The next decade could be one of accelerating electric vehicle (EV) adoption.
“It’s an exciting time ahead of us with regards to new technology in the automotive industry,” Martyn Briggs, an analyst at Bank of America, said on Yahoo Finance Live (video above). “You’ve got to go back a hundred years or so before we had such a transition, ironically then from electric to combustion cars, and now obviously we’re going to be doing the reverse.”
In August, President Biden announced a target for EVs to represent half of all U.S. auto sales by 2030. To give the scale of the effort, the share of new electric vehicles sales, which also include plug-in hybrids, reached 2% in 2020.
“50% in the U.S. might sound bullish from where we are today, but if you look at that kind of momentum of the models that are coming out, how good they are in terms of the range, the cost declines of batteries, the improving charging infrastructure, several other factors, … it might not be as scary as it might sound from the outset,” Briggs said. “So… is there going to be enough capacity, enough momentum, enough new models? Well, the early evidence shows that there will be.”
With 29% of greenhouse gas emissions coming from the transportation sector, electrifying cars and fleets is crucial for the Biden administration’s broader climate goal of reducing emissions to half of 2005 levels by 2030.
And the private sector has also joined in on reducing emissions with EVs. Walmart (WMT), for example, set a target to electrify its entire fleet by 2040 while others like Amazon (AMZN) and UPS (UPS) have taken similar steps by placing orders for tens of thousands of commercial battery-electric vehicles.
Briggs noted that “the policy is there. The climate crisis is real. Net-zero targets are real, and they’re not going away. And EVs are an obvious low-hanging fruit to be able to transition to zero-carbon, zero-emission mobility.”
The road ahead for electric vehicles
While the latest electric vehicle startups continue to unveil the cars of the future, this isn’t the first time electric vehicles have had their heyday.
The first EV prototype was built nearly 200 years ago in 1828, and by the turn of the century, electric vehicles rose to popularity in the U.S., making up a third of all vehicles on the road.
However, by the 1920s, gas-powered cars overtook the share of electric vehicles on the road as improved highways meant people could travel longer distances, the invention of an electric starter removed the need to hand crank vehicles, crude oil discoveries in Texas drove down the cost of gas, and mass production led by Henry Ford drove down the cost of gas cars.
Although the oil crises of the late 1960s and ’70s piqued interest in electric vehicles again, as did climate concerns in the 1990s, gas-powered cars remained dominant throughout the 20th century.
So what makes the most recent electric vehicle revival different from previously stalled efforts?
According to Briggs, the difference lies in aggressive EV targets set by governments, improvements in vehicle range and cost, and greater consumer choice.
“The key trend that we see more so is that there’s a minimum viable range,” Briggs said. “About 200 miles of real-world range seems to be the tipping point that now is pushing the new EV product that’s coming to market.”
This time around, he explained, there are various EV options — like battery-electric vehicles or plug-in hybrids — and he expects that to continue going forward.
“What we’ll probably see is a diversification,” Briggs said. “You’ll see entry-level city cars, cheaper batteries, maybe 100-, 150-mile range. Then you’ll have the midpoint, 200, 300, and to your point, real premium cars that can do 500-plus-mile range. But they’re not going to be the cheapest ones on the market, of course.”
But, one thing that could throw a wrench into the rollout of electric vehicles is supply constraints, Briggs said, especially when it comes to battery manufacturing.
“Europe alone is going to need about a 30-fold increase in capacity to achieve the 2025 targets that are there,” he said. “The U.S. won’t be far behind that and probably doubling that again to the end of the decade. So to achieve that, … where are they going to come from? They’re not going to be able to rely on the current largely dominated Asia supply chains where about 90% of the EV batteries come from today. They’re going to need to transition to local supply chains.”
“But in the short term, already you’ve got the mining companies expanding capacity to achieve some of this,” Briggs continued. “The big blocking point that we’ll need to, of course, come at the gigawatt-hour factory and even terawatt-hour-scale factories to achieve a lot of the targets to the end of the decade.”
Grace is an assistant editor for Yahoo Finance and a UX writer for Yahoo products.