Yesterday I came across a debate on a left-of-center political blog that sounded surprisingly similar to what I’ve seen in auto industry media. A number of commentators were quite skeptical about a rapid transition to electric vehicles — and Tesla leading the charge. Let’s briefly discuss.
History suggests that a rapid shift is possible
I get the skepticism. There are many hurdles to overcome even in the unlikely scenario that federal policies consistently support an EV shift over the next decade. That said, three factors would seem to work in favor of a shift that is more rather than less rapid.
First, the U.S. auto industry can be so faddish that it has often displayed lemming-like behavior. Once the momentum gets going on a particular type of product, just about everybody piles on . . . even when growth projections are pure blue sky. This has been a key factor in the boom-and-bust cycles of the industry.
Second, the birth of the auto industry is a good example of how quickly a techno-scientific innovation can transform the country. Between 1910 and 1920 the U.S. shifted from horses to automobiles, according to Scientific American (Schlenoff, 2017). That’s a pretty extraordinary amount of societal change for one decade.
The shift to EVs will obviously require a fair number of infrastructure changes, such as the development of a comprehensive network of charging stations. However, one could argue that those changes are less daunting than what was needed a century ago to make the automobile more viable than the horse.
Also see ‘It’s a big deal that Ford and GM knew about climate change in 1960s’
Third, climate change science demands a rapid response. “Our collective failure to act early and hard on climate change means we now must deliver deep cuts to emissions,” said Inger Anderson, executive director of the U.N. Environment Program. “We need to catch up on the years in which we procrastinated” (Dennis, 2019).
Transportation generates the largest amount of greenhouse gases in the U.S — roughly 28 percent. Perhaps even more importantly, “Between 1990 and 2018, GHG emissions in the transportation sector increased more in absolute terms than any other sector,” according to the Environmental Protection Agency (2020). The popularity of gas-guzzling SUVs has been a contributing factor.
“The coming decade will determine whether humanity retains a fighting chance to limit warming to 1.5°C or even 2°C,” states a World Economic Forum report (2020). “The later action is taken, the more dire our position will become.”
The Environmental Protection Agency (2021) recently revived a climate change indicators project shelved by the Trump administration that documents current impacts, which include bigger wildfires, more frequent heatwaves and earlier pollen outbreaks (Flavelle, 2021).
An EV shift could have many twists and turns
All that said, I wouldn’t be surprised if takes longer for the country to shift to mostly EV passenger cars than its evangelists propose – but not as long as assumed by auto industry critics such as Keith Crain (2019a, 2019b, 2019c; go here for our take).
For example, Washington state recently passed legislation that could ban the sale of all gas-powered vehicles by 2030 — but with enough of a caveat that the deadline could slip (Eisenstein, 2021).
Also see ‘Automotive News backtracks on shift to electric vehicles’
Deadline slippage — and exceptions to a ban — strike me as inevitable both from technical and political standpoints as states and nations come up against implementation challenges. Along the way, I suspect that proposed bans could become a big enough policy issue that they help determine the outcome of major elections. Crain (2019c) may be right that “as time goes on, we will see the battle get bloodier.”
On the other hand, I would not bet that an EV shift can be unplugged if the Republicans regain control of the federal government in 2024. By that point too many other nations will have imposed regulations on the auto industry — now a fundamentally global enterprise — to change course. The Republicans could slow things down, but it is hard to see how they could stop a shift to EVs.
Will Tesla get crushed by the legacy automakers?
It’s interesting to see how polarized this topic can get even outside of auto industry circles. That seems to be partly because Tesla head Elon Musk is so controversial. However, even fairly liberal Democrats have internalized longstanding assumptions that the auto industry has about itself. One assumption is that the bigger the fish, the more likely it will survive — and that Tesla is a small fry compared to the likes of Volkswagen, General Motors or Ford (at least in terms of total automotive production capacity).
In the long run Tesla could get devoured by a larger fish. However, the specifics of the situation also matter. In the early-60s American Motors managed to initially hold its ground against the Big Three’s assault on the compact car market. In the late-60s and early-70s the original VW Beetle still sold well for a number of years after its biggest competitors had come out with measurably better products. More recently, Toyota’s early lead with hybrids helped to protect it from being swamped by newcomers. So far Tesla has had a similar experience. The moral to this story: Branding matters.
Also see ‘Elon Musk’s infamous interview: What the auto media missed’
Conversations about Tesla’s long-term viability can take on a white/black tone whereby the automaker either becomes a big-time producer or gets swallowed whole. American automotive history suggests a third option: That Tesla settles into the role of a smaller, niche player along the lines of a Mazda, Subaru or even BMW.
Musk’s ambitious personality could work against Tesla settling into a niche role — at least as long as he is in charge. However, that seems like a reasonable bet for Rivian, whose growth projections have been more cautious than Tesla’s (go here for further discussion).
I have sketched some general parameters, but it still seems too early to tell with any granularity how fast an EV shift will occur — and what role Tesla will play in it. Peter DeLorenzo (2021) has quite rightly cautioned about the danger of “Assumption Disease.” Assuming that today’s auto industry “is any way, shape, or form predictable is a fool’s errand that inevitably leads to disastrous consequences.”
NOTES:
The discussion I refer to at the beginning of this story is from a private venue so links are not provided.
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RE:SOURCES
- Crain, Keith; 2019a. “EV fever: I just don’t get it.” Automotive News (subscription required). Posted March 11; accessed May 11, 2021.
- ——; 2019b. “When is enough, enough?” Automotive News (subscription required). Posted Aug. 19; accessed May 11, 2021.
- ——; 2019b. “Headed in different directions.” Automotive News (subscription required). Posted Sept. 15; accessed May 11, 2021.
- DeLorenzo, Peter; 2021. “The Dreaded Assumption Disease.” Auto Extremist. Posted May 4; accessed May 11.
- Dennis, Brady; 2019. “In bleak report, U.N. says drastic action is only way to avoid worst effects of climate change.” Washington Post. Posted November 26; accessed December 6, 2020.
- Eisenstein, Paul A.; 2021. “Washington State Banning Sale of Gas, Diesel Vehicles After 2030.” The Detroit Bureau. Posted April 19; accessed May 11.
- Environmental Protection Agency, 2020. “Carbon Pollution from Transportation.” Accessed December 6, 2020.
- ——; 2021. “Climate Change Indicators in the United States.” Accessed May 12.
- Flavelle, Christopher; 2021. “Climate Change Is Making Big Problems Bigger.” The New York Times. Posted May 12; accessed May 12.
- Schlenoff, Daniel C.; 2017. “The Motor Vehicle, 1917.” Scientific American. Posted Jan. 1; accessed May 11, 2021.
Scientific American’s 1910 to 1920 study from horses to automobiles is intriguing but not an apples-to-apples comparison. Horses are messy, temperamental and generally high maintenance. Even though any 1910s automobile was crude by today’s standards it was still a welcome change.
Today’s EV’s are not a significant change from the ICE for an EV to take over within a decade. On the other hand, if you roll out an EV equivalent of the Model T I bet that would be a game changer.
Steve, nice article. DeLorenzo’s caution notwithstanding, I think Tesla’s anemic EBIT was entirely predictable. EVs of the type that it and the industry are pursuing aren’t ready to be stand-alone profitable. What had been Tesla’s big advantage… that it is not an old-line car company, might become its biggest weakness. Without profitable I/C pick-ups and SUVs to use the EVs for GHG offsets, there is no EV business case. Until solid-state batteries come online, expect Musk to go through several pairs of dancing shoes.