The EV Revolution Is Happening Faster Than Expected
Don’t believe commonly repeated anti-hype, nor the praised but far too timid aspirations of companies like Lyft. Over a year ago, I wrote an article predicting the transition happening around 2025. The EV revolution is happening faster than I expected in that article, and the next 5 years will show a dramatic shift. What we saw in Europe before Corona changed the market into FUBAR was amazing. Some countries saw their EV market share go up 4 or 6 fold (Italy in January, for example).
In 2025, the fully electric (BEV) versions of most vehicle models will be cheaper than the fossil fuel vehicle (FFV) versions. We see now the first examples of this development with the Peugeot 208 and e-208, the MG ZS and MG ZS EV (only for sale in the UK), and the 800 pound gorilla in the room, the VW ID.3 and VW Golf. In 2020, the electric versions have higher list prices but lower TCO (total cost of ownership) if you are a frequent driver. However, BEV list prices are declining and FFV driving costs are rising. So, the question that is arriving is: how long will people pay a premium for an inferior product?
It is not just about the price mechanism, though. It is also social peer pressure and experience with BEVs, besides your kids being fans of Greta Thunberg.
In Europe, we see early majority buyers in a number of market segments. Late majority buyers will appear in 2022, and laggards will start buying BEVs in 2023. Not in all market segments, but in enough to have an influence.
Fleet conversion will still probably take 20–25 years, since used car buyers will convert later and for a while will have the choice between very cheap used fossil fuel vehicles or higher priced battery electrics. Even at a 100% market share for BEVs, new cars replace only 4% of the fleet each year.
But the bigger, more immediate issue is the new-car market. How are new-car buyers going to spend their hard-earned money in the coming few years? Do they buy a fossil fuel vehicle and get ridiculed by family, friends, and colleagues? Or do they buy the cheaper and better product with a battery and no tailpipe?
Charging will not be a problem. Installing a home charger in a driveway or garage is about 2% of the price of the car. Curbside chargers are between 5% to 10%. With demand and public pressure, they will appear like mushrooms in the fall.
Regulations and subsidies don’t create demand. Regulations push models to market. Subsidies make BEVs more affordable. Demand is interest and longing turned into a spending decision. And demand increases as the tech gets more competitive. Many buyers still pay a premium for driving electric. Current demand is based on people who are mostly willing to pay a premium. Next is the group that likes the idea but is not going to pay a premium. You will see them beginning in 2021 and they will be completely switched over in 2024.
Last is the group that switches when fossil fuel vehicles more clearly become too expensive. The first portion of them in 2023, and the rest in the second half of the decade. But this is a small portion of the laggards.
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