Electric vehicles are charging ahead and the market may have already passed the tipping point or is closing in on it with China out in front, according to a Washington-based think tank.
That was the conclusion of three analysts during a discussion titled “Charging onto the Open Road: EVs and U.S.-China Relations,” held by the Center for Strategic & International Studies on June 7.
Scott Kennedy, an author and senior adviser of the Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the CSIS, served as moderator.
He led an in-depth discussion on electric vehicles, batteries and what the future holds involving John Paul McDuffie, a professor of management at the University of Pennsylvania Wharton School and director of the Program on Vehicle and Mobility Innovation at the Mack Institute for Innovation Management, and Ilaria Mazzocco, a fellow with the Trustee Chair in Chinese Business and Economics at CSIS.
MacDuffie said technology forecasting is “notoriously dangerous,” but he was willing to try.
“I think the chance of it ramping back down toward zero is extremely low,” he said. “It's really a matter of what kind of inflection point in the slope would you consider a tipping point? I think the genie is out of the bottle, to keep using some different metaphors.”
National and international policies on emissions reduction are a driving force, and companies are responding to them. But the vehicles are becoming more appealing as well, he said.
“It's not really having to sell these vehicles on the basis of an environmental argument,” MacDuffie said. “There's the fun to drive, there's the amazing acceleration. There's all the other things that are going to start really catching on.”
Dodge Chrysler is marketing “American muscle” so they don't have to use the dreaded words electric vehicles, which may sound “a little too green and a little too liberal,” he said.
“I think we're at a stage where we're going to see really differentiated product offerings, differentiated marketing, a bunch of policies that will help support it,” MacDuffie said. “Could it be slowed down? Sure. Is there a strongly competing other green technology like fuel cells for passenger cars? I think that particular competition is past at the moment."
Mazzocco agreed, noting that the movement toward electric vehicles is obvious in China, Europe and now the U.S. as companies invest in them and consumers purchase them.
“At this point, policy in China and Europe and to a certain extent in the U.S. and California has really pushed companies to have a bigger stake in this technology,” she said. “I think that we've reached that point.”
Mazzocco said almost half of all electric cars globally are in China.
“Something like 3.3 million electric vehicles were sold in China last year. By comparison, the U.S. was just over 600,000,” she said. “Europe also very large market, but also smaller than China.”
MacDuffie offered a concise history of electric vehicles in the United States, which he said has seen periods of acceleration as well as times when it dropped “almost back close to zero.”
“I think in the 1990s you had a combination of some policy push from the Clinton administration; probably most dramatically and California's zero-emission vehicles guidelines began to create incentives for these American automakers to do something with electric vehicles,” he said. “GM and Ford in particular had already been in their R&D labs studying electrification. Both companies have quite a few patents on electrification going back a number of years."
He said General Motors was out front with a vehicle called the EV1, which was offered from 1996-99. However, when the automaker failed to sell at expected levels, the company withdrew all of them from the market.
That was followed by the Nissan Leaf, a small electric car marketed as a green vehicle.
“It was Nissan's decision to go with a pure battery electric vehicle because Toyota first, and then Honda had kind of grabbed the hybrid, the dual-drive train, Prius-type of technology," McDuffie said. "Nissan felt there was no point in them being third in that particular competition that they would go straight to the Leaf.
"The Leaf had a strong surge of sales at first, and there were some incentives at the federal and also sometimes at the state level to fuel those purchases," he said. "But it also didn't have a lasting or long effect. Its appeal was somewhat limited to people who were looking for a green purchase. Its range was limited, its space was limited. It didn't fit the U.S. market all that well.”
Georgia passed a law imposing a tax on the Leaf since its owners did not pay a fuel tax, he noted. That indicated the policy headwinds facing EVs.
“I think the third chapter is really the intertwined story of Tesla and China,” MacDuffie said. “The China developments weren't that visible in the U.S. to the consumer, but they certainly were to U.S. companies who have joint ventures in China. Tesla was really the thing that captured the public imagination.”
