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The car business is about to take us all on a wild ride. Autonomous vehicles will challenge industry business models. Electric propulsion will challenge the global economy.
I talked last week about how the current investment and political environment is starting to resemble the Gilded Age of the 1880s-1910s. There is so much innovation going on, and fortunes being made, that it’s like the dawn of mass transportation and information all over again.
This move to electric powertrains in cars, buses and trucks is going to be unstoppable as it makes so much sense, just like the development of the first automobiles. Electric vehicles (EVs) are better for the environment, safer, better for the U.S. trade deficit and EVs are a blast to drive.
Back at the turn of the last century, the growth of the automobile market — against the entrenched interests of the horse and buggy industry — was also front and center. Looking back, we can see that General Motors (GM) and Ford (F) were ultimately big winners due in part to their innovation of new factory, business and financing practices. But there were originally more than 50 competing auto manufacturers who presented propulsion schemes ranging from steam and electricity to gasoline and diesel. None were a lock. And now electric is coming back, and I suspect the transition will deliver gains now similar to what industrialists and investors in the Gilded Age enjoyed.
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| Car companies know autonomous vehicles will bring lower sales. |
That is going to change. Car companies know autonomous vehicles are coming. That will bring lower sales and a new Mobility-as-a-Service business model in which EVs will be sought after.
Veteran venture capitalist Steve Jurvetson told an audience that Uber Chief Exec Travis Kalinick recently told him that in 2020, if Teslas are autonomous, he’d want to buy every single one of them — 500,000 of estimated 2020 production. “I’d want them all,” he said.
That type of enthusiasm is not lost on auto company honchos. They see EVs as their path to MaaS fleet sales. Toyota chief exec Akio Toyoda, is personally overseeing EV expansion. Volkswagen wants EVs to represent 25% of sales by 2025. Ford said it would invest $4.5 billion by 2020.
While the rise of electric cars now seems inevitable, it will have a devastating impact on long-term fossil-fuel demand.
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In February, Bloomberg analysts predicted EVs will reach price parity with internal combustion vehicles by 2022. More important, many of these models will have better performance. Add that to operational advantages and it’s tough to see why most people would opt for anything else. They are fun to drive — featuring terrific acceleration and nimble steering due in part to their lighter weight.
Based on trends and forecasts that take into account MaaS, Bloomberg analysts suggest EVs could create a 2 million barrel/day glut of oil as early as 2023. And that is where the unintended consequences get tricky.
Even Tesla founder Elon Musk concedes political advantages make it difficult to replace fossil fuels as the main source of energy. However, oil prices are governed by margins. A significant longer-term glut would ravage prices, force producers to give up on costly projects and flip the power structure in global politics. It would also wreak havoc with the U.S. petrodollar equation, but we will leave that for another day.
This is a big deal, like identifying the auto industry as an opportunity in 1910. We know electric vehicles are coming. We know why. Now we just have to wait to see if politics will intervene, and how it will affect our investment choices. My guess is that the more innovative and progressive auto parts makers, like Magna Intl (MGA) of Canada, may be a better bet than car makers as they shift production toward higher margin pieces like electric powertrains.
Best wishes,
Jon Markman
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{ 46 comments }
Most of the “electric”power generated in the world is produced from coal. Why do you misinformed hippies keep lying about the environmental impact! I think its smart to have a diversified energy policy, but don’t build it on a lie…
You are misinformed. In the US, coal is important, but declining, in some areas. The Northeast and California has almost none. China is working hard to reduce coal use. Building nukes like crazy. Cars run great on solar and wind power. Cars can be charged when plants are idling at night using power from the grid that is otherwise wasted.
As electric cars age, they produce less emissions because the grid keeps getting cleaner.
As far as misinformed, you might want to look in the mirror. Are you aware how much COAL/Energy is used to MAKE gasoline? I’m not referring to the pollution from burning gasoline/diesel, but rather to drill, pump, REFINE, transport, etc. So even prior to the major overhaul of the grid, EV’s are far and away less dirty. Look up the “volts for oil” video to see what I’m getting at. The large batteries aren’t going to get thrown into landfills either, since the value of the components will drive a huge recycling program. I’ve been around machines shops & restored many gasoline vehicles. Once you test drive one, it becomes obvious that EV’s are going to obsolete gas cars in the not too distant future.
