The Battle for Transportation Supremacy
The State of Play
Electric cars are the future. This has been the mantra of the past few years, nevertheless, reality begs to differ. The majority of cars that are being produced and sold today are Internal Combustion Engine (ICE) vehicles. Let’s face the reality, electric cars are far from being a mainstream phenomenon. In 2021, it is estimated that less than 1% of cars sold globally were hybrid/electric. Let that sink in. ICE vehicles still dominate the market.
As of 2021 the market share of electric vehicles and hybrid is approximately less than 1% of new cars sold globally. Image: Ameya Joshi
Today, most vehicles are using combustion as the premier propulsion technology for vehicles around the globe. This is not a coincidence, it is a result of a love story between ICE and automakers. To put this into perspective, the top 5 legacy automakers spend close to 50 Billion US dollars per year on R&D . This means that tens of billions of dollars have been spent over the past decades on researching and improving ICE technology. Therefore, the migration from ICE to Electric Vehicles (EV) for those companies who are heavily invested in ICE technology is not easy. It is hard and painful.
We Were Friends
The war between electric and combustion propulsion has an intense irony in its history. It started when a legacy automaker General Motors launched it is electric vehicle program in the late 1990s. More than two decades ago GM electric cars were zooming around California. But this was short lived, the agreement between GM and it’s customers was that GM would lease these cars and take them back after the lease ended . Ironically, these EVs were so popular that customers did not want to return them back. GM knew something was up before they discontinued the program in the early 2000s citing that EVs were not profitable to support and maintain. Sadly, only 40 EV1s survived from that era.
Legacy automakers were so entrenched in ICE technology that it made sense to them to stick to it to maintain profitability. However, they were spending a lot of capital on research. The R&D strategy of these automakers were based on the strategy of incremental improvements in efficiency to meet customer and regulator expectations. Incremental, not radical improvement. This led to a typical 5 to 7 year cycles where a vehicle is released then slightly improved upon with yearly models before a material improvement is adopted 5 to 7 years later. This strategy is adopted until today.
Consequently, the logical technological step for legacy automakers to improve ICE vehicles was hybrid vehicles. This materialized with the debut of the poster child of Toyota which was the successful Toyota Prius in 1997. Hybrid vehicles conserve energy, store it in a battery, then use it when possible. This idea is nothing more than an improvement to ICE technology. It is also important to note that a lot of hybrid vehicles automakers produced were simply Ugly. It seemed like legacy automakers were not taking this trend seriously.
Radical transformation for legacy automakers was ironically moving from combustion to combustion. Legacy auto came back with Hydrogen Internal Combustion Engines Vehicles (HICEV). Japanese automakers were so pumped about HICEV led by Toyota and others. Until today, these automakers are toying with hydrogen. However, nothing materialized to mass production.
New Kid(s) On The Block
In a nutshell, legacy automakers were not even trying. They produced ugly hybrids and promised the world a cleaner combustion HICEV as the future. nothing can out of it, until a new kid on the block appeared: Tesla Motors.
Tesla was a new pure EV manufacturer that came up with a nice looking vehicle in 2012 that could reasonably compete with legacy automakers. Then hell broke loose on other car manufacturers. The challenge for legacy auto wasn’t the success of the Model S, legacy auto still made billions of dollars in sales and profits. The challenge was it became evident to everyone that EVs can be better than ICE.
What made matters worse is that the EV secret was out. Many entrepreneurs started purely electric car companies following Tesla footsteps. Tesla was not the only pure EV company in the automotive space anymore. Tesla was followed by Lucid Motors, Rivian, Polestar, Fisker, the Chinese Nio, and many other small EV companies. Many of these companies will fail, but the silver lining is that they became a form of protest against legacy automakers’ attachment to ICE technology.
The Rise of EVs
Weather people love ICE or not. EV production and sales are expected to accelerate dramatically in the next decade to take over ICE. There are several reasons for this. First, from a supply stand point, China is leading the way with local EV manufacturing. In addition, American companies like Tesla are ramping up EV production and expanding their offerings to include SUVs, pick up trucks and trucks. From a demand standpoint, there is no lack of demand for EVs, and the more prices go down, the higher the demand will be. Let’s explore why the demand for low cost EVs will be high.
Electric vehicles are truly superior to ICE in every aspect. They are better to drive thanks to the instant torque of electric motors. EVs are operationally better for consumers as they barely have any maintenance requirements compared to traditional cars. EVs can be charged at home with no need to go to a gas station. This means that operating costs are predictable and can be much lower that an ICE vehicle.
For manufacturers, EVs bring some advantages to automakers, they have significantly less moving parts compared to ICE engines, they have higher well to wheel efficiency compared to ICE engines. EVs can have a positive impact on Green House Gas (GHG) emissions, and when manufactured and operated properly.
However, EVs come with their design and manufacturing challenges for automakers, from sourcing critical minerals for batteries, to thermal management and battery safety. EVs are heavier than ICE vehicles and require careful engineering design to achieve efficiency and comparable range to ICE vehicles. For legacy auto, going all in on EVs is a bold decision.
Legacy Auto Folds
Traditional automakers know that EVs are superior. This is why most of them folded on their bets on other technologies like hybrid vehicles and elected to go fully electric. Hybrid vehicles never made too much sense in the first place as they increase complexity of an already complex system, combining two technologies (ICE+EV) was a perfect recipe for pain.
Other technology bets like hydrogen fuel cell and hydrogen combustion engines were bold stunts by automakers to show they may have something to offer. However, it quickly became obvious to every engineer that such technologies were not feasible for small size vehicle applications.
The pain for legacy auto comes from the fact that they are years behind in R&D spending on electric propulsion. There is a lot of technical legacy attachment to ICE technology that will take years to transform without bold radical change. Legacy auto can produce EVs today, however, they cannot do it economically. This is why legacy auto have to rely on other business models to turn a profit until they catch up with Tesla’s technology. Such business models may range from selling to fleets. Looking into battery energy storage, or operating own fleets to make profit.
Combustion is the darling of legacy automakers, therefore it shall continue to exist in the future. This come with a caveat, combustion will be used in applications that one may not traditionally think of.
Electric propulsion is touted to win the population wars for passenger vehicles applications. However, for heavier transport applications like trains, ships, and large airplanes, the jury is still out. The reason being that these applications require very high energy densities that are very challenging to achieve for batteries. Not only it is hard to build large scale battery powered trains, ships, and airplanes, but it is also hard to safely operate such applications. Hard but not impossible.
However, for applications like rockets and defense. Alternative fuels maybe the solution that will deliver. Such applications require higher energy densities and quantities that only liquid fuels can provide. This is where combustion lovers will win and where electric propulsion may lose the battle.