We will begin with the current landscape for vehicles, then explore what’s driving the push to electric vehicles (EVs), then we will look at where EVs are going.
Let’s begin by looking at the current landscape for cars.
- Car sales of all types were down last year compared to pre-pandemic levels by about 10% globally. The pandemic caused factory closures and a shortage in the supply of automotive chips. While the effects of the pandemic are beginning to dissipate, we are still in an environment of supply constraint.
- There have been price cuts for EVs recently and wait times are down, indicating that the market is beginning to loosen up.
- There are currently 40 EV models available. Between now and the end of next year, dozens of pure electric models are set to debut which will broaden consumer choices.
- There are currently incentives in place to encourage drivers to switch from gas to electric. In the U.S., there is a federal tax credit of up to $7,500 plus state incentives where applicable. In Canada, there is a $5,000 federal incentive plus provincial incentives where applicable.
Where are we with respect to global electric vehicle adoption?
Just three years ago, global EV sales were around 3 million per year. Now, they are over 12 million per year, and represent 13% of the new vehicle market.
Just three years ago, global EV sales were around 3 million per year. Now, they are over 12 million per year, and represent 13% of the new vehicle market.
What about Canada? Canada’s “Zero-Emission Vehicle” registrations are now 10% of new vehicles.
10% is up from just 3% three years ago, a tripling in market share in 3 years. So it is safe to say that electric vehicles are rising rapidly in popularity in Canada. The same is true of the United States.
10% is up from just 3% three years ago, a tripling in market share in 3 years. So it is safe to say that electric vehicles are rising rapidly in popularity in Canada. The same is true of the United States.
What’s driving the push to EV’s?
- Consumers and governments are recognizing that there is a need to reduce carbon emissions, which have never been higher than they are now. According to the United Nations, the last decade was the hottest on record, and we can expect more severe and destructive storms, increased drought, rising ocean levels, and loss of species. The UN states that: climate change is “the single biggest health threat facing humanity… contributes to a global rise in hunger… and increases the factors that put and keep people in poverty.” As climate change worsens, the interconnectedness between the environment and human well-being and need for action is becoming clearer to many.
- Air Pollution - EVs have no tailpipe emissions and therefore offer a solution to air pollution. The government is aware of the costs that air pollution imposes on society: Health Canada estimates that 14,600 premature deaths in Canada per year can be attributed to it. Cleaner air means less asthma, heart disease, and cancer. So, less pollution from cars and trucks isn’t just a win for the climate. It’s a win for our health.
- The price of gas can be volatile - A AAA survey taken last year found that gas savings and concern for the environment are the key drivers of interest among American consumers in buying an electric car.
- Geopolitical consequences of energy dependence - The second and third largest oil producers after the United States are Saudi Arabia and Russia. Their influence over the world’s energy supply gives them influence that they otherwise would not have if vehicles were powered by batteries and renewable energy. So, global security and electrification are linked.
- Technological advances have made EVs more capable, durable, and affordable. A decade ago, the only mass-market electric vehicle for sale could go a maximum of 120 km on a charge. Today, the majority of EVs go over 400 km per charge and can be driven long distances on road trips. The price of batteries has come down and new technology has improved their longevity so that today’s EVs normally come with battery warranties of 8 year or longer, giving consumers the confidence they need to make a purchase.
- Consumer satisfaction with EVs is high. AAA’s survey of electric vehicle owners revealed that 96% of EV drivers say they would buy or lease another electric vehicle the next time they were in the market for a new car.
Looking more closely at the carbon reduction motive for purchasing an EV…
Globally, transportation accounts for 25% of greenhouse gas emissions, with automobiles and trucks causing the majority of them.
According to a U.S. study of EVs by the Union of Concerned Scientists: “Over their lifetime, electric cars produce 52% less greenhouse gas emissions than gas cars, and electric trucks produce 57% less than gas trucks.” The study considered the manufacturing, operating, and disposal emissions of both vehicle types. It also considered that 60% of the U.S.’s electricity comes from gas, oil, and coal.
In Canada, less than 20% of electricity is generated by burning fossil fuels, so driving an electric car in Canada would typically result in an even better emissions profile than this U.S. study.
There is also the potential to make EVs greener than they currently are by using cleaner sources of electricity, improving vehicle manufacturing, and designing and selecting more efficient vehicles. As a whole, the share of the world’s electricity from low carbon sources is increasing with the increasing use of renewable energy, making electric vehicles powered by renewables a beneficial strategy for addressing climate change.
