Economics is Causing this shift, not Guilt
The common image of an electric vehicle in the past was a quirky, if not even downright ugly, limited range vehicle and generally purchased with the mindset, it was a step towards saving the environment. This wasn’t far off the mark only a decade ago but the reality is quite different today. Today the production car with the highest acceleration ever is electric, with a 0 - 100 km/hr in 2.1 seconds, the range is exceeding 600 km, will seat 5 people and the style will match any performance sports car. Buyers no longer have to pick an inferior car if they want to go electric.
The reason electric cars (EVs) are becoming more economical is simplicity. An internal combustion engine typically has up to a 100 times more moving parts than its electric equivalent. An EV just stores energy (taken from the grid) and feeds it to a motor which spins the wheels, while a diesel/petrol car has to lug around a mini power plant, converting fossil fuels to energy first.
So what’s keeping EVs from being cheaper today? Batteries. They are the most expensive part of an electric car by far. The most popular EV of 2020, the Tesla model 3, has a battery pack size of 54kwh (relatively small), estimated to cost roughly 6000 euro. At higher price points, EV’s can compete quite well with cars of similar performance and quality since the battery cost makes up a smaller portion of the total car cost. Moving into the 25,000 to 35,000 euro range, it becomes much harder to compete since now the batteries make up a large portion of the price.
The price of batteries isn’t static however, they’re following a declining cost curve. The graph below shows the cost per kilowatt hour since 2010.
A continuation of this trend indicates that by 2023 a point of cost parity in the mentioned 25 to 35k will be achieved. By 2025 new electric cars in this range should be considerably cheaper than their ICE counterparts, not even including the fuel savings with an EV.
In 2020, 3.1m out of a total 64 million autos sold were electric, with total sales down due to COVID. Some aggressive estimates suggest that annual electric vehicles sales could total 40 million units in 2025. While this number seems unrealistic, if electric cars are in fact cheaper than ICE vehicles at this point, it has to be assumed that there will be demand for this number of EVs.
A more realistic miss of this number would be due to manufacturers not being able to build this many EVs. There is valid concerns that the raw materials needed for battery manufacturing at this scale might not have ramped up to meet the demand. After all, lithium ion battery production has grown more than ten times in the last decade, mainly due to EV growth, and it will need to do the same again. However, delays in growth due to raw material shortages are likely to be temporary at most. There is no shortage of the needed materials in the ground, but new mines will need to be opened. If the shortages grows to high enough levels, there could also be government intervention to incentivise new mining, due to increased pressure to accelerate the transition to electric.
Transferrable skills and differences
It’s important to keep in mind that the total vehicles on the road today stands at roughly 1.5 billion, so even the extreme case of 40 million per year is still just replacing 2.6% of the fleet per year. Assuming most new cars sold in 2030 are electric, an aggressive estimate would be 20% of the world’s fleet as EVs. While many service areas are similar regardless of whether a car has a battery or internal combustion engine, considerably different know how will be needed to service the drivetrain of an EV. For individuals in the auto service industry, this is important to think about. It may be several years before the know how to service electric vehicles is critical, the opportunity for mechanics to distinguish themselves as capable of catering to electric vehicles has begun.
Parts Supply Chain
With estimates varying between 30 - 40% fewer parts required for EV maintenance, this will have a knock-on effect for the motor factors sector. Speaking to Declan Ennis of Top Part Motor Factors, he said this was an area they are closely monitoring. While it is early days yet, he agreed that change was inevitable and could be faster than is generally expected. However, he is optimistic about the future and is confident they will adapt to where the market will go, whether that is going to be electric or hydrogen, or both. As with every change, there will be winners and losers. Declan believes training and up-skilling for their clients in the trade will be key. Just as in recent times with the advent of diagnostics, training and investment was critical for mechanics and garages to survive and flourish in a changing environment.
Also he believes that European legislation will ensure independent garages are protected from being sidelined from the right to train and service for the vehicles of the future, just as European Block Exemption Regulation gave the right to independent garages to service any make or model of vehicle provided OE quality parts are used.