What electric car makers need to do to get every household driving one

Although the first electric car was invented in 1837, it took the affordability and availability of Henry Ford’s Model T in the early 20th century to end the reign of the horse. More than 78 million automotive vehicles are sold globally each year, with electric vehicles accounting for 0.8 per cent of sales in 2017, up from just 0.2 per cent in 2014.

Drivers’ mindsets are adjusting to a realistic and comparable alternative to the conventional engine vehicle. There is no doubt that electric vehicles are coming. But with the sector still in its infancy and petrol-powered cars still considerably cheaper than electric vehicles, there are several hurdles electric vehicle providers must overcome before they are adopted in every household. We believe a critical mass of consumption will occur when carmakers manage to increase battery range, improve charging infrastructure and reduce costs – thus breaking down the barriers to mainstream adoption of the electric vehicle.

Battery depletion is a significant concern for consumers, with battery technology a key focus for car manufacturers that sell electric vehicles. Manufacturers including BMW and Toyota have begun developing solid state batteries, following claims they are safer and have increased energy density than lithium ion batteries. Enhancements in battery power will go hand in hand with an increase in charging stations and their technology. There are more than 90,000 public charging stations worldwide, which is set to grow to 120,000 in 2018, and we expect that with this growth, improvements in charging technology will advance. The market is ripe for electric vehicles to grow significantly in the next three years. Key enablers for growth will be improved battery efficiency, more accessible charging and the day when electric cars can eclipse the driving distance of a tank of petrol. Premium brands are more likely to invest in developments of electric vehicles, given their higher selling points and ability to recoup costs.

Car giants join race

Leading the charge in the electric vehicle market are Tesla and Daimler. But in the past 12 months many major car manufacturers have declared their intentions to enter the market, with Porsche announcing 50 per cent of its cars will be electric by 2023 and General Motors, Toyota and Volvo declaring a target of 1 million in electric vehicle sales by 2025. For many consumers the relatively high cost is a barrier. While price premiums are normal for a sector in its infancy, advancements in technology, greater demand and more manufacturers will push prices down.

Worldwide, China has the lead market share for electric vehicles, just short of 50 per cent in 2017, followed by Europe with 26 per cent. China also leads in terms of unit sales of 600,000, eclipsing the US, which reported 200,000 and we expect this to continue in the short-to-medium term. Australia is lagging in the global uptake, with only 219 electric vehicles sold in 2016 out of 1.2 million. By 2040, Bloomberg New Energy Finance predicts that 40 per cent of all vehicles on Australian roads will have a plug, and 60 per cent of new car sales will be electric.

One of the largest owners of car dealerships in Australia, AP Eagers’ (ASX: APE) chief executive officer Martin Ward recently forecast disruption of the sector from electric vehicles from 2023. The market and investors will be monitoring closely how APE and other major industry players including Automotive Holdings Group (ASX: AHG), will evolve over the next 10 years.

Forbes forecasts that in 2020 electric vehicles are likely to cost the same as conventional cars.

But the popularity and accessibility of traditional cars, the challenges facing electric vehicles and their manufacturers and the slow uptake by consumers highlights the disparity between predictions for the future and what is happening on the ground. It is clear we are a long way off mass adoption of electric vehicles, both in Australia and globally, but all indicators point to a rise in their use in the future.

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