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Automakers come to accept that the EV revolution has begun

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The last several months have been busy in the electric vehicle revolution. Governments have been announcing their phase out plans for petrol vehicles and automakers have committed billions of dollars to electrification programs. At this point automakers are practically falling over each other racing to get out their announcements. How many electric vehicles they’re developing, how much they’re investing, are they going fully electrified, and when.  Suddenly no one wants to be perceived as falling behind in this revolution. And why should they? Nokia and Blackberry can attest to what happens if you do.

In the past, established automakers have been very cautious with electrification, with many simply watching to see how the situation developed. Generally, their investments could be best described as vague or immaterial to their core business of making cars. That’s clearly changed – take a look at the timeline of announcements below.

Taken as a whole these announcements are really quite striking. Most recently it was GM and Ford that released their competing declarations of electrification. GM with twenty new fully electric vehicles by 2023 and Ford quickly following up to say they had a new dedicated team for fully electric vehicles, while reiterating their previously committed $4.5 billion in investments for 13 new electrified vehicle options. Ford followed up the next day to say they were also diverting one third of their investments from combustion vehicle development.

The month prior was filled with even more announcements, including tweets between Elon Musk and Mercedes about the size of the latter’s investments. Volkswagen, BMW, Mercedes, Jaguar, Honda, BYD, and Dyson all made significant announcements about their EV programs that month, but it was Volvo’s “fully electrified” announcement that first caught the media’s attention back in July. It was a clever, if somewhat misleading PR move, but it did set important targets for their company and the competition. The fact that Tesla started producing their mass market Model 3 was almost lost amongst all this news. That’s an exaggeration of course, but only a year ago many believed their plans were impossible.

Government announcements have been another important part of the narrative, with targets that provide direction and impetus to the industry. Based on some of the lobbying it hasn’t been entirely welcome, but that’s to be expected. Anytime an entire country is talking about completely phasing out your current business model, it’s going give an industry pause. In this case there were multiple, with China, the UK, France, India, and several others weighing in with their plans to phase out combustion vehicles.

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Looking at these announcements together suggests that a new phase in the electric vehicle revolution has begun. The fundamentals behind this shift are what I will argue here. My proposition is that the combined macro-economic drivers of regulation, competition, and market growth are pushing EVs to the mainstream. Be forewarned, it’s a long post, but analyzing any of these factors in isolation loses the bigger picture. Electric vehicles are coming, of that there can be no doubt.

Regulation, competition, and market growth.

You’ll notice the analysis below centers around plug-in electric vehicles (PEVs). Today a little more than 60% of new EV sales are pure battery electric vehicles (BEVs) and the rest are plug-in hybrid electric vehicles (PHEVs). PHEV’s are a transitionary technology, which currently offer some benefits that will disappear as battery costs continue to fall and range continues to increase. Note that the analysis doesn’t include hybrids without plugs, they’re old news. Also note that in talking about vehicles and vehicle sales, these are always in reference to passenger vehicles (i.e. no freight trucks). Annual passenger vehicles sales data was taken from the International Organization of Motor Vehicle Manufacturers and electric sales information is from the International Energy Agency.

Regulation:

The 2015 Paris climate agreement requires country specific greenhouse gas reductions by 2030 or sooner. As part of the agreement countries must also submit annual reports on their progress. Transport is a key part of each country’s emissions and it’s one that has a solution at hand, hence the plans to phase out combustion vehicles. France and UK announced for bans by 2040, Scotland by 2032, Netherlands 2025, Norway 2025, and India and China in development. There’s some subtlety to each. Norway for example is leaning towards economic levers to achieve their goals in lieu of outright restrictions, while India has said they expect all vehicles to be electric by 2030 without regulation being necessary, though their official policy is expected later this year.

Personally I tend to agree. I expect we will all be buying electric vehicles long before 2040 largely due to economics, especially with carbon pricing. That said, all of the government announcements are important. They provide both the public and automakers a framework in which to operate, while the more aggressive targets are actually moving the industry forward.

