The internal combustion engine changed the world as few other inventions have. The development, along with the advent of assembly line production for automobiles, offered an easy and individualized way to travel long distances and soon transformed global geopolitics. As the demand for oil to fuel automobiles increased, countries that were once an afterthought on the global stage — such as Azerbaijan, Iran, Venezuela, Indonesia and Saudi Arabia — became essential links in the international supply chain. Fossil fuels, and their producers, quickly attained singular importance in the global order.
Over the past several decades, however, numerous technologies have emerged that could rival and eventually replace the internal combustion engine and, with it, oil. Though vehicles powered by natural gas or hydrogen are gaining ground, particularly in Asia, electric vehicles — both hybrid and fully battery-powered models — are poised to give gasoline- and diesel-fueled vehicles the biggest run for their money. Falling costs and rising energy density stand to level the playing field between electric cars and their more traditional counterparts. By 2040, researchers project that fully electric vehicles and hybrids will account for more than half of all new automobiles purchased worldwide. Government initiatives will be crucial to incentivize and facilitate the adoption of electric vehicles, and countries such as France, the United Kingdom and China are doing their part to kick-start the transition.
The Electric Avenue
Paris and London reaffirmed their commitment to renewable energy in July by announcing plans to phase out fossil fuels in transportation over the next several decades. The French government first unveiled its initiative to ban the sale of new gasoline- and diesel-powered vehicles, including hybrids, starting in 2040 as part of the environmental minister's proposal to address climate change. The United Kingdom followed with its own policy a few weeks later. The plans are hardly surprising. Europe has had greater success incorporating electric vehicles into its fleet compared with the rest of the world. Norway, where nearly one-third of the new automobiles sold in 2016 can run on electricity, leads the Continent in this endeavor, and along with the Netherlands, it has adopted an even more ambitious timeline for eliminating conventional cars.
To help realize their goals, the French and British governments likely will take measures to promote electric automobiles. Leading consumers to the technology is only half the challenge, though. Paris and London will also need to expand the infrastructure necessary to support electric cars. Last year, the number of public and private charging installations worldwide increased by 72 percent, compared with a 60 percent growth in the number of electric cars in the global fleet. The number of charging stations worldwide will still need to increase at least eightfold by 2025, however, to support the electric vehicles hitting the roadways. And whether electricity grids around the world can handle the rise in usage that the transition away from gasoline- and diesel-powered cars would entail is another matter.
Analysts have determined that the bump in demand for electricity as more electric vehicles enter the fleet will be "sizable but manageable." Through methods such as raising prices to discourage charging at peak times, adding capacity, and improving transmission lines and other distribution equipment, the world's grids could rise to the challenge. But developing countries — and even developed countries with aging infrastructure — may struggle to expand their infrastructure to meet the new demand. The United Kingdom, for example, would have to increase its electric output by as much as 50 percent at peak charging times to fully implement its proposed fossil fuel ban. Importing electricity is one possible solution to reduce future strain on the country's electric grid, though the structure and viability of such an arrangement will depend in part on the results of the Brexit negotiations.
Life in the Fast Lane
Notwithstanding Europe's ambitious plans for electric vehicles, and its success to date with introducing the technology, the European market's growth has slowed recently relative to that of electric vehicle markets elsewhere. In the United States, for example, consumer demand for electric cars has taken off in the past several years, particularly in California. And though President Donald Trump's administration has promised to roll back the fuel efficiency standards the Barack Obama administration put in place, individual states may well take up the cause on their own, as they have with climate change policy. California, in fact, already has enacted a plan for reducing emissions so effective that Beijing has used it as a template for the burgeoning Chinese market.
China is now home to the world's largest market for electric vehicles, and the country's central government, like its counterparts in Europe, is trying to further encourage consumers to buy electric vehicles. A government official recently indicated that Beijing is working with domestic automotive companies to hash out a timeline for phasing out fossil fuel-powered vehicles. The move, though not as aggressive as Paris and London's bans, is just the latest in the central government's efforts to push electric vehicles into the mainstream. Beijing previously introduced subsidies for consumers and producers, as well as reduced registration fees and tax exemptions, to incentivize the manufacture and sale of electric cars. In 2014, it even issued a mandate requiring the government to buy electric vehicles for 30 percent of its new automotive purchases.
But China's central government has hit some bumps along the way. Beijing had to rethink the subsidy scheme after it led to fraud and inefficient production practices. And since the government revised the subsidies and implemented a new quota system for domestic car manufacturers, production and sales numbers haven't lived up to its expectations. Even so, domestic companies still dominate the Chinese market for electric vehicles. (They're not far from global domination, either. Last year, Chinese firms produced 43 percent of all electric vehicles worldwide.) Much as it has in larger sectors such as steel or coal, the central government is working to consolidate the automotive industry and weed out inefficient producers by adjusting its policies.
Catching Up to the Competition
Foreign auto manufacturers, meanwhile, likely will base their own plans for producing electric vehicles on the thriving Chinese market. Two years ago, Volvo — which since 2010 has been a subsidiary of Chinese company Geely — announced that it would introduce only new electric and hybrid models to its lineup from 2019 on. In addition, several major carmakers have opted to partner with domestic producers in China to try to increase their access to the country's consumers. Volkswagen AG, for instance, has teamed up with Anhui Jianghuai Automobile Co., and the two companies are set to release models of their jointly produced electric vehicles next year. Similarly, Honda and Nissan-Renault have established partnerships with Dongfeng Motor Group, while Ford Motor Co., Daimler AG, General Motors Co. and Tesla all have working agreements with Beijing to push their vehicles onto China's market. Chinese companies could in theory wind up with full access to the technology they develop with their partners — a concern that Germany has raised in the past. So far, however, that's a risk foreign producers seem willing to take in the interest of selling electric cars in China.
As joint ventures between Chinese and Western car manufacturers improve the quality of electric vehicles in China, lower cost producers may get edged out of the market. In that event, Chinese automotive firms could find haven in India, where demand for electric vehicles is on the rise. BYD Co., one of China's largest electric vehicle producers, already has a strong foothold in the Indian market. But Chinese companies may have a harder time making inroads in India in the future, considering the mounting tension between Beijing and New Delhi.
And at home, Chinese electric car manufacturers face an even greater challenge. The infrastructure problem weighs heavily on China, and the growing demand for electric vehicles will only amplify it. To address the issue, domestic carmakers are looking for innovative solutions, such as building battery swap facilities instead of charging stations to keep traffic moving without overtaxing the electric grid. Chinese companies, which are the largest producers of electric vehicle batteries worldwide, are hard at work to enhance their production capacity in keeping with Beijing's request earlier in the year that the firms double their capacity by 2020. At the same time, charging stations have proliferated across China over the past few years. Infrastructure is considered a prerequisite for the successful incorporation of electric cars — one that China is determined to meet.
Despite the rise of electric cars, and of policies to promote them, the internal combustion engine still reigns supreme. And dethroning it will take decades. Today, electric vehicles make up less than 1 percent of the global fleet and well under 5 percent of the cars on the road in most advanced nations. Yet as the recent announcements in France, the United Kingdom and China illustrate, leaders around the world are charting a course for the long journey ahead.