The long road ahead for the electric-vehicle revolution
While politicians and industry leaders worldwide have created the impression that EVs are on the verge of replacing the internal combustion engine, it is not going to happen overnight
The electric vehicle capital of Canada is a small town in Quebec cottage country, some 95 kilometres northeast of Montreal.
The family-owned dealership of Bourgeois Chevrolet Buick GMC, located in Rawdon, Que., consistently ranks as the top seller of electric vehicles (EVs) in the country – both new and used versions of battery-only models such as the new Chevrolet Bolt and plug-in hybrids such as the Volt, which has a backup gasoline motor. Last year, fully half the 1,000 cars and trucks that Bourgeois sold were EVs, whereas most Chevy dealerships around the country sell a couple each month on average.
To boost those sales, Bourgeois general manager and part-owner Hugo Jeanson makes sure he has a steady stream of inventory from the manufacturer, but also imports used models from the United States. Mr. Jeanson has also trained his sales representatives to know the vehicles and be able to answer customers' concerns about price, range and performance. A key marketing feature: Operating costs for EVs are considerably lower than for gas-powered vehicles, both in terms of fuelling and servicing.
The dealership keeps electric vehicles as loaners for customers when their cars are being serviced. And it has invested in public chargers – 25 slow chargers, which take several hours, and one fast charging station that can power up a vehicle in an hour. This year, Mr. Jeanson plans to add three fast chargers powered by solar panels.
"It's really a shift that we're doing it," he said in an interview. "We're doing it because there are a lot of advantages for the customer but it is also very good for the planet – it's very green."
Mr. Jeanson's effort is part of a worldwide drive to boost the market for electric vehicles in order to reduce the greenhouse-gas emissions that cause climate change. The goal is to phase out the gasoline-powered internal combustion engine [ICE], which has provided affordable, long-range mobility for the past century.
Quebec is leading that push in Canada. The provincial government offers generous rebates to buyers but also requires auto makers to sell a growing number of EVs and plug-in hybrids or face fines.
The federal government is crafting its own zero-emission vehicle [ZEV] strategy, which will not include mandates for auto makers but will support the building of charging infrastructure and the R&D required to mass-market electric vehicles.
Quebec and California have ambitious policies to encourage the adoption of battery-only EVs and plug-in hybrids. Ontario has stopped short of requiring auto makers to sell a certain number of such vehicles but has a target of an EV in every multivehicle driveway in the province by 2026.
Internationally, governments in France and Britain have upped the ante, announcing that they would ban the sale of new cars with internal combustion engines by 2030, while China is pursuing an aggressive policy to boost EV sales and dominate the global market for the related battery technology.
Car companies, of course, have ratcheted up expectations over the past year with announcements about their plans to introduce new EV models.
General Motors Corp. announced last year that it would add 20 new EV models to complement its plug-in hybrid Volt and battery-only Bolt.
Volvo Car Group said last July that it would offer electrified engines on all its vehicles starting in 2019, although it will continue to sell ICE-powered cars. Still, president Hakan Samuelsson declared: "This announcement marks the end of the solely combustion engine-powered car."
That same month, Tesla Inc. founder Elon Musk piled on by telling U.S. governors that by 2027, more than half the vehicles produced in the United States would be battery-only electric vehicles.
With all this government and industry action, consumers can be forgiven for thinking that Mr. Jeanson is in the vanguard of a movement that will change what people drive overnight. Politicians and industry leaders have created the impression that EVs are on the verge of relegating the internal combustion engine to the museum of industrial history.
There is no doubt that EVs will eventually displace the reigning champion, but this will not occur overnight or even by the end of the 2020s. EV sales are growing rapidly and topped one million worldwide for the first time, but that represents just 1 per cent of the global vehicle market. In Canada, sales of electric vehicles represented 1.4 per cent of the market in 2017, with Quebec leading the way at 2.2 per cent, according to figures released Friday by FleetCarma, a Waterloo, Ont.-based firm that tracks the market. All told, some 18,560 EVs were sold in the country last year, including 7,477 in Ontario and 7,194 in Quebec.
There are billions of dollars to be spent on charging infrastructure, vast improvements in batteries to be made and massive doubts in consumer attitudes to be overcome before EVs are close enough in cost and performance to traditional vehicles.
And at the North American International Auto Show in Detroit last month, GM, Ford Motor Co. and Fiat Chrysler Automobiles NV all showcased pickup trucks, the least fuel-efficient vehicles in their lineups. Those trucks generate a substantial chunk of their profits and are coveted by American consumers.