California and nine east coast states have long mandated a portion of sales be zero emission vehicles (ZEVs), administered through a credit system. The system gives partial credit to plug-in electric vehicles (PEVs) and more credits to long range zero emission vehicles (ZEVs).  It’s basically the reason automakers have produced ZEVs in the USA. In quite possibly the biggest announcement of the year China is now doing something similar. They’ve mandated a ‘new energy vehicle’ credit requirement of 10% of sales in 2019 and 12% in 2020.  Since one EV can be responsible for multiple credits it means that less than 12% of all vehicles sold will be required to be zero emission vehicles. For example, if the requirement was met with vehicles like the BMW i3, it would mean 4.6% of all vehicle sales in China would be ZEV in 2020, about 1.4 million that year. For reference there are about 2.5 million PEVs on the planet right now.

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China is also looking at establishing a date for complete phase out of petrol vehicles, which has caught California’s attention. California is not eager to lose their leadership position in electric vehicles and is now looking to increase their own targets and establish their own timeline for complete phase out. I believe the quote from their governor was “Why haven’t we done something already?”. It seems that an EV target race has begun and that means mandated growth for the EV market.

source: BMW

Market Growth:

This one has always been a bit of ‘chicken or the egg’ scenario.   Historically demand for electric vehicles was low, which automakers referenced as the reason for their limited offerings. Others argued that there could be no demand when so few options were available, especially when those that did exist had such weird aesthetics (which was an effective way to prevent scavenging from more profitable combustion sales). Tesla flipped this around with their preorders of the Model 3 and showed everyone the latent demand to the tune of nearly 400,000 preorders. Other automakers took notice. BMW even started having widespread video presentations depicting the threat of Tesla to motivate their employees.

If you’ve only heard the rhetoric of how electric vehicles constitute a small fraction of the world’s annual sales, you might have missed something important. Exponential growth. Since 2012 growth of plug-in electric vehicles has been over 40% every year. Cumulatively that means 10x more PEVs will be sold in 2017 than 2012, as shown in the graph below.

Historical data from the IEA, 2017 estimate from EVvolumes.com

Don’t get me wrong, the existing market share is almost laughably low at 1.1% worldwide (2016 data from the IEA), but over the last three years sales have grown at an average 54.6% compound annual growth rate (CAGR).

To illustrate the effect of exponential growth consider the following example about bacteria in a jar. If the number of bacteria doubles every minute and after 1 hour the jar is full of bacteria, that means at 59 minutes the jar is half-full, at 58 minutes ¼ full, at 57 minutes 1/8 full, etc. At 54 minutes that jar is only 1.6% full and everyone is thinking that bacterial will never fill the jar. It’s simplistic and exaggerated but that’s where we are today, at 54 minutes.

The example shows the power of exponential growth but also the challenge in forecasting it. Over the long term, small changes in annual growth rates can have big impacts. Solar power projections were notoriously underestimated and each year forecasts had to be revised upwards. That’s not to disparage the forecasters, it’s incredibly difficult to do what they do and certainly some caution in forecasting is warranted. But it is worth considering that electric vehicles may be in a similar situation. For example, Bloomberg New Energy Finance (BNEF) posted an EV outlook report in 2016, estimating that annual sales in 2040 would be 35% of all vehicles sold and the total PEV fleet would be 410 million. This year they revised those projections up, to 54% and 600 million. That’s 200 million more EVs, on a starting estimate of 410 million, after one year of new data. Will the next years’ forecasts also be revised upwards?

Shorter timeframes are usually more accurate, BNEF’s numbers indicate they expect approximately 2.5 million PEVs to be sold in 2020.  That seems reasonable, but it would mean that PEV sales growth slows to 35% annually for the next few years. With more models coming that have better features and lower costs, and with governments now pushing the market with more aggressive targets, it seems unlikely growth will slow.  So as an experiment what happens if the 54.6% growth rate over the last three years continues, to 2020 and 2025?

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The impact would be impressive. The graph indicates that over 4 million PEVs would be sold in 2020, for 5% of total vehicle sales. That jumps to 37 million PEVs sold in 2025, nearly 40% of the total vehicle sales predicted. Contrast that with BNEF numbers, of 3% of sales in 2020 and 8% in 2025. Personally I think 8% is a low estimate for 2025, it works out to a compound annual growth rate of approximately 25%. Interestingly UBS  increased their 2025 PEV estimate upwards by 50% this year (from 2016) to 14% of total sales – showing that short-term projections can be just as uncertain.

