Despite all the hubbub about EVs, as of 2021 they accounted for 1% of all vehicles on US roads (Car and Driver magazine). Change is coming, though. Most EV-makers have a substantial backlog of orders, but interest is from high-end customers who can afford sexy, expensive EVs. Catering to the high-end entails creating a driving experience comparable to that of gas vehicles. Doing so complicates the vehicle – the more complicated the vehicle, the more complicated the production line and higher labor and related costs. That said, EVs are still simpler machines than gas vehicles and easier and faster to make. What’s more, now many EVs also trump gas vehicles in style and performance. The culture shock of EVs is over – most prospective customers grant that EVs are a viable alternative to gas-powered vehicles – but the sticker shock is not.
Price
EVs must come down in price for mid-range customers to start routinely buying them. If the average middle class car driver can’t afford an EV, then EVs will remain a luxury for the relatively wealthy and have little market penetration. Hybrid vehicles are cheaper than EVs, so they are an option for the middle class. Hybrids don’t get you to net-zero, though.
Range
The other gating factor to EV proliferation, of course, is range – the best EVs with the best batteries are recording about a 700-mile range. That’s great. How many drivers travel 700 miles in a month? The downside is this – only a very few EV OEMs can make that claim.
Charging Stations
Another consideration is this – the availability of charging stations. Speaking strictly about the US, there is still a shortage of charging stations here. That will change -- and fast. Tesla, for instance, built and installed hundreds of stations before it launched its first EV. This was brilliant on Elon Musk’s part – he built a virtual highway for his cars before he built the EVs that would use it.
Other vendors, of course, will install their own charging stations. Will the charging stations from different OEMs be compatible? Probably not – that is, absent a win/win partnership with another OEM. Tesla has just entered such a partnership with Toyota, so vehicles from those two OEMs will charge on the same stations. This is a real value-add. Two OEMs can install twice the charging stations for owners of both their respective EV brands and, with more stations, customers have greater convenience. Convenience, moreover, across two major geographic regions – North America and the Asia Pacific Rim.  Â
Getting From Gas
Most big EV OEMs are traditionally gas carmakers. This fact disadvantages them in two ways. First, they have had to reengineer their gas production lines for EVs, or they have had to build new EV production lines. These are unavoidable sunk costs that must be recovered by putting a higher price on their EVs. As these OEMs still build gas vehicles, they also have to figure out how to market their EVs without cannibalizing their gas vehicles. Needless to say, if past is prologue, they’ll up the price of EVs so it’s comparable to the prices of their gas vehicles then sell EVs into their existing customer base of gas vehicles. Whatever they do, they’re less competitive with pure-play EVmakers that originally built their production lines for EVs. As long as they have brand-loyal customers who will buy what the OEM makes, though, gas OEMs will prosper. But for how long? As competition drives down EV prices across the industry as a whole, what rationale will gas OEMs claim for selling you a gas vehicle?
The Asian Equation
The battle between gas and electric vehicles is already largely a fait accompli. The fight for market share in the US in the near future will be between EV-makers. New competition from Asian countries, especially China, will also soon require US EV OEMs to up their game.
Asia has a robust and widespread EV presence. Asian OEMs also make low-end EVs for under $5,000. If they thought the market was there, American car companies could soon get to that price, too, but to what end? The margins on cheaper EVs would be so slim, EV carmakers would have to sell many more than the number of higher priced EVs to make it worth their while; and sell them to a different customer – probably younger people who are salary-challenged and the working poor who otherwise could not afford a car and now rely on public transportation. Asia has many times the number of working poor than the US, so Asian EV-makers have a more viable target customer base for lowest-end EVs than do US EV-makers. The Asians can also sell low-end EVs to America’s working poor if US EV-makers cede that segment to them. That would establish their brand presence in the US. How many Americans identify these names with Chinese EV brands: BYD, Geely, Byton, Always, Zotye, …You get my point – and these are a very few of the more than 46 EV brands in China.  Â
The EV Value Chain
When you speculate about the future of EVs, you can’t limit the discussion to the vehicles alone – you have to evaluate the phases of the entire EV value chain of raw materials, suppliers, factories, workers, robots, the EV itself, dealers, salespeople, customers, maintenance and charging. The more vertically integrated an OEM is, the more of the value chain it controls, which makes it more competitive. Tesla is one of the few that has made that happen, which may be why it produces more EVs a year than anyone else – and why it’s the leading EV-maker in China as well. Granted, Tesla produces far less than the number of gas vehicles other OEMs make, but it points a viable way forward for EV-makers.
