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Four reasons electric cars are poised to completely take over the market

There are four big reasons to be bullish on electric vehicles, according to Bernstein.

Government support, improving cost economics, technological development, and increasing acceptance of the powertrain by both customers and automakers all suggest the market is nearing an inflection point with the technology, said Bernstein analyst Toni Sacconaghi in a note sent Tuesday.

Right now, battery electric vehicles (BEVs) make up only a small portion of total vehicle sales, and critics say there are a number of limitations, such as limited charging infrastructure, and the relatively long time needed to charge a vehicle. For a long time, automakers seemed reluctant to invest in EVs, and customers did not seem terribly interested in buying them.

But the factors listed above appear to be turning that around.

First, government support has boomed. Entire countries are beginning to make pledges to phase out internal combustion cars entirely in the next few decades. Notably, the United Kingdom recently said it will ban the sale of all new gasoline and diesel cars starting 2040. France has as well. Those countries account for 6 percent of all global auto sales, Saconnaghi said.

China, the world’s largest car market, is considering a similar move, but has not given an exact timetable.

Even countries without plans to ban gasoline cars outright have fuel efficiency standards that will increasingly put technical pressure on combustion engines. Japan, the European Union, the United States, Canada, China, South Korea, Mexico, Brazil, and India, collectively make up 80 percent of all auto sales around the world, and all have some kind of fuel efficiency regulation.

The second factor is rapidly improving cost economics. Saconnaghi forecasts that in 10 years, battery electrics will cost about the same to make as internal combustion engines.

As “stringent fuel efficiency standards” make gasoline cars more expensive, fuel savings and government incentives make electrics cheaper. In addition the cost of electric drivetrains is declining faster than expected, Saconnaghi said.

“And even with no subsidy and no fuel savings factored, electric powertrains may still reach absolute cost parity before 2030, at which point we believe it is game over for ICE cost efficiency,” he said.

Third, battery electrics have certain technical advantages over internal combustion engines for many customers. For example, the ability to conveniently charge cars allows drivers to avoid a trip to the gas station. Battery electric motors also offer instant torque, which makes for a different driving experience. They still have disadvantages, such as longer charging time and lower range. But the advantages will remain constant and the disadvantages will diminish, Saconnaghi said.

Finally, there is a shift in market sentiment, Sacconaghi said.

“Even if we disregard the governmental, economic, and technological tailwinds benefiting the BEV segment, market momentum is increasing for BEVs, in no small part thanks to Tesla. Importantly, Tesla has created a compelling BEV unlike any other offered on the market: the Model S, X, and 3 all have wide consumer appeal and excellent performance; arguably, Tesla is changing the mindsets of consumers in terms of what an EV can be.”

Automakers are noticing. Several are releasing electric models, and some are making massive investments. Jaguar Land Rover on Thursday said all of its models will be electric by 2020. Volkswagen is investing $24 billion to make 80 electric modelsby 2025. These are just a few examples. General Motors released the Chevrolet Bolt, and has said it will continue pursuing electrification. Ford has also reportedly been working on electric vehicles, in particular an electric SUV.

“Seeing Tesla’s success and bracing for a BEV future, OEMs have jumped onboard,” Sacconaghi said.

Source: Tech CNBC
Four reasons electric cars are poised to completely take over the market

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