Is OPEC Delusional About Electric Vehicles?
According to the Organization of Petroleum Exporting Countries (OPEC), electric vehicles are no threat to gasoline-powered cars. In fact, OPEC projected plug-ins will have no more than a 6% share of the world’s passenger cars by 2040. This prediction came with a number of vast assumptions about EV technology, some of which already ring hollow at the dawn of 2016. Considering the trends sweeping through the auto industry, OPEC’s outlook borders on delusional.
Granted, OPEC’s World Oil Outlook is a self-published document meant to calm investor anxieties and keep member countries feeling positive vibrations about the future of the industry. In that respect, it goes out of its way to toe the party line, saying electric cars will not be a major player in market share anytime soon “without a technology breakthrough.”
The outlook points out “the high purchase price” of EVs and “serious challenges in terms of convenience, such as range limitations and poor battery performance during very hot or cold weather conditions.” This reasoning would work without any future electric cars in the pipeline and automakers firmly committing to long-term gasoline domination, but neither is the case.
Electric vehicles expected to change the industry are now close to market, beginning with the Chevy Bolt EV that will see production in 2016. Offering 200 miles at a reasonable price point, EVs like the Bolt EV and Tesla Model 3 will bring many more customers into the fold by doubling available range in the price point. Meanwhile, plug-in hybrids like the redesigned Chevy Volt and comparable models from other automakers are turning gasoline into a last resort for a growing segment of drivers.
While the first-generation Volt (38 miles electric range) had drivers covering about 80% of trips in EV mode, the second-gen model now on the market should get drivers about 90% of trips without using gasoline. What should be worrisome to OPEC is the versatility of these plug-in hybrids. Cold weather and range anxiety, two of the quoted stumbling blocks for the segment, do not apply to PHEVs the way they do battery-powered cars.
General Motors is far from alone in the electric push. Ford recently announced a $4.5 billion investment in electrified products while Honda pledged to reduce emissions 50% by 2050 on the back of new products, including fuel-cell electric vehicles and the company’s first battery EVs. As for Toyota, the projected world sales leader of 2015, the automaker announced it could be finished with gasoline engines by 2050.
Automakers are not acting alone. Emissions standards set by the U.S., China, and Western Europe practically command a decline in gasoline engines and a dramatic rise in alternative fuels to power vehicles. The Paris Climate Summit (COP21) recently provided the framework for the global change to take place in the coming decades. (OPEC’s report said the coal industry should brace itself.)
It has always been difficult for industry leaders to admit vulnerability. For millennials, Tower Records and Blockbuster Video are the clearest examples of old-guard businesses that went obsolete believing they could double-down in a changing landscape. If automakers were alone in this shift, we might see a slower pace of development in the EV segment. However, some of the world’s most valuable companies — including Apple and Google — are in on the action.
If a future of long-range EVs powered by fast chargers won’t scare OPEC, maybe these tech giants should.