You are probably thinking recent, aspirational announcements by Britain, Germany, India, and China to eventually phase out the sale of gas-powered cars is the kind of shock to the system that will rouse the global auto industry into action. The industry is of course already on high alert to the threat from EV, shared transport, and autonomous mobility. So, phase out targets that don’t arrive until 2030, 2035, or even 2040 provide more than enough time for the industry to adjust. Instead, automakers face a more immediate problem, already bearing down in 2017: sales growth of ICE vehicles (internal combustion engine) may have already peaked.

If ICE vehicles never return to sales growth, then automakers must now confront the task of managing gas-powered vehicles as a legacy business, while finding their role in the new, broader area of mobility. How is it possible that ICE vehicles are already a legacy business? Because ICE sales growth in the US, for example, is expected to fall for 2-3 years starting this year. More crucially, by the year 2020, electric vehicle models will be falling into the price affordability window. If gas-powered cars are already losing market share to EV starting this year (EV sales are growing from a tiny base, ICE sales are falling from a large one) then how will ICE sales growth mount a recovery in 2-3 years time?

The tiny, almost hard-to-detect market share growth of EV is reminiscent of the buildout of wind and solar power and how market share growth of fossil fuel in electricity generation was halted. Ten years ago, combined wind+solar stood at just 0.84% share of total US power generation. In the first half of this year, that share reached a full 9.00%. (the forecast for the full year is ~8.57%). But in an overall system that has been running with zero demand growth, at about 4000 TWh per year, the entry of wind+solar has been a zero-sum game. What are the useful lessons here for the auto industry?

Neither the auto, nor the solar and wind industries, are digital businesses. The deployment rates for wind and solar, therefore, are directly applicable to the encroaching advance of electric vehicles. These are slower-moving, capital intensive endeavors and reaching the first 1% of market share—for wind+solar, or EV—requires heavy lifting. Indeed, EV sales are finally expected to cross the 1% sales share in 2017, as EV are expected to sell 214,000 units in an overall market that is falling from 17.47 million units last year to 16.84 million total sales this year.

The forecast depicted above, for total market light duty vehicle sales (LDV), uses only the most modest decline from this year’s auto-industry analyst forecast of 16.84 million sales in 2017, and 16.75 million sales in 2018, to 16.5 million sales in both 2019 and 2020.

The progression of EV sales from 2016 through 2020, however, is quite reminiscent of wind and solar’s advance in a comparable period from 2007 through 2011. Both technologies required five years to climb from just below 1% to over 3.5% of sales share.

Current consensus is that autonomous vehicles (AV) are a near term threat and EV are a current, but slow moving threat to the auto industry. Neither of these views is likely correct. Full AV is likely much farther away from a deployment threshold that would threaten market share of personal auto ownership. EV, however, now present a credible risk that by 2020 numerous models will fall into an affordability window that combines price, range, and lifetime maintenance and fuel costs. In some US states like California, we have already reached the point where a basic model Bolt or Leaf is a comparable choice to an ICE car. What chance do ICE now have, in the US at least, to return to growth?

–Gregor Macdonald

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Photo by author: Lobby of Guardian Building, Detroit, May 2017.