Electrical vehicles (EVs) are not a recent innovation of only the past years. At the beginning of the 20th century, about one-third of the overall US motor pool were electrically powered. The decline in EVs sales started after Ford introduced the assembly line and started the mass production of the famous Model T, making internal combustion engines cars cheaper than their electric counterparts.
According to today’s trends and forecasts, a return to the past seems quite likely regarding EVs market share. The sales of electric vehicles rose by 63% on a yearly basis (thanks, in part, to Chinese demand) and are expected to represent around 35% of the total amount of new cars sold by 2040.
The renewed interest in EVs can be related to stricter rules on greenhouse gas (GHG) emissions and the consequent stronger commitment of governments and manufacturers to be compliant with them. However, a question arises: is the environmental concern the chief reason driving this renewed interest?
It Is Not Just the Environment
Considering the main sources of GHG in EU in 2015, it emerges that transportation as a whole is not the major contributor of GHG in the atmosphere, only representing 24% of all emissions.
Since the environmental benefits of EVs will offset just only a minority, though significant part, of overall GHG emissions, is it possible to assume that there are also other drivers that are making governments and companies invest in this particular technology?
First of all, cars are a very special kind of product. Federal Reserve classifies them as durable consumer goods, together with: home electronics, appliances, furniture and carpeting. However, compared to the other goods belonging to that category, cars are more expensive, more complex, and more labour and capital intensive. In other words, the car industry brings a lot of job opportunities. Indeed, using data provided by the US Bureau of Labour Statistics, it is clear that cars are the consumer good that creates the most jobs.
Source: US Bureau of Labour Statistics
Nevertheless, governments might not be only interested in assuring the survival of such a labour intensive industry, but also in acquiring the role of major raw material supplier to the same industry that has been so dominated by OPEC. This could explain why some countries are trying to gain dominant position across the whole EV production chain (from the extraction of minerals to the selling of EVs) and others are willing to re-open mines of minerals useful for making EV batteries.
Car manufacturers, as well, can take advantage of this technological change to achieve market supremacy. Indeed, in the past, there have been a lot of companies that were leaders in their market, but that were not able to keep up with innovations and eventually lost their leadership, such as Nokia, Sony, and Kodak. Hence manufacturers, that are now struggling to gain market share, may be motivated to pursue an electric charge in order to compete with better-established brands.
Car companies are investing a lot of resources in cutting-edge EV technology. Volkswagen, for example, announced a €20bn deal for batteries supply in Europe and China and it will equip 16 factories to produce electric vehicles; Mercedes is going to invest more than €100m in manufacturing operations in Bangkok for setting up a new battery assembly facility.
Risk of Electric Shock
While the switch to renewable sources of energy is going to do away with concerns about emissions coming from power production used to charge EVs, there are other issues which have been overlooked.
Lithium and cobalt are used for making EV batteries. These substances are only extracted in certain areas of the world. For example, 65% of cobalt in extracted in the Democratic Republic of Congo (DRC). The fact that one of the pivotal resources is mainly procured by one supplier country exposes car makers (and ultimately consumers) to the bargaining power of the miners operating in the DRC as well as the DRC’s government decisions. Indeed, the DRC has promulgated a new mining code that will increase royalties on cobalt by 10% and it has also introduced a 50% tax on some profits. There could be the risk of future supply shocks similar to those faced during the oil crisis of 1973.
Other concerns are related to the working conditions in which cobalt is extracted. A fifth of the cobalt extracted in the DRC is drawn out by manual miners, who work with their hands. Also, UNICEF in 2012 estimated that 40,000 children are being forced to work in the mines.
There is also a considerable environmental impact related to this intensive mining. It can cause erosion, the formation of sinkholes, loss of biodiversity, and contamination of soil, groundwater, and surface water by chemicals used in mining. Besides creating environmental damage, the contamination resulting from leakage of chemicals also affects the health of the local population.
If the supply side of EVs raises some social and economic concerns, the production of these cars also raises some fresh issues. Premium cars brands base their success on their engineering heritage. Compared to internal combustion engine (ICE) vehicles, EVs are simpler and have fewer parts, meaning that not only are fewer people needed to assemble them but also fewer subsidiary systems are required from specialist suppliers. Today, about half of US spending on car maintenance is linked to the internal combustion engine. While households may save money on car repairs with the adoption of EVs, this means that many jobs in the automotive maintenance industry will be lost.
This pattern of massive displacement of old skills and polarisation between new and old industries is typical of every period of technological progress. Governments will have to properly manage the consequent painful social disruption and adaptation, but as yet no policy announcements about this have been made. EV technology can help to generate 206,000 net additional jobs in Europe, but efforts must be made to ensure that workers who are currently producing legacy technologies are retrained for quality jobs in producing the technologies of the future.
An additional concern regards the future of EV technology itself. According to a KPMG report, 54% of global auto executives think that pure battery EVs will fail commercially because of the challenges of setting up the required infrastructure, and 60% are concerned with the excessive EV recharging time compared to an ICE vehicle. Additionally, 77% of executives consider fuel cell EVs, which have an onboard power supply, to be the real breakthrough for electric vehicles.
If EVs are not the future of transportation or at least the substitute of ICE cars, it would be reasonable to focus the attention, and economic resources, on possible alternatives.
Beyond the Electric
One alternative to EVs was already mentioned above: it is FCEVs, based on a hydrogen fuel cell. These vehicles present some advantages in terms of energy storage, charging infrastructure and driving range. In regard to the first point, FCEVs need only water or natural gas as raw material inputs. Hydrogen can be physically transported similar to gasoline or diesel, and the needed to refuel is close to that of ICE vehicles. Finally, the higher range provided by fuel cells makes this technology more feasible for long-haul lorries. The technology behind FCEV is still immature and expensive though. There are still several issues which have not been addressed, including the cooling of hydrogen, its safe storage system in the car and increasing hydrogen extraction.
Lowering GHG emissions cannot be delayed and reducing the CO2 impact of vehicles is a necessity. Currently, the most trustworthy technology is the one of EVs, as confirmed by increasing investments from car manufacturers and governments. Nevertheless, EVs technology cannot be applied to the full spectrum of means of transports.
As a matter of facts, it seems that EVs technology will eventually be the chosen one because of the large investments that have already been made, although it may not be the best solution in absolute terms. Apparently, economic interests related to EVs are overtaking the social and environmental impacts that this technology can have. Let’s hope we are not in for an electric shock.
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