Perhaps 54.6% isn’t feasible, although Tesla has nearly managed it with a 47% growth rate since 2013. They did this while building up their staff, infrastructure, technology, and procedures virtually from scratch all at the same time. It’s also worth considering the history of smartphones. Globally smartphone sales grew at a rate of 46.4% year over year for ten years from 2004 to 2014, growing from sales of 27 million a year to over a billion.  It was even more dramatic in China, where smartphone users accounted for about 5% of mobile subscribers in 2010 but were 70% by 2015 (Statista). That’s in just 5 years.

Data from www.gartner.com

Granted smartphones are not cars. The average smartphone costs orders or magnitude less and is traded in every two years, while the average car is traded in every 6.5 years (in the USA). A smartphone apparently has an average total lifespan of 4.7 years and a car can last to ~200,000 miles, approximately 15 years of average driving.

But electric cars do offer something cell phones never have. A lower cost. Cell phones provide a wealth of new functionality in our lives, but generally at a premium. Today, electric cars already cost less to operate than combustion vehicles, by 2018 they are expected to reach cost parity on total cost of ownership (UBS report), and by 2025 Bloomberg expects them to cost less upfront than combustion vehicles. That’s battery only electric vehicles (BEVs). Perhaps the changeover is longer than it was for cellphones, but once BEVs have an upfront cost less than petrol, why would anyone buy anything else?

Competition:

More and more manufacturers are entering the electric vehicle field with legitimate programs and their EVs are getting excellent reviews. At the end of 2016 the Chevy Bolt came out and won the North American and Motor Trend car of the year awards. Be prepared to see future EVs dominate the awards. VW already has a new e-Golf, Nissan a new Leaf, BMW an updated i3, Hyundai released their Ionic, and Audi, Porsche, and Jaguar are all coming out with pure EV models in 2018. Then there are the massive “electrification” shifts from the likes of Mercedes, BWM, Volvo, Austin Martin, VW, Ford, GM, and others. All now committing to reshaping their companies and the industry by moving to electric vehicles. There’s also that company Tesla which started making their game changing Model 3. Suddenly there’s a lot of competition and if your company isn’t one of those competing…. what are you doing? Those automakers on the sidelines are starting to look obsolete and it’s a short road from obsolete to ‘out of business’. 

With automakers and governments committing to electrification of vehicles, we are going to see a significant ramp up in the electric vehicle market. More plug-in options are coming out, billions are being invested, and governments are seriously planning the end of combustion vehicles. It really is a paradigm shift.  In large part we have Tesla to thank. If they hadn’t shown the world what was possible, who knows when this would have happened. Certainly the future would be a bit darker.

 

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As an engineer working to improve sustainability and energy use, I have a passion for renewables, research, and data analytics. I'm based out of Toronto Ontario and you can contact me on LinkedIn or Twitter.

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Tesla rolling out Robotaxi pilot in SF Bay Area this weekend: report

Similar to the Austin pilot, the Robotaxi rides will reportedly be a paid service.

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Credit: @AdanGuajardo/X

Tesla is reportedly preparing to launch a Robotaxi pilot program in the Bay Area this weekend, with invites to a select number of customers reportedly being sent out as early as this Friday.

The update was shared in a report from Insider, which cited an internal memo from the electric vehicle maker.

New Robotaxi service launch

According to Insider, the Robotaxi service in the Bay Area is set to launch as soon as Friday. Thus, some Tesla owners in the area should receive invites to use the driverless ride-hailing service. Similar to the Austin pilot, the Robotaxi rides will reportedly be a paid service.

The publication noted that the Robotaxi service’s geofence in its Bay Area launch will be quite large, as it will include Marin, much of the East Bay, San Francisco, and San Jose. This is not surprising as California has long been saturated with Teslas, and it is home to several of the electric vehicle maker’s key facilities.

Unlike the Austin pilot, the Tesla Robotaxi service’s pilot in the Bay Area will use safety drivers seated in the driver’s seat. These drivers will be able to manually take over using the steering wheel and brakes as needed. As per a spokesperson from the California DMV, the agency recently met with Tesla but the company is yet to submit a formal application to operate fully driverless cars. 

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Tesla Robotaxi expansion

Interestingly enough, Tesla did tease the release of its Robotaxi service to the Bay Area in its second quarter earnings call. While discussing the service, Tesla VP of Autopilot/AI Software Ashok Elluswamy mentioned that the company will initially be rolling out Robotaxis with safety drivers in the San Francisco Bay Area. He did, however, also highlight that the electric vehicle maker is working hard to get government permission to release the service for consumers.