It should be noted that there are greener alternatives to purchasing a car, whether gas or electric. These greener alternatives include walking, bicycling, and taking public transportation if these options are available where you live.
Globally, transportation accounts for 25% of greenhouse gas emissions, with automobiles and trucks causing the majority of them.
According to a U.S. study of EVs by the Union of Concerned Scientists: “Over their lifetime, electric cars produce 52% less greenhouse gas emissions than gas cars, and electric trucks produce 57% less than gas trucks.” The study considered the manufacturing, operating, and disposal emissions of both vehicle types. It also considered that 60% of the U.S.’s electricity comes from gas, oil, and coal.
In Canada, less than 20% of electricity is generated by burning fossil fuels, so driving an electric car in Canada would typically result in an even better emissions profile than this U.S. study.
There is also the potential to make EVs greener than they currently are by using cleaner sources of electricity, improving vehicle manufacturing, and designing and selecting more efficient vehicles. As a whole, the share of the world’s electricity from low carbon sources is increasing with the increasing use of renewable energy, making electric vehicles powered by renewables a beneficial strategy for addressing climate change.
It should be noted that there are greener alternatives to purchasing a car, whether gas or electric. These greener alternatives include walking, bicycling, and taking public transportation if these options are available where you live.
Now that we’ve discussed the current landscape and what’s driving electric vehicle adoption, let’s discuss where we’re driving to.
Western automakers have ambitious sales targets and are investing hundreds of billions of dollars in making the switch from gas to electric. A Reuters analysis of 37 global automakers found that they plan to invest nearly $1.2 trillion in electric vehicles and batteries through 2030. Here are some examples of specific manufacturer targets.
Let's look at some recent headlines. The Toyota Corolla, a gas vehicle, was the world’s best selling car in 2022. As an indication of the momentum that EVs have, for the first time ever, an electric vehicle is at the top of the charts. In the first quarter of 2023, the world’s best selling car was the Tesla Model Y.
VW is investing billions in creating a battery gigafactory in Ontario.
GM is preparing to launch 7 new EVs this year.
Honda is building a gigafactory in Ohio in partnership with LG.
Ford has begun construction on the largest Ford plant ever, which will be 5 square miles in size. It will help Ford achieve its goal of producing 2 million EVs per year by 2026.
Subaru, historically a laggard in electrification is planning four new electric crossovers by 2026 and its planning to produce them in volume.
Chinese automaker BYD has stopped production on non-electric vehicles altogether.
It's not just consumers and automakers. Governments are pushing for a switch to cleaner vehicles. Earlier in 2023, the EU gave final approval to a landmark law to end sales of new carbon-emitting cars in 2035.
Canada also recently issued regulations to switch to plug-in hybrid and all electric vehicles only by 2035.
In the U.S., billions of dollars in investments in manufacturing, charging infrastructure, and incentives are being made as a result of the Inflation Reduction Act.
Also, state governments are implementing rules which phase out sales of cars without a plug by 2035. The California Advanced Clean Cars II rule does this in California and has been adopted by 6 other states at present, with more likely to follow.
Also, state governments are implementing rules which phase out sales of cars without a plug by 2035. The California Advanced Clean Cars II rule does this in California and has been adopted by 6 other states at present, with more likely to follow.
And governments are using their purchasing power to propel the transition. 10 transit organizations in Quebec are joining together to purchase 1,229 electric buses that will reduce greenhouse gas emissions by 930,000 tonnes.
EVs can help improve the electric grid through smart charging and discharging. For example, EVs can be charged at times of day when renewables such as solar are abundant and demand on the system is low. And, EVs will soon be able to discharge their batteries during times of peak energy demand, helping support the electric grid, preventing the dirtiest generators from coming online, and potentially even earning revenue for their owners.
And, EVs can provide backup power in the event of a power outage. In this picture, school buses are being used to power an emergency relief center in Prince Edward Island. Similarly, a growing number of passenger electric vehicles now offer backup power capabilities for the home.
And, EVs can provide backup power in the event of a power outage. In this picture, school buses are being used to power an emergency relief center in Prince Edward Island. Similarly, a growing number of passenger electric vehicles now offer backup power capabilities for the home.
The momentum depicted in the previous slides moves us closer to meeting the longer term objective of eliminating nearly all polluting vehicles by 2050.
According to BloombergNEF, a strategic research provider, the rate of switching from combustion vehicles to EVs needs to accelerate to address climate change. If nearly all gas vehicles are to be off the road by 2050, all new passenger cars sold globally would need to be zero-emission from around 2035, with annual EV sales hitting a peak of 139 million per year in 2040, up from the 12 million annual sales today.