Fiat Chrysler CEO Sergio Marchionne told a Toronto audience last year that his company loses US$20,000 on every battery-powered version of the Fiat 500 subcompact it sells. At the Detroit auto show last month, Mr. Marchionne told reporters: "I don't know a guy or a person or an entity or an economic organization that is making money on selling electric vehicles unless you're selling at the very, very high end of the spectrum." And Moody's Investor Service said in a report last month that it estimates auto makers lose between US$7,000 and US$10,000 on each EV in the North American market.
"I love not buying gas"
Julia Schindeler loves her battery-only electric car.
Her white 2017 Nissan Leaf is quiet, peppy, handles well and flits past gas stations without ever needing to pull in for a fill-up.
"I love not buying gas," Ms. Schindeler said. "I can't believe how much money we've saved not buying gas."
Ms. Schindeler's husband, Ben Chan, charges the car at a lot in downtown Toronto for a small fee and estimates that every hour of charging restores 35 kilometres of driving range. He also notes that during the summer months, the fully charged battery will last for about 220 kilometres if they don't drive on the highway.
It has its downsides. The battery takes longer to charge in cold weather, drains more quickly when the car has to climb the two-kilometre hill from the Don River Valley to their home in the Leaside neighbourhood, and long trips during the winter are non-starters.
None of that diminishes Ms. Schindeler's enthusiasm.
"This Leaf is an ideal urban car for the summer," she gushes.
And there's the problem for auto makers, politicians and anyone who wants the roads cleared of traditional vehicles as soon as possible in favour of cars that run solely on electricity: For the almost 20 million Canadians and Americans who buy new vehicles annually, the fully electric car just doesn't fill the needs of drivers who want the liberty of virtually endless mobility.
For the moment, the electric vehicle's shortcomings are mainly in the battery. The issues are relatively simple to identify: The cost of batteries needs to come down; the range of the vehicles must be vastly improved; charging systems must be quicker; and the recharging infrastructure has to be expanded.
Range is one of Ms. Schindeler's concerns about her Leaf and is cited as a key reason why others are reluctant to buy the vehicles.
She won't drive the car from her home in Toronto to visit family in Ottawa or North Bay, Ont. – in part because the battery drains quickly in the winter and she hasn't taken the time yet to plan a route that would allow her to recharge along the way. According to a Canadian Automobile Association map of charging stations, the route to North Bay along highways 400 and 11 is not a recharging wasteland, but there aren't a lot of stations and some are at private locations such as car dealerships for other auto makers. Stopping at some sites along the way would require a drive of a few kilometres off the main highways.
Even where chargers are available, there is still the issue of waiting 30 minutes to an hour for a vehicle to juice up.
"If I want to go to North Bay, I'll just rent a car," Ms. Schindeler said.
Ms. Schindeler's 2017 Leaf has a range of 172 kilometres. That's the last year of the original model, which made its debut in 2011. Nissan Motor Co. Ltd. has spent the intervening time improving the battery performance and redesigned the car for 2018. The newer model's range is listed at 241 kilometres.
Increased battery performance is the holy grail of the EV industry. Traditional batteries simply can't store enough power in a cell small enough to be practical. The use of lithium has led to a dramatic increase in energy density – the amount of energy that can be stored for every unit of mass. But researchers need to go further and find the right mix of alloys for the electrodes and electrolyte material to maximize energy density and avoid unwanted reactions, which degrade a battery's performance and lifespan.
The U.S. Department of Energy has set some clear goals that are broadly acknowledged by industry to be the key to greater consumer acceptance: a range of 300 miles (480 kilometres) and a charging time of 30 minutes or less.
Those improvements need to come at the same time that battery costs are lowered. Industry expects to cut battery costs by half over the next decade – to US$100 per kilowatt hour, the point at which an EV would be roughly comparable in price to a traditional car.
Tesla – the EV maker and stock-market darling – and GM, which has put Detroit's best-selling electric vehicle on the road, say battery costs are falling. GM said in a presentation to investors in December that the cell cost for its Bolt is US$145 per kilowatt hour, but it's working on a new system that will cost less than US$100.
Companies working on batteries have cut costs dramatically, said Brett Smith, assistant director of the manufacturing, engineering and technology group of the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.
"That's an important part," Mr. Smith said. "The question to me is: Do you also have the other aspects of performance in line that make a gasoline car much more simple for a consumer to own?"
Tesla says its Supercharger system will recharge the battery on a Model X SUV in 1.08 hours for a 413-km highway trip or what it calls a road trip. For what it calls a daily trip, a 100 kwh wall connector will take 5:36 hours to recharge a Model X. It does not say how long a Supercharger will take to recharge for a daily trip.
Investors appear to believe that Tesla is the future, bidding up its market capitalization to about US$50-billion , more than Ford and close to GM's $58-billion. That's despite the US$3.5-billion in losses that Tesla has racked up since 2014 and the recent announcement that full production of its cheapest vehicle, the Model 3 sedan, will be delayed for a second time.