Failure at any phase has severe consequences for time-to-market. If 2% of supplies required for a gas vehicle don’t arrive or arrive on time, the vehicle does not go out the factory door. Pure-play EV-makers have fewer parts and have developed newer supply chains, so they control them better and thus are less susceptible to delays. Shortening the EV supply chain expedites material transfer, so factories never lie dormant. An inactive factory does not a profitable EV OEM make.
Major American gas carmakers have outsourced to such an extent that, in attenuating their supply chains, they exposed more elements of them to disruption while also surrendering more leverage to their suppliers. The result is delays in parts that have slowed or stalled production lines.
Factories have gotten so automated that robots, controlled by AI, do much of the work. China is way ahead of the US in researching and deploying AI and robots, so factories produce cars faster with less human intervention, which reduces a major fixed cost – labor. What’s more, it takes 30% less human labor to make an EV than a gas vehicle. Savings in labor can be passed on to customers in the form of lower-priced EVs. This is not good for gas vehicle OEMs with strung-out supply chains, less control over suppliers and less efficient production lines.
Recusant Sales
Salespeople in dealerships also sometimes are the tail that wags the dog. If their sales margins are too meager on cheaper EVs, salespeople simply won’t sell them, so the OEM must artificially inflate their cost to build in margin.
Self-Creating Markets
EV-makers, finally, must create their own markets. This means educating and marketing their brand intensely to customers of gas vehicles and competitive EV-makers, which costs big money in a young market.
AVs
In the not-too-distant future autonomous EVs (AV) will be fairly common. These will not supplant electric and gas cars at first; rather, fleets of busses, taxis, Uber, Lyft and delivery vehicles will go driverless. Inevitably, electric cars and trucks will then follow probably with driver-assist at first.
Distrust of the New
It’s almost never the limitations of the technology that impede such advances – it's due to people’s resistance and failure to adapt to the technology that does. Imagine, for instance, trying to launch a driverless bus service in an upscale suburb of Washington, DC next year. Afraid that the busses would run over their children, the Not-In-My-Backyard zealots would be out in force. This is the result of seeing the project with blinders on.
With more holistic vision, parents could equip children with bracelets that detect a bus within 50 feet, and the service could set busses’ governors so they don’t exceed 25 miles-an-hour and automatically stop 20 feet before any human or other obstruction.
A project like this is happening in three cities in China where, using advanced AI, the bus manufacturer Yulong Group has deployed driverless Mini Robobusses. In the US, Alphabet and GM have deployed experimental pilots of AVs. Of course, local, state and federal policies must change, but advances in 5G networks and other enabling technologies bode well for AVs.
The Impact of EVs on US EUs
I may have tried your patience with these extensive prefatory remarks about EVs. However, I think they provide a necessary and instructive context for discussing how EVs will affect US electric utilities (EU).
EUs and gas vehicle OEMs have one thing in common: they both operate in hybrid environments. This reality will continue for some time. Prosumers, as we know, are generating a portion or all of their own electricity from renewable sources like rooftop solar panels and storing it locally with high-capacity batteries.
EUs for their part are slowly weaning themselves off fossil fuels and migrating to green ones. But the operative term here is “slowly.” Complete transition by EUs to green energy is years away. Oil, coal and natural gas are simply too pervasive to be replaced completely any time soon, and conservative political resistance protecting fossil fuels will also slow the go to green. Green power can’t as yet meet the world’s power demands, so short-term reliance on fossil fuels by EUs is inevitable for now. However, if fossil fuels can’t be phased out long-term, then we are headed to planet death. Ideally, these exigencies portend EUs’ greater dependency on green fuels, if not on their own initiative then driven by legislation and prosumer’s increasingly green habits. Â
President Biden is pushing new environmental restrictions on gas vehicles and for half the new vehicles sold in 2030 to be zero emissions ones. Ironically, new cars pollute less than old ones, but there’s no plan to get those off the road. Biden might take a cue from Sadiq Kahn, Mayor of London, who has created an ultra-low-emissions zone in the city center. Cars older than 2005 must pay $17 every time they enter the zone. That’s in addition to a $21 congestion fee all cars pay for entering the zone. These measures are pushing commuters to use public transportation and ride-share (Transport for London, tfl.gov.uk).
SaaSlike solar business models are also promising. I use the SaaS descriptor because these models centralize solar in large, shared arrays and keep changes to customer sites exceedingly thin. Whereas prosumers commonly now put rooftop solar panels on their houses to cut power costs and go green, large centralized solar arrays obviate the need for any changes to a prosumer’s house and any costs, labor, maintenance and management associated with such a project.
