Monday, September 25, 2017

Electric Cars Have Obvious & Not-So-Obvious Impacts

Tesla Model 3 white (Credit: Tesla) Click to Enlarge.
Electric cars and other vehicles continue to gain momentum, just as autonomous features are becoming mainstream.  But while potential job losses due to autonomy are a strong focus, the multitude of impacts electrification will have on road transportation aren’t as clearly stated.

Overall, the impact will be very positive economically, but there will be a lot of disruption and many losers too.  Universal basic income isn’t just a value proposition for those displaced by weak artificial intelligence.

Let’s assume a reasonable transition period of roughly 40 years to get to the point where electric cars were pretty much the only cars being sold.  Internal combustion cars won’t disappear overnight, after all.

Primary impacts:
  • Wealth will be generated globally.  Cars are increasing in number even though there are indications that might be slowing somewhat.  Companies that are successful at making and selling electric cars will make a great deal of money, especially as they take market share from ones that don’t.
  • A lot of legacy car companies won’t make it*.  The global epicenters of automobile manufacturing will have shifted substantially.  California, China, and India will be winners.  Japan, most of Germany, and Detroit will be losers.  Areas of advanced manufacturing and related economic value will shift.  While individual legacy car companies will survive the transition and grow, many will continue to lag and diminish as a result.
  • Much less oil will be consumed.  Peak oil has arrived in a very odd and unexpected way for many.  Hubbert turned out to be right about timing and there being a peak, but not because cheap oil disappeared.  There’s more cheap oil now than there used to be due to shale fracking.  The USA is on the verge of being a net energy exporter.  That will play out over the next 40 years to a substantial decline in oil demand which will keep prices low.  Many oil companies won’t make it, and parts of the world with higher-cost oil, such as Alberta’s oil sands, will be severely impacted.
  • Much less money in automotive parts.  Automotive parts manufacturers will be significantly negatively impacted.  Electric cars have thousands of fewer parts than internal combustion vehicles.  They are much simpler and following Tesla’s lead will trend to even more minimalism.  Just as skeuomorphism is finally going away in digital interfaces, the analog and horse buggy antecedents to car controls and interiors are fading as well.  That will have a dampening effect on global supply chains, parts distribution companies, a lot of OEMs, etc.
  • Carbon-neutral electrical generation companies will flourish.  The generation firms which embrace renewables in a big way will see significantly increased demand for their product, a rare piece of sunlight in an ugly utility market.  Carbon pricing and further regulation of pollution are inevitable, so only green electrical companies are positioned for rapid growth with increased electrical demand.
  • Car dealerships may disappear, but at minimum there will be a lot fewer of them.  Dealerships make the majority of their profit off of post-sales maintenance. Electric cars require a lot less post-sales maintenance.  Dealership business models don’t add up for electric cars, which is a key reason they are currently a significant inhibitor on legacy manufacturer electric car sales.  Tesla is leading the way in this, as with so many other necessary transformations, but legacy manufacturers aren’t willing or able to take on their powerful dealer networks.  With the decline of legacy manufacturers and the necessary transition from the survivors away from this distribution model, dealerships will be radically impacted.
Secondary impacts:

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