Heads up, Calgary oil executives. For the first time, global sales data suggest Early Adopters have begun buying electric vehicles (EVs) and that means the electrification of transportation is speeding up.
The only credible threat to oil as a transportation fuel is electricity. In fact, the only question now is when, not if, electricity will begin to displace oil. For Alberta, however, timing is everything. The big oil sands producers now consider electric vehicles a material risk to their business model and track adoption as part of their carbon risk management strategies.
That risk just ticked up according to a new study from Navigant Research that shows EV adoption has reached a critical juncture. Co-author Scott Shepard says the most important takeaway from the survey of US consumers is that purchase price is no longer the most significant constraint to adoption. Number one is now range and the related issue, lack of charging infrastructure.
“The fact that price isn’t as significant anymore is really indicative of how successful the industry has been at reducing the cost of the vehicle,” he said in an interview. “Battery prices have fallen significantly since 2010, falling from $1,000 per kilowatt hour to below $200 today.”
At first, when a technology is at the very bottom of the adoption S-curve (see figure at right), Innovators are the only consumers buying. They account for roughly 2.5% of technology adopters. They will pay the most for new gadgets and accept the highest risk that new technology will fail. This is where EVs have been stuck since Elon Musk introduced the Tesla Roadster in 2008.
“EV consumers are highly educated, wealthy, on the younger side and their political affiliation is typically greener, as you might expect,” he said, “It’s also heavily skewed toward people who own their own homes.”
Homeownership implies a higher income, but it also enables the EV owner to install charging equipment and avoid relying on public infrastructure, says Shepard.
The Navigant study also showed that the EV consumer profile is changing as the “mobility model” evolves. Today’s consumers are more likely to choose from a wide range of transportation options – private car, Uber or Lyft, public transportation, bike and scooter rentals, and so on – and they’re adapting their mobility model to Evs.
“Families use an EV for short commutes or around town activities like getting groceries while taking the kids to soccer practice, and have a gasoline-powered car for longer trips,” said Shepard. “Low-cost electricity and far less maintenance for EVs means the new mobility model can be more cost-effective for many families.”
This kind of consumer adaptation is typical for new technologies as they begin to accelerate up the S-curve, transitioning from one adopter category to the next.
That transition is reflected in the 2018 global EV sales: just over 2 million autos out of 86 million total units, about 2.4 per cent of new sales, right on the cusp of Early Adopter territory. In 2019, EV sales look to be headed for roughly 3 million units, while total auto numbers will fall slightly as trade issues weigh on the global economy, putting EV adoption around 3.5 per cent, solidly into Early Adopter status.
What changes to relative strengths of “accelerators” (those things that speed up adoption) and “constraints” (those things that slow adoption) does Shepard foresee during the electric vehicle Early Adopter phase?
For example, consumers are becoming educated about the benefits of EVs, he says. As their family and neighbours buy electric cars and trucks, they are hearing anecdotal evidence about what works and what doesn’t. That “cohort effect,” as economist Blake Shaffer calls it, is usually one of the strongest adoption accelerators.
However, consumer understanding of EVs is still low, according to the report: “Educating consumers who are outside the typical early adoption category will improve the perceptions of PEVs [plug-in electric vehicles] and decrease the amount of misinformation in the market.”
Another important accelerator is model choice. North American consumers, in particular, love trucks and SUVs, but there are few EVs in this body style to choose from and like the Tesla Model X – starting at $110,000 in Canada – they tend to be pricey. Automakers like GM and Volkswagen are introducing a full lineup of EVs in 2022 and that should provide a considerable boost to EV adoption, according to Shepard.
Next question: when do EV sales hit the “inflection point,” that moment when sales take off and look a hockey stick on the S-curve? If the inflection point comes early, as it did for the smartphone, the S-curve is flatter. If it comes later, the S-curve looks more like the figure above.
Using the hockey stick analogy, Shepard thinks that between “2025 and 2030 is when we’re going to get to that point where the blade meets the shaft,” which should coincide with the move into the Early Majority adoption category that arrives when sales hit 13.5 per cent of new sales.
If we believe Bloomberg New Energy Finance (BNEF), the most aggressive of the EV forecasters, by 2037 electric vehicles will account for 57 per cent of global auto sales and comprise over 30 per cent of the global auto fleet. Not coincidentally, given that crude oil demand is tied to transportation consumption, Wood Mackenzie forecasts peak oil demand in 2036.
Only a few years ago, I thought that BNEF’s EV sales predictions were far too rosy. Yes, adoption is speeding up faster than my EV analysts thought possible.
For instance, Energi Media will be reporting later this week on another Navigant study, this one about battery storage and the gathering speed of adoption that will affect other industries like electrical utilities and transportation. Co-author Alex Eller said in an interview that with many low-carbon technologies, like battery storage, one can expect the inflection to arrive within a decade.
There is a very good argument to be made that the electrification of transportation is speeding toward its own inflection point faster than expected.
Heads up, Calgary oil executives, you don’t want to be flattened by an electric pickup truck in the near future.