Volvo became the first major auto company to announce the phase out of the internal-combustion engine from its lineup. The Chinese-owned Swedish car company announced on July 5 that every car it builds beginning in 2019 will have some sort of electric motor, "marking the historic end of cars that only have an internal combustion engine (ICE) and placing electrification at the core of its future business," the company said in a press release.
"This is about the customer," HÃ¥kan Samuelsson, president and CEO, said in a statement. "People increasingly demand electrified cars and we want to respond to our customers' current and future needs. You can now pick and choose whichever electrified Volvo you wish." Volvo's entire lineup will either be fully electric or hybrid-electric by 2019.
Volvo laid down a marker, becoming the first company to announce the beginning of the end of gasoline and diesel-powered cars.
The timing of the decision is also notable, since it comes in the same week that Tesla announced that it would begin shipping its highly-anticipated Model 3 this week, with production slated to ramp up by the end of the year. The Model 3 is Tesla's answer for a mass market car, a $35,000 fully-electric vehicle that is has been hyped as the car that will help drive the EV market forward.
But as the Volvo announcement notes, Tesla won't be the only game in town. Volvo represents "the hard-reality case that Tesla will face intense competition by next decade from legacy [auto makers] expanding their electric options," Barclays auto analyst Brian Johnson wrote in a research note to clients. "Tesla may have a lead in battery costs," he said, but the long-established major carmakers have "scale advantages" that will allow them to catch up quickly, and perhaps even overtake Tesla.
Tesla could still be on track to lead the EV market in the U.S. According to Bloomberg New Energy Finance (BNEF), Tesla will sell more than 700,000 vehicles cumulatively through 2021, more than its competitors.
But the bottom line is that with the major automakers shifting towards hybrids and electric vehicles, making major investments in new models, the competition will lead to improvements and further cost declines. While they battle it out, the top beneficiary will be consumers, who will find EVs increasingly affordable.
Related: Saudis Refuse To Relinquish Grip On Key Asian Market
BNEF estimates in a new report that not only will EVs be more affordable than the competing internal-combustion engine over their full lifecycle, but falling battery costs will put them at cost parity or better with conventional vehicles by 2025-2029. The upfront cost is an enormous barrier to EVs, which are still significantly more expensive than traditional gasoline-fueled vehicles, even though they tend to be cheaper over their lifecycle.
But EV sales are set to rise quickly. Global EV sales will jump from 700,000 in 2016 to 3 million by 2021, which will be equivalent to 5 percent of the European light-duty car market and 4 percent in the U.S. and China.
However, that is just the beginning. By the second half of the 2020s, the sticker price for EVs could drop below those of conventional vehicles. That is when EVs really start to steal market share away from gasoline and diesel-powered vehicles in a big way. By 2040, BNEF estimates, EVs will capture the majority of car sales worldwide, a conclusion that has surprised even BNEF's own analysts. "The central finding of the research is that the EV revolution is going to hit the car market even harder and faster than BNEF predicted a year ago," the report concludes.
In its previous forecast, BNEF projected that EVs would make up 35 percent of all new light-duty vehicles sold by 2040. But because lithium-ion batteries are becoming cheaper at a faster rate than expected, BNEF now says that EVs will account for 54 percent of all new light-duty vehicles by that date. EVs will account for 67 percent of sales in Europe, 58 percent in the U.S., and 51 percent in China.
As the IEA noted earlier this week, there is a lot more to oil demand than passenger vehicles. Heavy-duty vehicles will add substantially to crude oil consumption in the decades to come without big changes to policy. That will be a much more difficult sector to electrify.
However, the implications of an EV revolution happening much quicker than expected are hard to overstate. BNEF says that EVs will erase 8 million barrels per day (mb/d) of crude oil demand by 2040, while also adding 5 percent to global electricity demand.
A reduction of 8 mb/d is a colossal threat to the oil industry.
By Nick Cunningham of Oilprice.com
More Top Reads From Oilprice.com:
Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. More
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Comments
I don't understand this statement. If 3 million sales are equivalent to 5 percent of the Euro car market, that would mean the Euro car market is 60 million sales a year. I don't think it's anywhere near that much. Maybe a fourth of that, present day. I don't think auto sales will quadruple in Europe in 5 years.
Nope..:
Krebs said Autotrader anticipates sales of new pickup trucks will rise to 13 percent of all new vehicle sales for 2017, with compact and midsize SUV's being the fastest growing segments.
"In contrast," she said, "the entire category of EVs, hybrids, plug-in hybrids, etc. is under 3 percent of all new vehicle sales. It has been shrinking, not growing, even before gas prices dropped. It is the most heavily discounted (biggest incentives) segment with the lowest resale values. If the tax credits go away, the segment is in even more trouble."
http://www.cnbc.com/2017/04/17/demand-for-electric-vehicles-bucks-low-gas-prices-says-aaa.html
1) Look into e.g. UK registration numbers of cars. Diesel cars are down 10% year over year, BEVs are have enormous growth. Norway is at 42% BEVs for new registration. This not happening in the 2020s - this is happening now. Always remember that in this saturated car market all it takes to destroy demand is for customers to postpone a purchase decision.
2) Your headline is way off: Firstly, Volvo has only issued a statement to the press - no cars are delivered yet. And the argument that traditional car makers will dominate can be heard since 2012 with the introduction of the Model S. That has not happened to date - I'm still waiting for that much promised "Tesla Killer" to be available. All cars from the Cadillac ELR, the R8 eTron, the various Audis, VWs etc. have not been able to "kill" much and either never arrived in the market place or are gone today.
Tesla is a huge risk. However, if they follow through and deliver the 700k cars a year, they would be bigger than Volvo today: Volvo only makes some 500k to 600k cars a year.
In September, Tesla will announce its Semi. This will be heavy duty, long distance, and electric torque. The Semi will use the same 300 kW drive unit (motor, inverter, and gear box) as the Model 3. This drive unit is built for over 1 million miles of service. The difference between the Model 3 drive train and the Semi is that the Semi will use about 3 drive units and have a battery that is 10x the size. But underneath it is all the same technology.
There is no gap between light duty EVs and heavy duty EVs. Indeed, heavy duty EVs become cost competitive before light duty EVs do. So EVs are likely to dominate the HDV markets before they dominate the LDV markets.
Most energy analysts including the IEA get this backwards. And the oil industry is severely misled by underestimating HD EVs.
1. Tesla has already been taking sales from Volvo and others. Volvo US sales down 7% YTD.
2. With the Model 3, Tesla becomes an existential threat to Volvo, at least in the US.
3. Assuming Tesla achieves 20K unit production of the Model 3 by Jan 2018, it will be selling roughly 3X more cars in the US than Volvo!
4. Assuming Tesla achieves 30K unit production of the model 3 by June 2018 and continues to sell roughly 40K new S & X in the US in 2018, Tesla could be one of the top 10 car brands in unit sales in the US in 2018!
5. With the Tesla Semi beginning sales in late 2018, the threat to Volvo gets worse.
Let's operate our cars on vacuum motors. Everything else sucks.
Said. No. One. Ever.
That's the logic of our central bank though. Derp.
Someone saying vacuum motors suck carbon dioxide from the atmosphere is like saying eating pancake is good for the lungs :)
Elimination of tax credit
Road taxes
Long wait times..meantime buyers go elsewhere
Surge pricing by electric companies..smart meters were installed for a reason..that quick charge may be costly
Higher insurance cost
Long collision or repair waits and high repair cost
Resale..would you buy a car with a 10 year 14,000$ battery when it is on year 5+