According to BloombergNEF, a strategic research provider, the rate of switching from combustion vehicles to EVs needs to accelerate to address climate change. If nearly all gas vehicles are to be off the road by 2050, all new passenger cars sold globally would need to be zero-emission from around 2035, with annual EV sales hitting a peak of 139 million per year in 2040, up from the 12 million annual sales today.
Despite the good news regarding an increase in the adoption of clean energy technology, challenges remain.
Charging infrastructure must increase in tandem with the switch to EVs for adoption to occur at the requisite pace. Its true that most EV drivers do the majority of their charging at home, saving time and money by not purchasing gasoline. For people who don’t have a driveway or garage, the options for charging are less convenient. There is a significant need to add charging at apartment and condo parking lots and streetside for urban dwellers to allow them to make the switch to EV’s.
Charging infrastructure must increase in tandem with the switch to EVs for adoption to occur at the requisite pace. Its true that most EV drivers do the majority of their charging at home, saving time and money by not purchasing gasoline. For people who don’t have a driveway or garage, the options for charging are less convenient. There is a significant need to add charging at apartment and condo parking lots and streetside for urban dwellers to allow them to make the switch to EV’s.
Another challenge is that an expansion in mineral availability is needed to enable the switch to EVs to occur at the pace that is required to address air pollution and climate change. We also recognize that mineral extraction can have environmental consequences as does fossil fuel extraction. It is important that governments take the regulatory steps to minimize the impacts of extraction on people and the environment, and that companies source their minerals responsibly.
Consumer confusion and disinformation could slow the rate of EV adoption if not addressed. Ultimately, the choice is ours as to whether to make the switch to cleaner transportation. Consumers vote with their wallets when they buy a new vehicle and in democracies like ours, vote with their ballots too. As a result, it is vital that the public understands the imperative to stop burning fossil fuels. Unfortunately, a google news search reveals a great deal of information that can mislead consumers and voters about the desirability of switching to EVs. For example, many articles focus only on the challenges associated with today’s EVs while ignoring or downplaying the issues with gasoline cars. EV’s are a substantial improvement when compared to fossil fuel vehicles.
There is a trend toward larger and heavier vehicles that dates back to about 1990 and today, average vehicle size is at an all time high. The trend toward large vehicles can be seen in upcoming releases of electric vehicles. While there are some small EVs coming out soon, many of the electric vehicles destined for the North American market are SUVs or pickup trucks in line with the current market preference for larger vehicles. This is a concern because, whether driven by fossil fuels or electric, large vehicles release more carbon when they’re produced, use more energy to drive, and take up more space in cities. It is also true, though that if people who otherwise would have purchased a gas SUV or truck switch to an electric SUV or truck, there would be a significant carbon emissions benefit.
And, parking, traffic, and auto accident issues will not be solved by switching to EVs. Therefore, there should be a concurrent focus on creating walkable, livable communities with a goal to reduce the need for automobiles.
We’ve discussed the promise and the challenges of electrification. We can look at Norway to get a better understanding of what the switch to electric vehicles might look like for our communities.
- In Norway, about 80% of new cars sold today are battery powered. The result is that the air is cleaner, the streets are quieter, and greenhouse gas emissions are lower.
- Norway will end the sale of internal combustion vehicles in 2025, and will likely be the first country to do so.
- And all city busses in Oslo, Norway’s capital will be electric by the end of this year.
Looking ahead, here are six predictions based on what we know today:
- With the numerous benefits of electric vehicles and the imperative to address climate change, consumers, automakers, and policy makers will continue the shift to EVs and sales are likely to continue to surge globally.
- More models and types of EVs will become available soon.
- The purchase price and capabilities of EVs will continue to improve as further advances in batteries are made and greater economies of scale are realized. We recommend looking at the total cost of ownership to get the most complete financial picture of how EVs compare to gas cars rather than the purchase price. However, we also understand that when the purchase price of an EV is lower than a gas car, it will be a no-brainer for the consumer to go with the EV.
- The used EV market will expand offering low and moderate income drivers more choice.
- Battery technology will continue to evolve. Universities, battery companies, and automakers are currently developing battery technologies that aim to enable even longer ranges, lower costs, better energy density, and longevity.
- More battery recycling facilities will come online. In 2022, the largest EV battery recycling facility in the EU came online, enough for all of Norway’s batteries. The facility is able to recycle 95% of the materials used in battery packs. In the U.S., a new battery recycling plant in Georgia just came online earlier this year with a capacity more than double that of the EU recycling plant.