Your head yanks backward into the custom synthetic headrest as you propel forward to a blistering 60 mph in 5.3 seconds flat. It’s eerily quiet as you barrel down the stretch with all four 18’ tires humming gently on the blacktop. You’re in the best-selling electric vehicle in the world—the Tesla Model 3—and there are 262 miles of road ahead before you need a charge.
You bought the base model for $35,690 after rebates, but beyond the sticker price, you’ll save over $6,000 in the first five years on gas and repairs. Also, you’re no longer emitting carbon into the atmosphere, and the previous ho-hum of driving to work feels like blasting out of a rocket ship—all while sipping your cup of morning joe.
This begs the question, why the hell would you ever switch back to a regular vehicle?
You probably won’t.
Electric vehicles (EVs) displace internal combustion engine vehicles (ICEVs) by offering stellar performance, environmental benefits, and cost parity better than the current, century-old technology.
In the next ten years, EVs will overtake ICEVs, and most developed countries will sport an all-electric automotive fleet.
Lessons From the Great Henry Ford
Over 100 years ago, the automotive industry was turned on its head by the late great Henry Ford. He introduced the Model T and took the world by storm. And while there were many iterations before the Model T—this one was different. Ford said it was the “Motorcar for the great multitude,” and like hell, it was.
When the Model T hit the market, Ford Motor Company couldn’t make them fast enough. They expanded their operations and overtook horse and mule registrations in roughly 17 years (figure 1.1). The leadership, entrepreneurial spirit, and drive of Ford gave him the keys to the automotive kingdom. Even today, Ford’s F150 is the best-selling vehicle in America.
Why EVs Are at a Tipping Point
Once adoption happens, it moves quickly, but two conditions must be met before the tipping point occurs:
A Better Product
One of the footholds for mass adoption is creating a better product. And while ICEVs can reach top speeds north of 200mph (a feat no EV owner will see anytime soon), EVs have other redeeming qualities from a consumer standpoint.
Say you’re at a stoplight, and the jerk next to you takes off like a bat out of hell in his fully loaded, V8 red and black Dodge Camaro SS. The 200 parts under the hood discuss fuel, air, compression, combustion, and energy transfer. Meanwhile, the Tesla Model S Plaid is a full two seconds ahead because its motor produces instant torque through electrical currents.
In fact, electric motors convert over 85% of electrical energy into mechanical energy, compared to less than 40% for gas combustion engines. This ensures the motor is over twice as efficient with zero emissions.
Battery efficiency and density in EVs have made significant advancements in the past few years. The average range for an EV is 250 miles—almost on par with the 300-mile average ICEVs can travel. And the future looks bright, as companies like Lucid Motors are pushing the boundaries with a record 500-miles of EPA-certified range.
Charging has gotten better, too. Supercharging stations can juice your battery up with 200 miles of range in 15 minutes. The current network holds over 120,000 charging ports, with a goal almost five times that amount by 2030—making range concerns a thing of the past.
We use electricity everywhere in our lives, which makes having a generator on wheels invaluable. Ford’s upcoming Lightning truck (2022) promises to power an entire home for up to 10 days, and many automakers are experimenting with built-in solar panels to maximize energy capture.
Outside of having a portable energy source, freight could change forever. Tesla’s unveiling of their Semi (2022) promised over 50% better performance carrying heavy cargo uphill and autonomous driving capabilities.
The second essential piece of disruption is cost parity among alternative options. The average selling price of a vehicle in America is north of $40,000, which makes EVs affordable for the everyday consumer.
To illustrate this point, look at the base model Tesla 3 versus the most popular small-sized sedan in America, the Toyota Camry:
You’ll notice the cost of ownership gap becomes closer over time—despite the higher initial cost (figure 1.2). In fact, the Toyota Camry (provided it runs over 185,000 miles) is more expensive to own than the Tesla Model 3.
- Base cost of Toyota Camry: $21,400
- Base cost of Tesla Model 3: $35,690
- 5-year loan with 10% down payment and 6% interest rate
- Gas cost: $3.00/gal
- Average annual miles: 11,926
- Costs of ownership compared: fuel, tires, maintenance, registration, license, insurance, and loan payments
As battery technology progresses and more legacy automakers enter the fray, the cost of production should sink, unlocking future value.
The Challenges EV Adoption Faces
No good story plays out without risks, and for EV adoption, there are two significant hurdles:
1. The Modernization and Expansion of the Electric Grid
Remember Texas’ recent energy crisis when 4.5 million homes were left without power for several days? Outdated power grids don’t only apply in Texas, even if they are bigger there. Boston Consulting Group (BCP) estimates the need for $1,700-$5,800 in grid upgrades per electric vehicle through 2030.
The faster we move into an all-EV future, the more strain will occur on our already ‘stressed-out’ power grid. Furthermore, as the world grows reliant on digital goods and services, we’ll require more reliable power beyond the scope of EVs.
2. Materials, Technology, and the Supply Chain
Many natural minerals are required for electric batteries and semiconductors. EV makers will need to source these minerals from all over the world and navigate complex logistics to meet demand.
Additionally, the auto industry is experiencing a shortage of semiconductors. And the shift to EVs only complicates the matter. Next-generation vehicles require more semiconductors due to their technological sophistication.
Amongst these include other challenges, like foreign policy and charging infrastructure, it’s no doubt EV makers will stay busy.
The Bottom Line
The automotive industry is ripe for disruption as a new product leader emerges with seemingly better tech and decreasing costs. Consumers are swooning over the stellar performance and environmental utility shifting from ICEVs to EVs. The cost parity between EVs is now at a tipping point where the everyday consumer can afford an EV on a steady salary.
While there are inherent risks with upending a century-old industry, I believe they’ll sort themselves out, and in the next ten years, we can expect mass adoption of EVs. Legacy automakers who don’t pivot will die, and the future of transportation—in most forms—will be electric.