You must be wondering what I am talking about. I am saying that cars will go out of fashion soon, and will be replaced by horse carriages. Technological changes are developed over a period, but once they reach the tipping point, technology spread can be breathtaking. Okay, I was joking! What I want to say is that IC Engine cars will be replaced by Electric Vehicles!
The photos below were taken 13 years apart. It’s 5th avenue in New York. The first picture was taken in the year 1900, and the second one was taken in the year 1913. Production of the Ford T model started in 1908, and by the year 1930, the equestrian age was over for all practical purpose. Such is the power of disruptive technology.
We can replace these years by the current relevance of electric vehicles; replace the year 1900 by 2010, 1913 by 2023 and 1908 by 2018 the trend looks very similar. IC engine vehicles will be replaced by 2040 if we replace the year 1930 by the same logic. Are you surprised? At least I am not surprised. In the first 30 years of the last century, there were many battery-operated vehicles, but somehow the research in battery technology lagged far behind other developments. IC engine cars took over.
The year 2019 has seen dramatic sales drop in Indian Automotive sector. Sales are down by about 10 % in two-wheelers, by average 25% in cars and 35 to 40% in the commercial sector. Is the point of inflexion in the automotive sector reached? Nobody can explain why this is happening. The only sector where sales are doing well is high-end cars. In this range, people buy cars when they want, recession or no recession!
According to me, there could be many reasons. For the first time in the car segment, the number of second-hand cars sold was more than the new cars sold. Millennials would rather buy a second-hand Corolla instead of buying a new I 10. Or they may not buy cars at all and use Olas and Ubers. According to me, two-wheeler production has reached a saturation point. Add to the woes of automotive sector, Metros are getting operational in many large cities; their introduction is also a game changer.
In the commercial sector, many things have happened in the last five years. Roads all over India have become much better. The stoppages of these vehicles at various hurdles has reduced to one hurdle, the toll plazas. Most other checkpoints have gone away because of system changes. Because of this change, the turnaround time of these vehicles has improved drastically. Computerisation, GPS and other such systems have helped to keep track of the vehicles easily. Now toll collection all over India will also become automated in the next few months due to mandatory implementation of RFID technology. It will further reduce the time wasted at the toll plaza! The overall efficiency improvement has resulted in a reduction of the commercial vehicles required by the industry.
On top of this scenario, Electric Vehicles are slowly being introduced. What direction it will take is difficult to predict. But it appears that many Metro cities are trying to introduce Electric buses.
In Nagpur, Ola has introduced 200 Mahindra Electric cars. Raipur has introduced 200 Mahindra autos. It appears that established companies are coming into the market strongly. Bajaj Auto has declared introduction of Chetak Electric scooters.
Tata Motors is talking about introducing Electric cars for individual customers. MG Motors and Hyundai have introduced high-end Electric SUV’s, with good range per charge, in the Indian market.
So, the similarity between horse carriages/cars and IC Engine cars/EV’s is not far-fetched! Another strong variable getting into the market is driverless cars. Looking at traffic in India, we feel that it will be impossible to introduce such cars in India. But in the developed countries this technology has been developed, and it is said that driverless vehicles will come on the roads by the 2021/2022. How will this development affect the car segment? Consider a journey which costs Rs 100/ today. If Ubers and Olas of this world introduce driverless cars, the cost of the journey will reduce by say, Rs.30/. Further, they introduce Electric driverless vehicles. Assume that the running goes down by Rs.20/. The same trip will cost you Rs.50/. When the costs go down so much, will you buy a car? At least I will not buy one. There will be lots of Ubers and Olas on the road at any time.
As the battery costs go down, and as the production is scaled up, the running costs of cars will go down. Even at today’s running costs of EV per km is less than that of IC Engine cars.
About Electric cars, we forget one thing. The batteries are going to replace petroleum products. Currently, petroleum products are delivered finally through petrol pumps. But there is a huge ecosystem which has come up over a period of one hundred years to reach the fuel to petrol pumps.
Similarly, “the new petroleum products” also need a delivery system. The delivery system is the charging station like the petrol pump. For charging we need Electricity- “the new petroleum”. Increasing electricity production is also equally important; it is equivalent to oil wells. Non-conventional methods like Solar, Windmills and Nuclear power stations are the way forward. In the time frame that I have mentioned above, the required infrastructure will be in place.
What about the scaling of battery production? It is already happening. Tesla is in the process of setting up a Giga factory. Part of this factory is leased to Panasonic. Panasonic brings their raw material and processes it, and produces battery cells. These cells are handed over to Tesla on the same premises, and Tesla do the final assembly.
Similarly, Volkswagen is also in the process of setting up its own Giga factory for battery production. I am sure other serious players will follow suit. In India, Toyota and Suzuki have joined hands with Toshiba to manufacture batteries in a plant in Sanand. Suzuki will make Electric cars for both themselves and Toyota in India, using Toyota technology. Toyota has joined hands with Mazda in the US!
Unless you make your own batteries, the cost of electric vehicles will not come down. Costs will further come down on scaling. But smaller players will have a disadvantage with the cost of batteries.
I am not an expert in this field, but I have been in the automotive components field all my career. So, my comments are based on my gut feeling. Electric vehicles will spread faster in small developed countries like Norway, Sweden. In large countries, they will spread into the market in regions. For example, in the US, it can happen quickly in the bay area or areas around New York on the East Coast. The introduction will be faster in areas where average daily commute distance is smaller; people anyway will have home chargers.It can happen around London, Paris, Madrid, Frankfurt and so on. China anyway is way ahead of others in EV production. 50% of EV’s in world are currently made in China.
In India, I feel that it will happen faster in buses, taxis, rickshaws and high-end vehicles. In high-end vehicles if per charge distance covered is decent, price hardly matters. Total moving parts in IC Engine cars are 2000, and the same in Electric Vehicles are 20. Hence commercial vehicle maintenance cost will be reduced drastically. Once “new petroleum” infrastructure is in place, the numbers will go up exponentially in cities for local transport like buses, rickshaws. Small cars will be initially costly because of battery prices; hence, their spread will be slower.
Car? No, I would instead take the horse carriage!
Oh, my title was wrong! I would instead take a Driverless Electric Vehicle!