This all sounds interesting and may come true but I doubt it. People just like their gas combustion car. I owned a Nissan Leaf for 3 years and while it was fun to drive, for a while, it was a pain in the butt at times. With a claimed 100 miles per charge I never came close, maybe 80 at best. And since I live in the Northeast with frigid winters I’d get maybe 50 miles per charge. You really have to plan your day because if you run low in power you just can’t stop at a gas station. It takes all night to trickle charge the car’s battery. If you want a higher speed charger figure a few thousand to buy and install it. You also find in the winter you’re running with no heat because heat is a battery killer. Thank God for the heated seats and steering wheel. Biggest minus of them all is you can only use them as a commuter car, you need a second car. I also wonder when those batteries need replacing whats that going to cost. Nissan at the time wouldn’t even give me a price. Personally, I’ve been there, tried it, I’d rather drive my gas car.
You have provided a reality check for the dreamers.
I think Mr. Markman is looking to the future, not the past/
What is the source of electricity for electric cars?
Exactly Ken, and when you add in considerations regarding motor efficiencies; with electric vehicles you have a dual system of inefficiencies, first the inefficiency in engines to generate the power needed to charge those batteries, and second the inefficiencies in the electric motors needed to turn the wheels.
Although there is progress being made in solar and wind power, this progress is horse and buggy when compared to converting the horse and buggy to motorized vehicles. In fact the range that the electric car can travel in a day is more like the range of a horse and buggy than that of a tractor trailer or the family car.
Mine runs on solar power.
although for the most part fossil fuel (especially at night for charging to avoid peak demand) . . . the claim, which I have not been able to verify, is that they remain more efficient then internal combustion engines in each vehicle even when factoring electric power transmission loss – remains to be proven
If I buy an EV it will come from the 8 kw of solar panels on my roof. They are currently yielding a 13% return on my investment.
Solar Panels and the Telsa Powerwall. Those 3 things together – Electric Car, Solar Panels and the ability to store the power generated by the Solar Panels eg the Tesla Powerwall should save people a lot of money and hopefully save the environment as well.
Except solar panels need hydrocarbons in order to be produced. We won’t even go into the disaster than all current battery technology is on the environment.
I have to wonder if Li-ion batteries may represent a greater environmental hazard than petroleum.
Bill Bly is right on the money!
Batteries will deteriorate with age and have less useful life. In colder climates this, as he noted, is a real issue. Battery technology is improving but has a long way to go before EV are commonplace. Car manufacturers do not want to talk about the costs of battery replacement because they do not know. When batteries fail they cannot be discarded as normal waste there is an environmental cost, that has yet to be determined. Who will need to bear this cost? Will the EV cars have a reduced trade-in value to help pay for battery replacement? There are too many unknowns for me to be convinced that the number of EV’s will grow as currently predicted.
I would suggest that the electric vehicle craze could turn into one of the biggest flops since Y2K. Sure, they are fun to drive, just like it is fun to drive a Cadillac, a .Rolls Royce, or to fly first class. Short range, short life, short affordability, and short on markets. Those are very bad fundamentals for a new product to be stacked up against.
EV’s are fine but that will mean an increase in electric generation capacity, more than the increasing population and industry will demand. So are we going to build more fossil fuel plants that may actually be more polluting than the cars they replace? And what about other countries that are committed to coal/oil? Or will the investment in generation go into nuclear power? Nuclear is safe if you don’t build on the cheap. Fukushima was built on the cheap in the wrong place. Chernobal was the victim of a grass fire and getting unit 2 in service before it was finished.
Call me old but in my lifetime it is high hp gas engines for me. Also me driving not a self driver which I think is going nowhere except in large cities. Just give me my NorthStar and LS motors and I will be happy. You can’t beat the sound!
Electric cars will EVENTUALLY prevail on gas cars, no matter what, simply because they are clearly the future.
However………….how long time does EVENTUALLY happen to be?!?
Nobody mentions the environmental impact of the battery manufacturing process either , starting with the mining in countries that don’t pay much attention to the environmental regs . Then you have to produce the power , and transmit it to point of use , both of which are already stressed . Then , do they have a recycling program for lithium ion batteries ?
All of this on top of range and charge time concerns . You can go 300 miles refill in 10 minutes and go another 300 . How does that work with an electric ?
Bill Bly is absolutely correct. The electric car will turn out to be a niche market after the hype wears off and people have to live with all the limitations. There is no way a family could make a cross country trip in one without going nuts. It will become a rich persons toy. The reasons not to drive a gas powered car will disappear as soon as the CO2 scam is fully exposed. All of the unbiased science coming out these last few years has shown that CO2 is not a problem and never has been. We are entering a Solar Minimum where the Earth will get very cold for 15 years or so and then warm back up for 15 years or so. That should end the Global Warming Scam. CO2 is absolutely necessary for plant life and for animal life that require plants. Environmentalist need to look at the entire picture and they will have to as change takes place.
