Production of cars powered by fossil fuel will diminish and will be replaced by electric vehicles in the coming eight years as the entire market of land transportation switches to electrification.
These are the predictions of Professor Tony Seba, an economist with Stanford University, which he included in a report titled “Rethinking Transportation 2020-2030.” The report has gone viral among green energy advocates, causing anxiety in the established industries.
Seba makes a number of bold assumptions in his report, one of which is that people will switch to self-driven electric vehicles, which are cheaper to run and maintain. Also, the pattern of ownership will change to vehicles-on-demand. He sees a world without gasoline stations, mechanics and car dealers within the next decade.
Cities around the world would ban human drivers once authorities realize how dangerous they are — they would be banished to the suburbs. There would be a glut of unwanted gasoline and diesel cars and their values would plummet. People may have to pay to have their second-hand vehicles disposed of.
Major car companies would have to reinvent themselves as self-drive service companies such as Uber or compete in the low-margin electric vehicle markets. As the next generation of vehicles would be like computers on wheels, tech companies would gain the advantage to disrupt the market. The market’s development would be decided in Silicon alley, not in Detroit.
This overwhelming change is driven by technology, according to Seba, not by environmental concerns. Market forces would be stronger and more ferocious than any means of control by governments.
The economist describes the imminent change in dramatic words: “We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history.”
He believes the tipping point is likely to arrive over the next two to three years as electric vehicles surpass a range of 200 miles and their prices drop below $30,000. He thinks the low-end electric vehicles will drop in price to below $20,000 by 2022.
After that, the floodgates would open to electric vehicles of all sizes and by 2025 all new vehicles would be electric.
It would take some time to clear the backlog of cars powered by fossil fuel, but he believes that by 2030 about 95 percent of the transportation mileage driven in the US would be autonomous electric driving. People would resort to this kind of driving for cost, convenience and efficiency. The switch will save the average family about $5,600 per year as the cost per mile driven drops to 6.8 cents and insurance costs decline by 90 percent. Petrol cars would become obsolete. Western governments would be hit hard by losing fuel taxes.
Forward moves
Some countries are already preparing for the change. China wants 7 million electric vehicles by 2025; it is imposing a quota for “new energy” vehicles that actually shifts the burden for the switch to the manufacturers. The trend is irreversible according to Chinese manufacturers. The quota rises from 8 percent in 2018 to 12 percent in 2020. Those carmakers that cannot meet the quota would have their exports to China curtailed.
India, on the other hand, is drawing up plans to phase out all petrol and diesel cars by 2032. This ambitious plan leapfrogs China in an Asian race for electrification. India uses a mix of incentives, quotas and caps on fossil-fuel vehicles in order to cut pollution and break reliance on imported oil.
These changes would have profound implications for major oil companies and also oil-producing countries in the near future. High-cost oil producers would be forced out of the market including shale oil and deep-sea producers.
Simplicity
Seba seems fascinated by the simplicity of the electric vehicles. He points out that the Tesla Model S engine has 18 moving parts, 100 times fewer than a combustion engine. Maintenance is effectively zero and Tesla is offering an infinite-mile warranty.
The other forecast trend is for “vehicles on demand.” These electric vehicles would last up to a million miles each. Electric cars are about four times more efficient than petrol cars, which lose about 80 percent of their energy to heat and friction.
Seba believes what will happen to the internal combustion engine will be similar to what happened to Kodak once digital cameras hit the market. “You cannot compete with zero-marginal cost,” said Seba.
The economist does not believe that electric vehicles will put excess strain on electric networks, as consumption would increase by only 18 percent. Electric vehicles would draw power during low-peak times and would act as energy reservoirs.
Whatever happens in the near future, one car industry expert predicts that “the next 10 years will see more disruption in the industry than in the last 50 years.”
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