There was considerable “drama” around its efforts, he said, but the Model 3 has been successful.
“And then Tesla becomes a dominant force, not just in the U.S., but really worldwide, because they're competing very successfully with luxury makers like Mercedes and BMW in Europe,” MacDuffie said. “They get permission from the Chinese government to open a plant in Shanghai. They announced plants in Germany and Austin, Texas.”
That has led to a wave of interest in EVs, he said.
MacDuffie said he is interested in new developments, such as the Rivian, an electric pickup.
“This is an MIT grad who's had this dream of an electric pickup company, and they're in early production,” he said. “And then Ford, who makes the F-150 pickup truck the largest-selling vehicle in America going back to the 1950s, are the first to get a full electric pickup product into the U.S. market, the F-150 Lightning, [there's] a huge amount of excitement about that. Lots of advance orders, lots of amazing reviews from the trade press for both of those products.”
MacDuffie said Ford is wise to market it toward its commercial customers, stressing they can use the truck to provide power for electric tools at a job site.
Mazzocco said she has been keeping her eye on the success of BYD, which has been involved in electric vehicles from the earliest days. It has produced a wide variety of vehicles, including buses.
“They may not have the No. 1 electric vehicle in terms of sales but they have a number of vehicles in the top 10. And I think that's really remarkable,” she said. “The variety of vehicles and the fact that they've been able to produce vehicles that the average Chinese citizen wants to buy, I find that quite compelling.”
Kennedy asked about concerns regarding charging the vehicles. How is that being addressed?
Mazzocco said China, through a combination of public and private enterprises, has been at the forefront, in large part because of a surge in sales of EVs there.
“There's been a very rapid expansion of the charging infrastructure, I believe, at this point in terms of public chargers, some of the major cities are doing pretty well,” she said. “But it's always a catch-up race, right? Usually you calculate the ratio of how many electric vehicles are there per charger. And you don't want that ratio to go up too much. But the more vehicles you sell, the more you have to keep building up the infrastructure.”
Mazzocco also pointed to some creative solutions, such as battery swapping to keep vehicles moving.
“And it's supposed to provide some comfort to consumers or taxi drivers that they can find some sort of solution if they can't get a charger or fast charger,” she said.
MacDuffie said Tesla is out front because it has large network of dedicated Superchargers, but progress is being made by other companies and by governments.
“Batteries are supporting a bigger range and they're also getting cheaper. And so it's much easier and there's way more products available in the market,” he said. “It's way easier for a consumer to buy a product that, at least from a certain rational point of view, has plenty of battery range to get you through your whole week's commute. Twenty to 40 miles per day is what typical U.S. usage of a car is. Multiply that times five or even times seven and there's plenty of vehicles that have that. Range anxiety is not about rationality, but that helps.”
MacDuffie said the best solution is charging at home, often overnight.
“You need basically a 220-volt line, which is like what you would need for your clothes dryer,” he said. “Getting it installed, dealing with the grid and regulations, that's a slightly different issue. But the early appeal of these vehicles was thought to be environmentalists living in big cities. And they had the biggest dilemmas with where to charge them.”
Ford F-150 Lightnings are going to be bought by people who live in rural areas and the suburbs, MacDuffie said.
“That's where I think public policy has the biggest role to play," he said. "We should have interstate highways that are getting a lot of investment in charging for people on long trips. Those probably should be superchargers."
However, multifamily and multiuse commercial buildings in cities are a more complicated issue, MacDuffie said.
“Parking garages at work or parking places at work, these are all where we have to see gains as well," he said. "I think that's going to be a mix of probably some public policy incentives and market-driven change. The automakers that are selling all these vehicles have an incentive to help the infrastructure develop at the same time.”
Subsidies and success
Kennedy asked about subsidies for the EV industry. China has invested a great deal of money into the vehicles.
“When Washington, D.C. has a conversation about China and subsidies, usually it's not one of admiration. Usually it's one of criticism,” he said. “But what you all just described is sounds like a success story. You might say Chinese subsidies catalyzed the global development of the electric vehicle sector, but maybe that's not true.
