Electric vehicles of the future.

 Electric cars and electric trucks will make their appearance at some point in not too far away 2015. A new technology called vehicle electrification is set to transform our whole mobility system (and the way we use it) over the next decade, making the transition to electric vehicles possible on a scale never achieved before. But how far is this advanced version of electric vehicles likely to take us? I’ve recently written about what might happen to the future of transportation when electric vehicles are introduced in the U.S. and Europe. In that article, I discussed two key factors that could affect our ability to move around in the near future: battery technology and vehicle development. Today, most people understand that these technologies are critical to sustainable and affordable transportation and are very rapidly developing as the industry evolves, but there’s still a lot of mystery surrounding them. That’s why I’d like to answer some of the questions investors have asked me during the past years and get into specifics about how the future of transportation has changed when we reach technological standards for electric vehicles.

Electric Vehicle Technology

Before getting into propulsion, let’s look at where things stand today concerning the basic foundation for battery technologies and what the world is thinking about electric vehicles in general. Here in North America, electric vehicle companies — such as Tesla, BMW, Audi, Nissan, Toyota, Chevy, Ford, Volvo and others — produce the vast majority of the industry’s manufacturing lines and a significant part of its profits is generated by those investments. And here in Europe, you can also find the same companies in production: Renault, Porsche, and Kia. All of these company names are subsidiaries of major carmakers: Mercedes-Benz, Daimler, Honda, Ford, Nissan, BMW and other brands. There are many different models of all sorts of cars on the market. They range from supercars to compact sedans to minivans, vans to SUV’s, buses to coaches and pickup trucks to taxis. The list goes on and so does the cost of cars, but in general, they tend to fall within the $100,000-$200,000 price range.

Electric Vehicles Are Coming!

The current trend toward electric vehicles is growing exponentially. We’ve already seen some prototypes (see image) floating around in China, Germany, and Japan. In the U.S., electric vehicles could start coming onto the public roadways as early as 2017. In fact, according to Gartner, “electric vehicles that exceed 20,000 miles are now expected in at least 75% of US counties.” Many countries are looking to adopt similar policies toward vehicles powered by clean energy technologies, including the UK, France, Australia, Canada, Austria, Ireland, Italy, Poland, Portugal, Brazil, Mexico, Singapore, Hong Kong, South Korea, Taiwan, Thailand and India. If any of these countries decide to enter the EV market, then we may begin seeing the first examples of electric vehicles in the United States and maybe even Europe. While no one knows when or whether such an introduction of e-cars would come along in the U.S., probably never, a few years ago, Europe would probably have been among those places trying to figure out which vehicles would be best suited for moving around. This isn’t surprising, given that in Europe, government subsidies are increasingly low and reliable (see chart). You also do not need a passport to travel, which is perhaps one reason why European governments have begun considering launching mass adoption of EVs. Let’s start with car manufacturers for Europe, as outlined above: all of them are subsidiary companies of Chinese companies.

For Europe, having one of these big players in the country can be important because each player represents a key piece of the automobile industry and therefore serves as a strategic fit for European automakers. Given that GM and Volkswagen both own VW AG and its parent brand Audi A4, BMW, they’ll be able to help position themselves as attractive choices for Europe-based e-car buyers. This is good news, and in itself a little unsurprising. For example, a massive chunk of consumers globally might prefer something based solely on sustainability, so to avoid being hit hard by competition between Mercedes-Benz manufactures and German car manufacturers from Saab and Peugeot, they might choose a model that uses cleaner energy sources. If that doesn’t seem appealing enough, consider all of the potential benefits Europe has for the automotive sector. In other words, Europe has one of the highest levels of environmental security in the world. Even if the automotive sector were to thrive only in Western nations, China, New Zealand or the U.S., Europe promises to become Europe’s largest economic engine for 30 years or more. As of 2018, Spain alone is home to nearly 2 million industrial workers. What can Europe do with this huge number of people? It has plenty of jobs and it might just need to use them better by creating employment opportunities and training new members who want to have a greater impact on the community through a career path in the economy.

But beyond the question of employment, don’t we care about the environment and mobility more than just about employment? I’m sure the demand for green buildings and solar panels will increase over time, but the biggest challenge remains the problem of climate change. The average cost of building a traditional house in the United States is around $12,000 per square foot; the equivalent average cost in Europe is around $70,000 per square foot, which is staggering given that houses in the U.S. averages about 400 square feet per room. Climate-friendly housing alternatives like modular homes and sustainable construction aren’t cheap. Yet European governments often don’t put this issue front and center in their policy discussions. Why? Because Europe wants to sell its homes as well as its cities as high-end luxury items to consumers. Not only that, most Europeans can now afford at least some type of home—most notably their backyard mansion—which they need since the middle of this century. It’s hard to understand why people in Europe don’t see a link between climate mitigation and increasing renewable energy use, but when it comes to automobiles, Europe looks to the future as the most stable and most environmentally friendly sector in the world.

Electric Vehicles Make Their Appearance

Electric vehicles, like in almost every part of the globe, should begin making their appearance in 15–20 years, given that their debuting period is also the period when regulations can kick in to open up the roadways to new technologies. As mentioned earlier, Europe is currently using electric cars to move around and it won’t be long until the U.S. adopts these types of vehicles in its own. However, there’s a looming concern that the U.S. might not be ready to introduce EVs in its own as it prepares for the 2020 presidential election (see graph). To explain why, one solution would be to think about who will pay for the purchase of an EV in the U.S. After the 2016 election, President Donald Trump announced plans to replace federal highway funding with state funding to drive down the cost of buying/manufacturing electric cars in the U.S. He stated his plan at a rally the following week for Congress. His strategy was clear: he wouldn’t fund his administration to build the charging infrastructure to support EV purchases, and instead said he would simply ask lawmakers to amend the Federal Highway Administration law that sets forth rules governing interstate commerce. When President Trump signed off on his proposed rule change last year, it had nothing to do with transitioning to electric vehicles, but rather to accelerate progress on the grid through regulation of vehicle emission (the Environmental Protection Agency had said this was the case).

The Biden administration had previously pledged that they will support private vehicle manufacturers and local governments to create charging infrastructure that can support existing purchases of small internal combustion engines (ICE). Instead of pushing back the timeline, they have decided to pursue projects designed to create charging infrastructure, starting with urban areas and townships in the West. By the end of 2021, there should be several ways for states in the U.S. to be able to offer this type of service in their regions. If the legislation passes, that would mean that millions of dollars worth of infrastructure can be provided free of charge to the U.S. and the American people, including the possibility to spend it locally, in addition to providing financial resources. So, who pays for that? If the U.S. has access to the data needed to program that new regulatory framework, the process could become somewhat straightforward. Alternatively, if the U.S. doesn’t have access to that information, what about planning for the eventual return to gasoline and diesel-powered engines for cars in the U.S.?

How Much Should Americans Pay For These Types of Car Trucks?

The debate about which sort of model of van or truck will dominate mobility systems might continue because while all of our options will eventually grow more refined and less expensive, they’ll remain mostly the same. About electric cars (and I’m sure many will disagree with this), the amount you’ll likely be paying for such systems is relatively unchanged, although in most markets today, it’s between the $25,000 and $35,000 mark. Regardless of what kind of model you prefer, either way, all vehicles in North America are going to have roughly the same ability to generate some income. Just as electric trucks are going to be cheaper than older gas-powered ones, the lower-cost model of a zero-emission truck is compared to a larger fuel tanker of the same capacity.

What’s more, the average percentage of revenue earned.