 passenger per vehicle), vehicle electrification, and autonomous driving.
McKerracher and BloombergNEF see Digital Ride Hailing services like Uber ushering in a wave of electric vehicle adoption. This will be driven directly by services incentivizing drivers to switch to “electrified” vehicles and through riders experiencing an electric vehicle through these services. Autonomous driving is an exciting vector for Digital Ride Hailing, whether it be through Uber, Didi, Lyft, or the infamous Tesla Network of autonomous vehicles. That race is still on, but it is clear that the swell into vehicle electrification in these services will support the broader adoption of fully electric vehicles.
Last Mile Delivery
Last mile delivery is a key area for emission reductions, and delivery companies from the oldest to the newest are rushing forward into vehicle electrification and it’s not even saving the planet that has them excited. For fleets, the ability to simply run the numbers to determine the lowest cost to operate makes electric vehicles an obvious choice.
UPS ordered 10,000 electric delivery vans from Arrival, and newcomer Amazon, not to be outdone, ordered a staggering 100,000 delivery vehicles spread across 3 different vehicle sizes from Rivian. Amazon took the push one step further, investing a significant chunk of coin into a company that has yet to produce a single production vehicle. Not that it means anything in today’s age of new upstart companies disrupting a new sector seemingly every other week, but it does speak to the urgency with which companies are pursuing the gold-lined cloud that is fully electric last mile package delivery.
Urban parcel delivery is also being transformed right before our eyes with cities like New York City trialing e-bikes for last mile delivery. Companies in that space are also responding with innovative new electric bikes built for the rigors of daily use and heavy loads, like Rad Power Bikes’ RadBurro.
The Two Car Family
Households with two vehicles are a lucrative opportunity for the mass adoption of electric vehicles. In many such households, one vehicle is the family car while the second vehicle is relegated to commuting duty and errands around town. That second vehicle is a juicy target for electrification and has opened the door for many households around the world to add an electric vehicle to the family.
Here in Southern California, my wife and I went this route, augmenting our Toyota Prius with our first fully electric vehicle in 2014. The 2014 Mercedes Benz B-Class Electric Drive boasted a meager 87 miles of range per charge and over nearly 6 years of ownership, we have found that to be more than sufficient. The Toyota Prius, on the other hand, was traded up to a Nissan LEAF, a Model S, and most recently, a Tesla Model 3.
McKerracher said that around 70 million households in the US have 2 cars or more, presenting a juicy target for millions across the country to adopt an electric vehicle today with zero compromises.
On the Launchpad
The world has moved from questioning if electric vehicles will penetrate the mainstream automotive market to asking about when the inevitable transition will happen.
McKerracher did a great job of unpacking not just the why behind the electric vehicle revolution, but the how. Historically, disruptive technologies do not simply move into an entire market to smother it overnight with new products or services. They find niches with clear wins and grow there first. These early wins seed higher volume production, more R&D which fuels lower and lower costs. Eventually, the cycle becomes self-sustaining as the market adjusts to the new normal.
Cars with zero tailpipe emissions, much lower noise, and that require less maintenance sounds good to me. On top of that, they are just plain fun to drive. Count me in.
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