Chairman and CEO Mary Barra says the automotive industry will witness more change in the next few years than it has in the last 50 years, and that change largely will be driven by electrification.
The electric vehicle has the potential to eliminate the harmful tailpipe emissions of traditional internal combustion engine vehicles, as well as help make autonomous vehicles expected to reduce traffic fatalities and congestion a reality because their big batteries can feed power to the myriad sensors and cameras the cars relay upon to operate safely.
Beyond the vehicle itself, electrification could fuel an entirely new transportation infrastructure creating new jobs and economic opportunities, while widespread adoption also could uncover new, more reliable forms of renewable energy to phase out coal from the energy-making equation and move EVs to truly zero-emissions vehicles.
While there remains little doubt that this technology will have a significant impact on the industry and society moving forward, the Detroiter took a closer look at several factors that will determine just how quickly electrification will penetrate the market.
Learning to Walk Before We Run
For all the promise of EVs and the billions of dollars automakers are funneling into their development, the segment currently accounts for less than 3 percent of global vehicle sales. The lack of widespread adoption, in addition to setbacks or outright failures at some EV startups, has created warranted skepticism.
Technology costs also remain high. But with automakers committed to the technology, Brandon Mason, the Americas leader of PwC’s Autofacts group in Detroit, forecasts global EV production to rise to 6 million units annually by 2024.
“We anticipate an uptick driven mainly by the regulatory environment in China and Europe,” Mason said.
U.S. Rides Shotgun, At Least Initially
After lagging on emissions standards, China now employs light-duty carbon-dioxide emissions standards as stringent as Europe and often compared with those in California, a global clean-air pioneer. China also employs incentives for consumers to buy EVs, including granting those buyers precedence in its license plate registration process.
PwC estimates the total Chinese automotive market to reach between 30 million and 40 million units by 2024 from about 25 million in 2017, so even a slight uptick in EV sales would be significant.
The regulatory environment also is driving EV adoption in Europe, where the Volkswagen diesel emissions-cheating scandal has led some countries to plan an outright ban of gasoline and diesel engines, beginning with city centers.
“You’re starting to see the end-game there,” Mason said.
Playing the Long Game in the U.S.
Regulatory levers and consumer incentives also are at play in the United States. President Trump has signaled a desire to roll back stringent fuel-economy standards written under the Obama Administration, but automakers such as General Motors and Honda have recently pushed back with a national zero-emissions plan potentially putting 7 million EVs on America’s roads by 2030.
The United States also is a market of millions of full-size pickups and SUVs, which makes electrification challenging due to their size. As such, pure EVs comprise just 1 percent of the 17 million vehicles sold annually.
PwC expects incremental gains as more nameplates enter the market but does not envision mass adoption of EVs until their total cost of ownership reaches parity with ICEs sometime around 2027.
Michigan’s Pole Position in EV Race
Michigan enjoys a lead in research and development of EV technology, dating back to Gov. Jennifer Granholm’s administration when the governor’s office took advantage of President George W. Bush-era incentives to lure battery companies. As the nation teetered on the Great Recession, the seeds of Michigan’s battery industry were sowed with the arrival of LG Chem, A123 Systems, Dow Kokam (now Xalt Energy) and Johnson Controls.
Mid-Michigan, as well as the west and southeast portions of the state became ground zero for electrification, including applications in plug-in hybrid and mild-hybrid vehicles. There have been growing pains, but the gamble paid off, said Jim Saber, CEO of NextEnergy
“Everything was in its infancy 10 years ago, but Michigan was leading development of the electric vehicle in the U.S.,” Saber said, pointing to the 2010 release of the Chevrolet Volt plug-in. “And Michigan still leads.”