The Beginning of the End
The rise of Tesla resurrected the electric car. From producing a novelty electric roadster in 2008, Tesla has become the world’s most valuable car brand in just 12 years. What started as a ridiculed start-up, declared ‘destined to fail’ by the experts, and run by people who knew nothing about building cars it has now shaken the automotive world to its core.
The success of Elon Musk’s Tesla at first didn’t worry the ICE car makers, they foresaw a near-endless future for gas cars. That has all changed. The electric car has created a revolution which is increasingly accelerating the end of the internal combustion engine. With the clock running rapidly down to climate disaster and governments scurrying to action, the transition to EVs has been catapulted by ICE bans announced by countries and cities across the globe. Like the smoking bans introduced first in Ireland, it is quickly gathering pace and spreading across the world. The writing is on the wall for internal combustion, ICE cars are in the departure lounge.
Most manufactures have begun the transition to electric in a late and desperate race to avoid becoming the next Blackberry or Nokia to Tesla’s ‘iPhone’. OEMs were sleeping at the wheel and Tesla was virtually unchallenged until now. Until very recently, the existing car manufacturer’s first EV attempts at competition were mutton dressed as lambs. The only way they will survive the next decade is to create separate stand-alone EV units, new brands and wind down the ultimately bankrupt legacy ICE businesses.
Research and development has all but stopped for ICE. In September 2019, Daimler and VW declared an end to developing the next generation of internal combustion engines. The change will be massive for the industries that supply and maintain ICE vehicle production lines. There are clear indicators that the age of ICE is near dead and that the revolution is happening faster than most people are aware.
Nearly all the major OEMs are investing billions of dollars in electric vehicles. Ford, for example, announced an $11 billion plan for up to 40 EV models by 2022. The OEMs are waking up but too is the battery industry. The cost of battery production has been consistently dropping and with new production facilities, like Tesla ‘gigafactories’, worldwide supply chains are being established.
A huge variety of new charging infrastructure projects are underway and planned to eliminate ‘range anxiety’ and hasten the consumer’s transition. The cost of electric charging versus gasoline is lower and the total cost of ownership of an EV is now (as of 2021) on par and quickly becoming lower than owning an ICE car.
Research and development on new battery technologies like solid-state, faster charging times and longer ranges will quickly overtake a century of internal combustion innovation. Electric cars are also more reliable. Fewer moving parts need replacement and servicing. Batteries last a long time, cover a lot of miles and do not degrade anywhere as quickly as some of the misinformation out there suggests.
Electric cars now also have a better residual value over their ICE counterparts. With the coming ICE bans, a deluge of new electric models coming on the market and better ownership economics. consumers will shift en masse by 2025. This will further accelerate the depreciation of ICE cars with a likely value collapse and a possible glut of unsellable used ICE metal after 2025. Finally, the driving experience is way better in an electric car according to surveys – 91% of EV drivers in the UK for example say they would never go back. That number is 82% for US drivers, according to a January 2021 poll by JD Power.
In 2020, Europeans bought more EVs than the previously loved diesel car according to JATO Dynamics. Existing car plants, supply chains and workers now face an uncertain future. In early 2021, General Motors announced a strategic decision to phase out ICE car production and only make electric by 2035. Ending a century of ICE production, unfortunately, casts a shadow on the future of GM’s 160,000 workers. ICE manufacturing is mostly about the batteries; the need for components like clutches, cooling systems, gearboxes and pumps are obsolete and as the EV revolution gathers pace these jobs could become obsolete quicker than workers may expect.
