Russia’s invasion has dramatically accelerated the move away from fossil fuels. The International Energy Agency (IEA) – previously the champion of oil/gas investment – was quick to argue last March that policy had to change. And the auto industry has already responded:
- Europe will ban new sales of cars with Internal Combustion Engines (ICE) – gasoline and diesel – from 2035
- In addition, automakers have to further reduce emissions by 55% versus 2019 levels by 2030
- In the US, California is also banning new ICE sales by 2035, impacting ~1/3rd of US sales as many States follow its lead
- In addition, EVs will have to be 35% of the 2026 model year, and 76% by 2031, ahead of the complete ban in 2035
- Already, automakers with 30% of the global market have now committed to full ICE phase-out by 2035.
China, of course, was already well ahead in introducing Electric Vehicles (EVs). They were 29% of total car sales last year. And Autonomous Vehicle (AV) trials are also moving quickly, with the government supporting a fast rollout.
As noted here last month, the electrification of everything is now well underway. And the auto industry is set to be one of the key Early Adopters.
The world’s ‘Top 3’ auto markets – China, the USA and Europe – are around 75% of global auto sales. And they are now moving very rapidly to electrify their auto fleet as the chart shows:
- Electric Vehicles (EVs) were only 4% of the market in 2019, but this share nearly doubled to 7.5% in 2020
- It doubled again to 14.7% in 2021, and continued to race ahead last year to average 21.6%
- It was actually over 30% by the end of the year, as adoption continued to race up the S-curve
It therefore seems highly likely EVs will be at least 50% of sales in the top 3 markets by 2025. Almost certainly, they will be 90% by 2030. Nobody is going to risk buying a new ICE then, knowing its resale value will have collapsed by the time they come to resell.
And anyway, will large numbers of people still be buying cars in 2030? By then, robotaxis will have been around for a while in the major cities. And AVs have a lot of advantages:
- Cars cost a lot of money, after all, and are only used for an hour a day on average
- AVs in the form of robotaxis will instead be sold on a subscription model, like smartphones
- So will people still feel the need to own a car?
- As the trials underway in China and California have shown, people like the comfort and relaxation of a robotaxi
THE EV/AV REVOLUTION IS NOW HAPPENING VERY FAST AND HAS MAJOR IMPLICATIONS
The move to EVs/AVs is going to make a massive change to our personal lives and the wider economy – just as happened a hundred years ago, with the move from horses to cars.
The auto industry is the world’s largest manufacturing industry, with vast numbers of people dependent on it directly and indirectly:
- It doesn’t just involve the people who make cars, or those who design the components, or the garages that service them, or the insurers who insure them, or the banks who finance it all etc
- Transport also uses around 60% of all the oil we use, so those volumes are set for a major decline over the next decade
- At the same time, around 30% of all the land in our cities and towns will start to be freed up, as the need for parking etc is reduced
- Plus there will be major reductions in pollution as we no longer have to breathe gasoline and diesel fumes
As the photos from New York in 1900 and 1913 remind us, transitions happen very quickly once they get underway. One day, we are saying “it will never happen“. The next, we are telling our friends “I can’t understand why it took so long“. So it seems safe to assume that the auto industry will see major change in the next few years.