Finding traction in a wary market
One key barrier to consumer acceptance is the availability of charging stations.
Drivers who own a single-family home can install their own for $1,000, with government programs defraying that cost. But it gets complicated for renters or those who live in multiunit buildings. Governments are financing the expansion of a public charging network, but that still pales in comparison with the ubiquity of gas stations.
Public charging networks that charge by the hour are expanding. Ontario has financed their construction along its 400-series highways, while many retailers and other commercial outlets provide them on a fee-for-use basis.
What Ms. Schindeler calls her perfect urban car for the summer is effectively a niche vehicle at the moment and won't cause the transformation of the North American fleet that environmentalists and many scientists believe is essential to combat global warning.
The pace of the transition will depend on how aggressively governments will regulate auto makers – effectively forcing them to include mass-market-ready EVs in their lineups – as well as the industry's success in driving down the costs and improving the range of all-electric models.
The most stringent regulations introduced so far are in China, which has set the goal that 20 per cent of new vehicle sales by 2025 consist of so-called "new energy vehicles" – EVs or plug-in hybrids. In the land of the pickup truck and sport-utility vehicle – Canada and the United States – the appetite for EVs is weak at best.
In the third quarter of 2017, worldwide sales of plug-in hybrids and battery-only EVs rose 63 per cent in key markets compared with the same period in 2016, according to Bloomberg New Energy Finance (BNEF).
Growth was driven mainly by China, where sales last year doubled to more than 520,000 vehicles and accounted for half the total sales in major markets that BNEF tracks, including China, Europe, North America, Japan and South Korea.
Falling battery costs will bring EV prices down to traditional vehicle price points between 2025 and 2029, BNEF believes, and the firm forecasts that there will be more than 100 million electric vehicles on the road in the early 2030s.
"The single biggest reason we're optimistic on long-term EV adoption is that we think batteries are going to keep getting better and we think they keep getting cheaper," BNEF analyst Colin McKerracher said. "But prior to that, the market is still regulatory driven because batteries, even as far as they have fallen, are still not cheap enough to make EVs competitive on a standalone basis."
Consider, however, that the 100 million EV vehicles in the BNEF forecast is roughly the number of all vehicles sold around the world every year. So even by 2030, EVs and plug-ins will represent a maximum of 29 per cent of new vehicles, according to a forecast by Canadian auto parts giant Magna International Inc.
"We try to take a realistic view of everything we see," Magna CEO Don Walker said. "I don't think you can take any government or any industry participant as saying necessarily what they believe."
He wonders, also, whether governments will be keen to set aggressive targets when they discover that, as the size of the electric fleet increases, revenue from gasoline taxes will drop. (Federal and provincial governments took in $22-billion in gasoline and diesel fuel taxes in 2016.)
The regulatory landscape remains uncertain, too, particularly in the United States, where President Donald Trump has been rolling back the climate-change policies of his predecessor while raising doubts about the science of global warming.
Still, there are signs of support for electric vehicles: Even in a Washington where a Republican President and his party control both houses of Congress, the tax bill passed in December maintained the US$7,500 tax credit for consumers who purchase alternate-fuel cars and trucks.
The key test will come when the Environmental Protection Agency and the Transportation Department conclude their review of the planned fuel emission standards for cars and light trucks for 2022-25, which were finalized by the Obama administration just prior to leaving office. Those regulations – known as CAFE standards (corporate average fuel economy) – would increase average fuel economy to 54.5 miles per gallon by 2025. Because they are based on an auto maker's entire fleet of cars, they provide an incentive for companies to market EVs in order to offset the more profitable gas guzzlers they sell.
The manufacturers have been lobbying Washington to ease the standards, which EPA administrator Scott Pruitt described as "costly for auto makers and the American people."
The administration's decision on the CAFE standards could spark a battle with California, which has the right to set its own fuel regulations and is determined to maintain the Obama administration's stringency. California is leading the way on electric vehicles in the U.S. with a myriad of programs, including a target that would require 8 per cent of new vehicles sold to be either battery-only or plug-in hybrids by 2025.
The Canadian government is watching from the sidelines with its own climate-change plan at stake. In order to maintain a consistent approach to the cross-border industry, Ottawa has moved in lockstep with the U.S. on fuel-efficiency standards. Should Washington and California diverge, Prime Minister Justin Trudeau will have to decide whether to harmonize with the weaker U.S. federal standards or the tougher state ones.
Regulatory policy in many states, meanwhile, seems designed to discourage EV sales.
Georgia, for example, eliminated a US$5,000 credit for EV buyers in 2015, and EV registrations in the state slumped to 2,549 in 2016 from 10,540 in 2010. The state also introduced an EV fee – which now stands at US$208 – to replace the revenue it was losing because EV owners weren't paying gas taxes.
