The Electric Vehicle Transition In Historical Comparison

Advocates for battery electric vehicles (BEVs) are enthused about the potential for them to displace most internal combustion energy (ICE) vehicles within a decade or two. The figure below shows a number of projections of BEV market share for new vehicle sales from a variety of groups, some of which are more aspirational than predictive. But rapid growth in EV sales seems to be the consensus. Are there reasons to doubt this?

Many have noted that the rate of market penetration for new technologies has greatly increased in recent decades; in the U.S. smartphones reached saturation in a decade, compared to up to 50 years for appliances like washing machines. Others have compared Tesla to the Model T, suggesting their vehicles are so revolutionary that they will displace ICEs at the same speed that the Model T replaced horses.

Needless to say, much of this involves logic that is less than straightforward. To begin with, market penetration for large appliances like washing machines and refrigerators came when, first, a noticeable fraction of consumers still did not have access to the electricity grid, but more importantly, those appliances represented a larger portion of disposal income compared to smartphones or internet connections.

But also, and perhaps more importantly, is that the Model T was in a very different position from the Tesla. The Model T replaced competing autos quite rapidly as most of those were craft-assembled, often lacking in standardized parts, and quite expensive. The Model T, being mass-produced, had standardized parts and was specifically designed to be easy to repair as well as being rugged enough for then-mediocre roads. It was also cheaper than many competing vehicles, about 1/4^th the price of the Stanley Steamer.[1]

A better comparison is the replacement of horses with tractors in agriculture. As the figure below shows, it took 20 years for the number of horses used on farms to drop by 50% and over four decades before they were largely phased out. (I haven’t found data on autos versus horses in transportation yet.)

A similarly slow transition can be observed in the railroad industry, where the railroad companies replaced steam locomotives with diesel engines. The former were larger and heavier, reducing their net towing capacity, required a water tank for steam which had to be regularly replenished, and needed much more frequent cleanings than did the diesel engine. Since railroad companies had easy access to capital, they should have converted fairly quickly. Yet as the figure below shows, this again took 20 years from the first widely available diesel locomotives to surpass the number of steam locomotives in use.

Indeed, residual fuel oil could have been substituted for coal in steam locomotives, with the Russians leading the way in the 1870s. But the American industry was much slower to adopt it, as the figure below shows, with oil use by railroads (combining resid and diesel) surpassing coal only in 1950! I’d love to learn why this was so glacially slow. (One author claimed that the railroad industry was concerned about long-term availability of oil until the 1901 Spindletop discovery, but that doesn’t seem to conform to the timing.)

The crucial point is that the Model T and the diesel locomotive were far superior products than their competition. Is the same true of electric vehicles? Although there are certainly instances of inferior products being hard to displace (look at your keyboard), there are few cases of inferior products displacing superior ones. The CFL, for instance, was avidly promoted as more efficient and environmentally friendly, as well as cheaper to operate over its lifetime. Numerous programs offered buyers subsidies, yet they never dominated the market and ultimately lost market share to halogen lamps (actually less efficient than CFLs) and then LEDs (more efficient and better).

For automobiles, the comparison is not straightforward as some factors are intangible. But the table below provides a comparison of the Model T and the horse as of 1920, and while the Model T is more expensive to buy and operate, it is far more capable than the horse, with twice the power, ten times the cargo capacity, three times the passenger capacity, and five times the range. The one shortcoming is that a Model T could not be left in a pasture to refuel; on the other hand, fueling the Model T was quick; leaving a horse to pasture would be as gradual as charging an EV battery. Also, the amount of care the Model T required was far less than feeding, currying, and stabling a horse. The Model T’s emissions could be ignored by the owner: not so for the horse, whose ‘emissions’ needed to be shoveled up and disposed of.

What about the competitiveness of the electric vehicle? The primary benefit is lower maintenance, between 40-60% less than for the internal combustion engine vehicle, which is not trivial. Other than that, better acceleration matters but is not high on the average car buyers’ list of priorities, and the lower (not zero) emissions will appeal to only a small fraction of consumers. On the downside, range anxiety and slow charging are intangibles that weigh heavily on the market. Advocates denigrate the inconvenience of battery charging but is a huge drawback especially for a family’s primary vehicle.

To date, EV sales have been limited to early adopters (including those driven by the Tesla brand name) and luxury car buyers. The cheaper EVs like the GM Bolt sales are anemic: it represented 4% of GM’s sales in the last quarter. The necessity for large subsidies and a wide variety of intangible incentives (free parking and/or charging, use of carpool lanes, etc.) suggests that EVs remain an inferior product and there is little reason to believe that will change soon.

Given that the EV market is likely to remain heavily dependent on government support, and governments can be fickle, there is a lot of risk involved in their development. The Biden Administration’s Inflation Reduction Act’s extension of subsidies for purchases seems positive for the business, except for the many restrictions on foreign sales, income of the purchaser, etc. Whether these levels of support can be sustained over the long term in most major economies is debatable.

There is a significant chance that the electric vehicle will prove to resemble the CFL more than the Model T, something that is more expensive but with inferior characteristics, except for reduced emissions. The recent spate of price reductions still leaves them more expensive than competing conventional vehicles, and improvements in cost and performance for lithium-ion batteries seem to be slowing. The next few years will see the biggest test, as mass buyers scoop up the new models and evaluate them in real world conditions, where limited data suggests that buyers’ remorse is not uncommon.

I can foresee three possible forward paths for the EV (what the pundits call ‘scenarios’). First, government support continues at a high level, battery technology makes major leaps forward in providing lower costs and faster charging, and consumers’ concern about emissions grows exponentially. In this case, the optimistic projections of EV market share would prevail.

Alternatively, EVs could never become the primary light duty vehicle, but becoming a second car of choice for many families and increasingly used in some urban settings. Battery improvements would be offset by lower government support but the industry would thrive, albeit with market share on the lower end of projections. My belief is that this is most likely.

But also, the lithium-ion EV could be the CFL of the mobility industry, replaced by a combination of very efficient, hybrids and/or ultracapacitor or some other advanced battery. It would not be the first highly touted technology to prove a dead end. Ridden on a Concorde, lately?

[1] The Stanley Steamer was $1,000 in 1911, the Model T $385 in 1920. Inflation in the interim would mean the Steamer would have doubled in price.