Large community solar arrays (CSA) let customers pretty easily plug and play with the array that’s located near the community to transition quickly and painlessly to solar. Built usually by an independent contractor and funded by community and other investors, arrays can provide clean power to customers about 20% cheaper than fossil fuels. The Solar Garden Institute provides a list of CSAs around the US. CSAs further disintermediate EUs, so the latter will likely spin out more value-added services like monitoring and reporting customers’ use of solar via net meters to recoup spend.
Big Tech EVs
Little attention is paid to Big Tech elbowing into the EV market. Meta and Apple are researching EVs of their own brands, so is Huawei in China. Consider this hypothetical example… Meta is used by 1/3 of the global population. If Meta can sell EVs with its software into its installed base, it will create a massive market for its probably proprietary EVs. If Meta partnered, say, with Ford and used a version of its software in Ford vehicles, then that market would be compounded even more. Partnering strategies of this sort will be how the Big Tech EV segment will evolve. Proprietary EVs will use proprietary charging stations, which will further complicate the mix of charging infrastructure available to customers. New and different competitors will up the demand – and for differing customer profiles -- for electricity from EUs. EUs proactively following impending partnerships will be better positioned to power this expansion in their service areas.
Different Geographical Markets
Of course, the variety of sustainable power markets will also alter ways in which EUs provide electricity. For instance, the US’ renewable portfolio provided 20% of total electricity in 2021, while fossil fuels provided 61%, and coal alone accounted for 22% (US Energy Information Agency). By comparison, China’s renewable portfolio for 2020, the latest available year, was 43.5%, while fossil fuels accounted for the rest, and almost all of that was from coal (China’s National Energy Administration).
However, China’s population and energy needs are so demanding that, while its sustainable portfolio is growing rapidly, so is its use of coal. We know coal creates more pollution than any other source, so China’s race to power its vast and growing economy, while it creates a huge sustainable footprint, generates increased coal pollution, too.
By comparison, while the US sustainable footprint is proportionally smaller than China’s, the US also pollutes less with coal. Moreover, the US is trying to phase down power from coal, while China is trying to increase it. Migration of US EUs to green seems slower than China’s comparable migration, so EUs in the US must digitally transform to aid EV-makers in competing with Chinese ones.  Â
At 13.3%, the percentage of all vehicles that are electric in China (Statista) is higher than the figures for EVs in the US at 4.6% (Car and Driver magazine). That percentage of EVs in China’s monumental population is a much higher number than the number of EVs in a smaller US population. China is further along than the US in adoption of EVs, but because its population is so large it also has further to go than the US. That said, US adoption of EVs is, over all, retarded. The upside of this reality is that US EUs have more time to modernize and increase capacity to catch up with EV demand; the downside is its corollary – slower modernization makes the US EV market more vulnerable to Chinese competition.
AI
Growing US EU data is creating a mountain of real-world big data that AI systems can mine for new insights about EV operation, marketing, sales and service. The US and China are the world’s two largest economies, so big changes in either will have serious global economic repercussions. China already far exceeds the US in AI patents, which is driving more and better AI apps particularly, for our purposes here, in rapid manufacturing of EVs. AI is only as good as the penumbra of data and apps around it, so the more an EU has digitally transformed, the greater impact its AI will potentially have for more efficient operations and more differentiated services.
5G
5G, of course, affords high bandwidth at the grid core and low latency at its edge, so Autonomous Electric Vehicles (AV) will certainly capitalize on 5G. AVs maneuver by AI, based on ubiquitous and instantaneous data transmitted from vehicle sensors and cameras to the grid edge and back to the vehicle. As already mentioned, Alphabet’s Waymo and GM’s Cruise AV pilots are being conducted in San Francisco and other cities with complex streetscapes. The sweet spot for AVs as robotaxis seems to be cities where people use taxi and ridesharing services.
US EUs must power all those AV chargers when driverless vehicles go big. This is another factor militating for US EUs to modernize faster. 5G is just becoming really viable because telecoms that have 5G capabilities are only now figuring out how to sell it. Some are doing this better than others, so 5G-enabled services will differ according to the provider.
The Road Ahead
US EUs must get in gear and accelerate their modernization in keeping with the aborning EV market. Digital transformation, adoption of AI and hopping on 5G networks are now table stakes. US EV- and AV-makers must establish a solid foothold in the American market to ward off impending Asian competition. New green energy models for prosumers like CSAs will expand the prosumer base. Smart EUs will proactively address this change by spinning out new value-added services that leverage net meters. Needless to say, all signs point to more accelerated growth of EVs and more EV players in the American market, which will create more demand on US EUs and drive smart EUs to modernize to better meet it. Â Â Â Â