06/23/2021 | News release | Distributed by Public on 06/23/2021 07:55
Lately, not a day goes by without a major player in the auto industry issuing a press release that signals a shift toward electrification. According to the New York Times, as many as 100 electric vehicle (EV) models will be featured in showrooms by 2025.1 All three carmakers with historical ties to Detroit have major plans to develop more EVs. General Motors Co. (GM) will invest $20 billion to produce electric and autonomous vehicles by 2025-with the goal of having 20 EV models in its global lineup even sooner (by 2023). Ford Motor Co. intends to spend over $11 billion on EV development by 2022. Ford also stated in 2020 that it will add 300 jobs at its Rouge Complex in Dearborn, Michigan, to support battery assembly and the production of its new F-150 Lightning models (both hybrid and fully electric), scheduled for release in 2022. Like its competitors, Fiat Chrysler Automobiles N.V. (now Stellantis N.V.) announced that it will invest over $10.5 billion in EVs-with the goal of having more than 30 nameplates with electrified powertrains (including new Jeep models) in its lineup over the next few years.2
Is the electrification of the auto industry today akin to when the internal combustion engine (ICE), led by Ford's Model T, wiped out alternative propulsion systems (such as those based on steam power and even electricity3) just over a hundred years ago? If so, what are the principal features of this transition? In this blog post, we provide some big-picture context for what's going on in the auto industry as it ramps up its efforts to produce and sell more electric cars.
According to Melissa Diaz, an analyst in energy policy with the Congressional Research Service,4 electric vehicles can be divided into 'three broad categories,' which she defines as follows:
In this blog post, we focus on the final category of electric vehicles, given that many within the auto industry and those who study it view the hybrids as transitional technologies. We prefer the term 'BEVs,' so we'll refer to such vehicles with that shorthand, rather than 'AEVs.'
The current popularity of BEVs originated with Tesla, which started selling its first model in 2008. Since then the company has become the largest producer of BEVs globally. In the U.S., Tesla accounted for 77% of all BEV sales in 2020.5 The company has been valued by financial markets as the most valuable car company anywhere.
What's behind the current move toward electrification in the auto industry? As of 2017, the transportation sector accounted for the largest share of greenhouse gas emissions in the U.S. Moreover, nearly 60% of this sector's emissions are attributed to light-duty vehicles, such as cars and light trucks (see Diaz, 2020, p. 4). Led by regulatory efforts designed to reduce greenhouse gas emissions, carmakers have intensified their efforts to reduce tailpipe emissions. Traditional carmakers (such as GM and Volvo) have publicly committed to phasing out the production of ICE vehicles by specific dates (2035 and 2030, respectively).6 The California government has banned selling new gasoline-powered motor vehicles in the state starting in the year 2035.7
How will the switch to electrification in the auto industry play out? At this point, the share of EVs-and especially BEVs-in U.S. auto production and sales is still quite small,8 but it's growing (see table 1 for the multiple BEV models currently being sold in the U.S.). The consulting firm IHS Markit, which has deep expertise in both energy markets and auto supply chains, predicts that with the regulations presently in discussion, BEVs could represent more than 50% of auto sales in Europe, more than 40% in China, and more than 25% in the U.S. by 2030.9