Electric Cars: Have We Reached the Tipping Point?

In 1957, Morton Grodzins first used the term “tipping point” to describe societal changes. In physics, the tipping point is the point at which an object that was balanced tips over after additional weight has been added to it. In society, it’s the point at which a quick and dramatic shift in behavior occurs. Electric cars are still a small percentage of the global market, accounting for just over 2 million of the 2 billion cars on the roads in 2016, but the market is changing. Morgan Stanley predicted in a recent report that electric vehicles could account for 50% to 60% of global light vehicle sales by 2040. Are we approaching the tipping point for electric cars? What does that mean for energy markets?

There have been some significant shifts towards electric cars recently.  

Volvo follows Tesla, leaves combustion engines behind

When Tesla opened pre-orders for its Model 3, more than 300,000 people deposited $1,000 to reserve their place in line. The company literally cannot make the car fast enough to meet demand, and eager purchasers are willing to wait a year or more for delivery. Tesla plans to sell 1 million cars per year by 2020, making a significant impact on auto sales. But it’s not just Tesla anymore. Last week, Volvo announced that it will no longer manufacture vehicles powered solely by internal combustion engines in 2019. Volvo plans to introduce five fully electric cars and every car Volvo produces will have an electric motor. Volkswagen, Ford, and Honda have also announced ambitious goals to sell more electric cars.

China and France move away from combustion engines

China is the major reason why Volvo is leaving internal combustion engines behind. China is the world’s second largest economy with a serious air pollution problem, and Volvo is now owned by a Chinese car company. In 2016, Chinese drivers bought 507,000 electric and plug-in hybrid vehicles out of 873,000 sold worldwide, so more than half of electric cars sold are sold in China. There is a huge opportunity for Volvo in China. China is also Tesla’s second largest market, and a key region for the company. 

Last week, France decreed that that no more gas- and diesel-powered vehicles will be sold in France by 2040. Starting at that time, companies will only be allowed to sell electric cars and cars powered by other, cleaner fuel sources in France. The French government is also proposing a range of initiatives to help reach its goal, including support for the development of alternative fuels and financing new infrastructure for charging electric cars.

What does this mean for energy markets?

Tesla plans to deliver 1 million cars each year by 2020 and Volvo already sells over 500,000 cars every year. If these two companies alone meet their goals for sales of electric cars, 1.5 million more electric cars will be on the road in three years, replacing gasoline-fueled cars. If Ford, Honda, and Volkswagen meet their goals, then demand for auto fuel will fall even further and the rise of electric vehicles will reduce demand for gasoline. Every home and business with a charging station will consume more electricity, so utilities will consume more fuel to power the electric cars.   

Smart energy companies are investing in advanced analytics to analyze continuous streams of data – market reports, politics, technology, social media, and internal data – so they can evaluate the impact of market shifts in time to adapt and grow. Using real-time intelligence for smarter, faster decision-making provides them an advantage over slower moving competitors.