OK Jon, electric cars are a new wave but how is all that electricity going to be created? Right now, electric cars are a 2-stage process. Something has to be burned (solar and wind aren’t generating enough power right now) to power all the electric cars. Where is the prevenient technology to produce electricity that can replace oil and coal? Now there’s a stock to buy!
In New Mexico we could use solar rather than coal, but Solar City won’t install solar panels on flat roofs.
Orrg stock, 25,000 acres of lithium in Nevada
Is priced from the two dollar range down into the $.20 range now. I I have made money trading this stock in the dollar 50 range before. If electric vehicles are going to be the wave of the future this is a good bit now. I own 20,000 shares what do you think? John
John m- Orrg does not come up as a symbol or a company. Would you share the symbol?
While you might end up correct eventually, I wouldn’t count on it soon though. Gas will be affordable for the foreseeable future and I believe most people will stick to gas. I mean for instance my 2015 Kia Soul cost $16,500 cash. The EVO is like double that. You can’t make that kind of money back. We’ve been working on this now for 20+ years and if that’s the best we can do than it’ll be awhile. By the way my gas powered car will go 400+ miles on the highway before I have to fuel, and the next gas station is just around the corner. It will be that way for quite some time yet. Will it change? Yes!
Oh Ken, everybody knows you just plug it into the outlet in the wall and it magically appears. Next thing you know everyone will have a windmill on top of the electric car that powers them for free
Why is it that electric car enthusiasts never follow the energy path back beyond the plug in the wall?
How is all the additional energy that will be needed to run the electric car be produced? Magic!
That will necessarily be produced by power plants that will need more fuel-do u get the point-.
There is no saving energy wise, just transformed.
Then the question–will there be less oil needed?
Thanks,
Happy Holidays!
I’m with the three contributors above. It takes forever to recharge an electric car, I can fill my 400 mile tank at the petrol station in less than a minute. How long until we get batteries that can take a car that kind of distance and recharge in a couple of minutes? And the environmental advantage of electric cars – surely lost in the fact that power station capacity will have to be massively increased because of the demand for electric power to charge batteries. Also as batteries recharge they will steadily lose their miles per charge, my 400 mile tank still takes me 400 miles everytime I fill it up. Pipe dreams without a sensational breakthrough in battery and recharging technology.
Energy efficiency is not in the cards for electric vehicles. A small gas engine can get 30-40% efficiency from converting chemical energy into motion. Just reducing the car size has a big impact for both electrical and mechanical systems alike. A modern electric power plant is 40-50% efficient at best producing electric power – assuming you build new expensive high performance plants. Then you lose around 20% in transmission to a charging station. Then you lose energy in charging. As the batteries age, the losses mount – say to an average of 5%. If the vehicle sits, it loses charge and life both. To preserve the battery a trickle charge is needed during downtime.
Also as the batteries age, the range steadily decreases which is always very limited.
The question of short battery life is another factor. The higher capacity batteries pose real challenges in their toxicity and cost for disposal.- then the high replacement cost hits. Further, you can lay up a fossil fuel car and rest it for weeks at a time and it will start up none the worst for wear.
At that said, there is a niche market for high-density low use transportation and autonomous vehicle transport service has a definite place – just as taxis do now on an expanded scale.. As to oil, petroleum has a huge non-energy contribution to the economy for its fertilizers, lubricants, plastics, synthetic fibers, etc. etc. These are presently largely byproducts and relatively cheap. Their contribution will grow proportionally – and will be reflected in higher living costs. Gasoline will become more and more a byproduct and its price will stabilize.
Further, water is needed to produce more food through both fertilizers and water. Water consumes over 20% of California’s entire energy production just for its transport. The importation of coal-produced electric power from out of State is a dirty little secret. Desalinization is a real power hog. People mist eat, be clothed, etc. That requires energy. Cheap energy.
I absolutely agree that we are in the age of major innovation reflecting the late 19th and early 30th Centuries, but that age also produced massive monopolies and gross widespread inequity in wealth. These in turn produced massive depressions and social distress. The formation of giant monopolies is rearing their ugly heads aided by government crony capitalism with deep pocketed investors who are more than willing to suffer upfront losses for years to an ultimate monopoly when prices soar. Today, those years of losses are made much less painful and shorter with government collusion and massive outright taxpayer subsidies.
The intervention of government in the economy to support monopolies is one of the major challenges of the age producing competing trends in nationalism, Trumpism, and Brexit which seek a better way to benefit all – not just a few.
We live in interesting times.