In Washington there is talk about the solar industry and, all major solar makers are in China after massive subsidies that the Chinese provided," he added. "And what we have in the U.S. are solar-panel installers.”
Mazzocco said it was an unfair question so she would provide an equally unfair answer.
“I think there's two ways of looking at this,” she said. “I think there's subsidies that actually go toward promoting the switch among consumers from internal combustion engine to electric vehicle. And we've seen this in many countries.
"What's controversial, I think, is actually the targeting of those using those subsidies and other measures to actually benefit domestic producers," she said. "And that China has done quite successfully, I'd say, considering that up until the rise of electric vehicles, China really didn't have a wholly owned Chinese company that was quite as competitive or was considered quite so promising. Now there's multiple ones. In that sense that's the part that's the most controversial. It's been somewhat successful, although I think the jury's still out.”
There is still a question of the return on investment for China. Did some companies thrive because they deserved to, or because they were backed by government money.
That’s a question that May never be answered, Mazzocco said.
MacDuffie said he's been impressed to see China displaying versatility and flexibility about its policies, including cutting back on subsidies at a point that they thought were too high.
“The Chinese governments, obviously, want a national champion in electric vehicles that succeeds in export markets in a way they haven't with traditional vehicles," he said. "They want a leapfrogging strategy around this new technology, but you couldn't say in any way that they're keeping foreign companies out. They are now encouraging those same companies to make electric vehicles in China with Chinese components."
The discussion turned to batteries, with the panelists predicting additional options will soon be available.
The U.S. companies don't want to be overly dependent on Chinese battery-makers, and so they're pushing much of this new investment toward the Korean and Japanese battery suppliers, Mazzocco said.
They also see additional Chinese investments in America to build EV plants here and make the vehicles closer to their customers.
“Every single foreign automaker that has wanted to have a piece of the U.S. market has built factories in the U.S. and the Chinese … that may be ultimately how they break into the U.S. market, too,” MacDuffie said. “They have some models that are appealing enough and they built factories in the U.S. to get it there.”
Kennedy said the concept of build where you sell or sell where you build makes a lot of sense. There’s also a political and trade aspect to that.
They also touched on security concerns, with this new generation of vehicles harvesting so much information from drivers and the surrounding areas.
“If there is one place where there's an allergy about Chinese-related companies in the United States, it's about them collecting information about consumers and others,” Kennedy said. “I think to the extent that electric vehicles just remain an electric vehicle, there's probably less arguments. But if they are collecting information, processing information, analyzing it, providing you TikTok over your screen, then I could see the national security intelligence side of Washington, D.C., both on the Hill and the executive, raising concerns.”
A viewer asked asked about environmental concerns from batteries.
“Are these public policy issues that can just be solved by smart policies in Washington and Beijing, or is it going to be more complicated to address these?” Kennedy asked.
MacDuffie said he is optimistic about some market-driven paths forward here.
“One is that the batteries and their efficiency in a vehicle do start to tail off at a certain point after a certain number of years," he said. "We're still learning about that. But they're not done with their useful life as batteries at all at that point. There are business models about repurposing old EV batteries, combined, wired together, new kinds of software management systems for all kinds of back-up purposes, whether it's for individual homes, whether it's for municipalities, whether it's for grid kinds of power storage and the like.”
MacDuffie said the batteries can be recycled and the raw materials used again.
“Now, I expect we'll see a lot of technical change that will increase the efficiency of that,” he said. “And so given that it relieves a bunch at the front end of the supply chain, given that there are these multi uses of EV batteries in the general electrification of the economy, which is being driven again by many different forces, I actually see some kind of promising developments there.”
Mazzocco said costs will serve as a real incentive.
“China itself has been exploring and trying to introduce more rules on recycling and better end-of-life management,” she said. “I think the devil is in the details. This is also a pollution issue. It's an implementation enforcement issue as well."