The dynamic forces that will shape the future of the Electric Vehicle in Europe

The mass adoption of Electric Vehicles (EV) in Europe has been endorsed and promoted by the European Union with huge investments, subsidies and laws to reduce the emission of CO2 gases, but I think the real deciding factor of whether the electric vehicles will be a success will be the convenience of the EV vs the traditional internal combustion engine cars (ICE).

This convenience is influenced by several factors: pollution, energy infrastructure, energy price, production costs as well as environmental laws and restrictions. It relies on a fine-tuned relationship between industry, government and customers.

I’m not a car industry expert but as a systems thinker I’ll expose, in a simplified way, the main forces I believe will condition the penetration of the EVs in Europe in the next few years.

Replacement of ICE cars

It would seem that people want to embrace EV because of its promise of clean air, the use of electricity instead of petrol, and reduced costs through energy consumption efficiency and the cheaper cost of electricity. But I have my doubts that the replacement of ICE cars will be as smooth as governments and politicians state.

DCL_mass_Adoption_EV_MPantaleon_Sep_2018-01

It is probably true that EV will keep our roads and streets clean from pollution; that it is its main value proposition. However, the industry is just swapping the pollution from the cars to the power station because they haven’t yet found a clear way to produce the energy required to manufacture batteries and cars. Despite this situation, I think many people will be pleased to have clean skies over their cities despite the dirty skies over their countryside.

There is another major question to be addressed in terms of pollution; the environmental degradation in the countries that supply the raw materials or store the waste produced by the battery recycling process. The extraction of dangerous substances like nickel, lithium or cobalt needed for the EVs batteries has been banned in many countries for its high risk to the environment and public health.

electric vehicles - Miguel Pantaleón

Recycling used batteries will encounter a similar problem if the more dangerous chemicals can’t be reused in new batteries. From this perspective law enforcement and regulation pressures can restrict the access to key raw material, so having a great impact on the availability and price of batteries.

The gases and dangerous substances coming from ICE cars are as dangerous as the EV ones, but we have been living with them for more than a hundred years, since the first Ford was sold, which is a massive advantage in how we perceive their risk.

The existing energy infrastructure is another main factor that influences the convenience of the EV vs ICE. Petrol stations are everywhere, making it accessible and easy to supply the energy for ICE cars. This is not the case with the electric charging infrastructure. A nationwide charging infrastructure that is compatible across countries is critical for the mass adoption of the EV, but this means a huge investment for governments and the industry.

The EU is pushing hard to build an extensive charging network, but it needs the EV manufacturing industry to meet it’s sales expectations to guarantee usage, and ensure that national governments are not just burning public money.

Today EV have the same support among EU governments as renewable energy had 15 years ago. Despite this, countries like Spain withdrew its endorsement and funding from its renewable energies infrastructure in favour of fossil fuel energies, provoking the stagnation of the industry and international lawsuits.

electric vehicles - Miguel Pantaleón

So why would customers would change from ICE cars to EV? If it is only a matter of pollution or environmental concern, it won’t be enough for most consumers. It is probable that in response the ICE car industry will develop the technology to make their cars more efficient and clean, and to reduce petrol consumption so they will be able to compete with EV as “environmentally friendly” in the customers’ preferences.

Additionally, the mass adoption of EV will have a direct impact on the price of the energy. It is likely that the price of electricity become more expensive by the increase in demand while the price of the petrol become cheaper because the overcapacity of the oil producers. In this scenario, driving an ICE car could become cheaper and more convenient than an EV.

Likewise, the final price of the EV is conditioned by the production costs. There are two main factors that affect the production cost: economy of scale and technology. The more EVs produced the cheaper the cost per unit. It means that the mass adoption of EV will help to make it cheaper, but the opposite is true as well, if EV doesn’t overcome the threshold that allows its mass production, it will remain expensive.

Technology can drastically reduce the price of the batteries, whilst increasing their capacity and durability, and improving the efficiency and costs of the recycling process. But technology development takes time and money, and it will be necessary to deliver and sale the first generation of batteries to provide a new generation more efficiently and cheaper.

Finally, the EU is in the process of banning diesel cars by 2040 and it is expected that it will apply more restricted regulations to ICE cars. It is not clear today what the real environmental impact of EVs will be but, as I said above, the countries that produce the raw material necessary are legislating against the mining and extraction due its dangerous consequences for human health. It is likely that, in the near future, EV car manufacturers will be constrained by laws against pollution, public health dangers or human rights violations.

In summary, the mass adoption of EVs in Europe is experiencing inertia by the EU investment and regulation forces. It depends on the ability of the EV car manufacturing industry to reduce costs, and the cooperation of the energy industry to control the electricity prices to make the EVs competitive.

electric vehicles - Miguel Pantaleón

On the other hand, it is likely that the ICE car manufacturing industry will improve the efficiency of their ICE cars to makes them competitive and convenient for customers. The EVs industry needs to demonstrate that EVs really reduce the impact on the environment, not only for the western markets and cities, but also for the countries that supply the raw materials.

Although all these massive forces operate together at the same time to shape the future of the EV, customers have the final decision, and I think that the success of the EV will be a matter of convenience.

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