Good luck operating an EV up here in Canada. You’d use most of your battery power just keeping the interior warm and the windows defrosted.
To Yung. When the word “lie” is part of a post it says more about the poster than the Content. Yes, charts show Coal is by far the largest source at 39%.
But the article is about the rise of EVs. Peak coal production may around the corner while other energy sources are being built more cheaply than the cost of new coal plants. These new sources will feed the grid with power offsetting new demand from EVs.
In short, EVs will increasingly be powered by solar etc.
The City of Las Vegas has just been deemed 100% powered by renewable energy sources and that doesn’t include Coal. The world is changing like Jon says.
Mine is from solar panels on my own roof.
Every time a robot replaces a human we lose an entire family of paid workers.
Well, I for one would not buy an electric car for the reason that Bill Bly has accurately covered. Case closed. Additionally, I would never buy an autonomous car. Trust the car computer to ever changing icy road conditions in the winter? HA! Have the car computer slow a vehicle down to 10 MPH (with no way for a program override by a human) on snow packed or icy roads where I could control the vehicle myself just fine at 30 or 35 MPH. HA! I myself, & humans in general, have quicker reaction times to avoid collisions…like deer. Think a computer could spot a deer’s eyes in a ditch & recognize the hazard?. If a person buys an autonomous car, would the car manufacturer be the party that would have to pay the insurance on it? I mean, if a human would not be ‘in control’ of the vehicle, why should they have to pay for collision, plpd, etc. No thanks. I will keep my gas car & truck. People, take control of your own destiny & resist the Skynet AI – KEEP YOUR HUMANITY!!!
To Razor:
94% of all Vehicle crashes are due to human error. Yes, people exercise judgment but in a defined situation like stop and go driving – ain’t no way you could match a computer in maintaining exact distance from the car ahead.
I have very serious doubts the cost of EV’s is going to drop down to parity with gas vehicles in that short a period of time. I remember reading just around a year ago a press statement from GM stating the goal with the Volt was in the next few years to get to a point where they were only losing around 10 thousand dollars per vehicle sold. Not to mention when these owners have to start replacing the battery packs they are in for a real surprise what the actual ownership cost is!.
Because you can plug in your charger doesn’t mean that where the electricity is produced there is no pollution. It’s just in someone else’s neighborhood. Also, as one energy is changed to another, such as Nat gas to electricity, etc, there is a loss of energy.
ha ha ..bill and jung are like those fellas in 1910..saying ‘i like our horse and buggy, bugger this new fangled car thing. where are they gonna find enough oil to run ’em? my horse eats only 1 bale of hay a day. hardly any cost at all.
with tesla, you are always dumb now..but later: ‘boy he wasn’t that dumb after all’ cheers
Just where are we going to get all the electricity to power these vehicles? I live in nutty
California where the environmentalists are destroying dams and power plants. Our electrical
grids need updating and are being overtaxed now, especially if we have a hot summer.
Unless the batteries have been improved since last I read about them, they are a worse environmental hazard than gas engines could ever be. Sometimes ideas just read better
than they live!
Nutty California leads the US in solar power. Roof top solar power needs no grid upgrade to use or distribute. Batteries can be recycled and the metals reclaimed for about the same cost as mining and refining new metal.We went to the Moon 47 years ago certainly we can get from point A to point B here on Earth without destroying the Planet.
What I am looking for is a plug in hybrid that gets about 55 mpg using gasoline and has an electric range of about 60 miles. Virtually all of my city driving would be covered by the EV and I wouldn’t need a second car for road trips. Hybrids improve mileage by using a highly efficient but low torque Atkinson engine and an electric motor to boost torque along with regenerative braking to conserve energy. My calculations indicate it would need about a 100 HP gas engine, a 60 HP electric motor and about 22 kWh in battery storage.
No one seems to mention the tons of fossil fuels used to mine, refine and manufacture these “high tech” batteries. They don’t just fall off solar trees like so much ripe fruit, and must be recycled because of toxic materials The Prius makes some sense, but can only go five miles on flat land on battery mode because the MNH battery is small, has only 2x the energy density of a car battery, and costs $3000! Why not just use two car batteries for $200 and call it a smart day. Idiocy seems to be the coin of the realm.
Nice try pripro:
Scotland gets 60% of its energy from wind on an average day. Statoil Corp just sold their tar Sands interests and bought wind turbine ocean rights off New York. Bottom line — Fossil fuels are getting more expensive and risky while technology is making alternatives cheaper and cleaner. The Nay Sayers have no Clothes. Our country is great because of the innovators and not the Nay Sayers who accomplish nothing.
For my money the future vehicle will be a fuel cell electric.