"It is extremely punitive and particularly impacts lower- and middle-income drivers who want to drive electric," said Anne Blair, clean fuels director of the Southern Alliance for Clean Energy.
Sixteen U.S. states now have such EV registration fees, including Tennessee, where Nissan assembles the Leaf.
Such taxes will only depress sales in a market already plagued by sticker shock.
As an example, the two-seater electric Smart car sold by Mercedes-Benz Canada Inc. went on sale at the beginning of October. It offers a pure comparison of sales of an EV model versus a gasoline-powered one. The EV version of the Smart coupe carries a suggested price of $29,050, compared with $18,700 for the 2017 gas model. The Ontario rebate of $13,000 eliminates the price gap, but Quebec and B.C. slash just $8,000 and $5,000 respectively from the price of the car. Between Oct. 1 and Dec. 31, Mercedes-Benz dealers in Canada sold just 93 electric Smart cars, compared to 540 gas-powered versions in the same period in 2016.
Ottawa is now developing its own policies to encourage the adoption of EVs. As part of its international commitments on climate change, the government is targeting transportation, which contributed 24 per cent of the country's greenhouse-gas emissions in 2015. Under the 2015 Paris climate accord, governments pledged to put policies in place that will drive a long-term transition away from fossil fuels, a process known as decarbonization.
Ottawa has several overlapping strategies that are expected to reduce emissions in the auto sector and provide incentives for consumers and auto makers to opt for electric vehicles. They include carbon pricing, which will drive up the cost of gasoline and diesel, and fuel efficiency standards that require auto makers to improve fuel economy and reduce carbon dioxide emissions. The government is also due to roll out a clean fuel standard that could encourage replacing gasoline-powered vehicles with low-carbon options such as EVs. In the past two budgets, Finance Minister Bill Morneau allocated $182.5-million over four years for R&D and to build charging and refuelling stations for EVs and other lower-carbon vehicles such as those that run on hydrogen or natural gas.
However, Ottawa is unlikely to provide direct subsidies to consumers who purchase electric vehicles. Faced with heavy lobbying by the auto industry, Transport Minister Marc Garneau ruled out a ZEV mandate that would require auto makers to sell a certain percentage of EVs or plug-ins. "A ZEV mandate is not the approach he wants to pursue," spokesman Marc Roy said in an e-mail.
Clean-energy proponents worry the lack of a mandate will relegate Canada to laggard status, well behind the leaders in EV deployment – California, China and Norway, which led the world with a whopping 29 per cent of vehicle sales in 2016. Norway has vowed to ban sales of new vehicles equipped with internal combustion engines by 2025. The EV advocates warn that auto makers will allocate their limited production of electric vehicles to markets where they face penalties if they underperform.
"It would send a much-needed market signal to the industry that it needs to produce the vehicles the market is demanding," said Dan Woynillowicz, policy director for Clean Energy Canada, an advocacy group based at Simon Fraser Univeristy. Mr. Woynillowicz notes that Canadians who want to purchase an EV often have to wait many months for delivery.
Meanwhile, Ontario and Quebec have a missionary's zeal for EVs.
Ontario's target of one EV or plug-in hybrid in every multivehicle driveway by 2026 would mean sales of 1.7 million by that year, an unlikely target.
Quebec is mandating that 10 per cent of new vehicle sales be either battery-only EVs or plug-in hybrids by 2025, with its climate plan forecasting 100,000 EVs on the road by 2020.
The province's powerful state-owned Hydro-Québec plays a major role in promoting the nascent industry. Hydro-Québec is also a major backer of Circuit Electrique, the province's EV charging network, which boasts almost 1,300 stations and 252 partners, from municipalities to private companies.
The road ahead
For now, several auto makers are banking on an "if you build it, they will come" strategy. They're also using the word "electrification," which includes hybrids and plug-in hybrids – not just battery-only EVs – as a way of demonstrating how environmentally friendly they are, even though hybrids and plug-ins burn gasoline.
"We're all expecting there to be more and more acceptance of electrification by the consumers over time because clearly there are going to be more offerings," said Joe Hinrichs, Ford's executive vice-president and president of global operations.
Mr. Hinrichs said at the Detroit auto show that Ford will spend $11-billion between 2017 and 2022 to develop and start producing 40 electrified vehicles – 16 battery-only EV models and 24 hybrids or plug-ins.
GM and other auto makers are focusing on China, in part because it is the world's largest market but also because of China's stringent regulations.
But regulators and environmentalists hoping to change the world will need more drivers like Ms. Schindeler if their billion-dollar bets are going to succeed.
"We say we are not going back to the ICE age," Ms. Schindeler vows. "We are totally committed to doing what we can as a family to minimize our carbon footprint."