“The next thing to expand would be in the San Francisco Bay Area. We are working with the government to get approval here and, in the meanwhile, launch the service without the person in the driver seat just to expedite and while we wait for regulatory approval,” he stated.

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Tesla is ready with a perfect counter to the end of US EV tax credits

Tesla executives have mentioned that these more affordable models would resemble the company’s current lineup.

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Credit: Tesla Asia/X

The United States’ electric vehicle tax credit is coming to an end at the end of the third quarter. Tesla, the country’s leading electric vehicle maker, is ready to meet this challenge with a rather simple but clever counter. 

Tesla executives outlined this strategy in the recently held Q2 2025 earnings call.

End of the US EV tax credit

While Elon Musk has always maintained that he prefers a market with no EV tax credit, he also emphasized that he supports the rollback of any incentives given to the oil and gas industry. The Trump administration has not done this so far, instead focusing on the expiration of the $7,500 EV tax credit at the end of the third quarter.

Tesla has been going all-in on encouraging customers to purchase their vehicles in Q3 to take advantage of lower prices. The company has also implemented a series of incentives across all its offerings, from the Cybertruck to the Model 3. This, however, is not all, as the company seems to be preparing a longer-term solution to the expiration of the EV tax credit.

Affordable variants

During the Q2 2025 earnings call, Vice President of Vehicle Engineering Lars Moray stated that Tesla really did start the production of more affordable models in June. Quality builds of these vehicles are being ramped this quarter, with the goal of optimizing production over the remaining months of the year. If Tesla is successful, these models will be available for everyone in Q4. 

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“We started production in June, and we’re ramping quality builds and things around the quarter. And given that we started in North America and our goal is to maximize production with a higher rate. So starting Q3, we’re going to keep pushing hard on our current models to avoid complexity… We’ll be ready with new, more affordable models available for everyone in Q4.,” Moravy stated. 

These comments suggest that Tesla should be able to offer vehicles that are competitively priced even after the EV tax credit has been phased out. Interestingly enough, previous comments from Tesla executives have mentioned that these more affordable models would resemble the company’s current lineup. This suggests that the more affordable models may indeed be variations of the Model Y and Model 3, but offered at a lower price.

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Elon Musk reveals Tesla’s next Robotaxi expansion in more ways than one

Tesla Robotaxi is growing in more ways than one. Tesla wants to expand and hopes to reach half the U.S. population by the end of the year.

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Credit: Tesla

Tesla CEO Elon Musk revealed the company’s plans for its next expansion of the Robotaxi in terms of both the geofence in Austin and the platform overall, as it looks to move to new areas outside of Texas.

Tesla launched the Robotaxi platform last month on June 22, and has since expanded both the pool of users and the area that the driverless Model Y vehicles can travel within.

The first expansion of the geofence caught the attention of nearly everyone and became a huge headline as Tesla picked a very interesting shape for the new geofence, resembling male reproductive parts.

The next expansion will likely absolve this shape. Musk revealed last night that the new geofence will be “well in excess of what competitors are doing,” and it could happen “hopefully in a week or two.”

Musk’s full quote regarding the expansion of the geofence and the timing was:

“As some may have noted, we have already expanded our service area in Austin. It’s bigger and longer, and it’s going to get even bigger and longer. We are expecting to greatly increase the service area to well in excess of what competitors are doing, hopefully in a week or two.”

The expansion will not stop there, either. As Tesla has operated the Robotaxi platform in Austin for the past month, it has been working with regulators in other areas, like California, Arizona, Nevada, and Florida, to get the driverless ride-hailing system activated in more U.S. states.

Tesla confirmed that they are in talks with each of these states regarding the potential expansion of Robotaxi.

Musk added:

“As we get the approvals and prove out safety, we will be launching the autonomous ride-hailing across most of the country. I think we will probably have autonomous ride-hailing in probably half the population of the US by the end of the year.”

We know that Tesla and Musk have been prone to aggressive and sometimes outlandish timelines regarding self-driving technology specifically. Regulatory approvals could happen by the end of the year in several areas, and working on these large metros is the best way to reach half of the U.S. population.

Tesla said its expansion of the geofence in Austin is conservative and controlled due to its obsession with safety, even admitting at one point during the Earnings Call that they are being “paranoid.” Expanding the geofence is necessary, but Tesla realizes any significant mistake by Robotaxi could take it back to square one.

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