In the course of the first 9 months of 2020, automobile gross sales cratered, with each main automaker seeing a steep drop in gross sales because the pandemic raged throughout the globe. That’s, in fact, each main automaker besides Tesla. Regardless of the world virtually stopping because of the pandemic, the Silicon Valley-based electrical automobile maker bought extra vehicles than ever earlier than. Tesla even maintained its momentum from the earlier yr by posting 5 worthwhile quarters in a row, and it’s poised to finish 2020 with an inclusion into the S&P 500 index.
A Make or Break Yr, and EVs Made It
What’s fairly attention-grabbing is that it was not solely Tesla that noticed some severe momentum this yr. At the same time as gross sales of inner combustion automobiles collapsed, EVs usually managed to thrive. A great instance of this may very well be seen in Daimler and Volkswagen’s electric car sales in 2020. Each firms noticed record-setting declines of their ICE divisions, however each firms additionally noticed their EV gross sales this yr doubling. This, if any, additional highlighted that there’s a rising demand for electrical vehicles.
Much more spectacular was the truth that 2020 was a yr when the electrical car motion might have been crushed as soon as extra. The yr noticed the launch of a few of the most vital EVs for his or her respective firms. In Tesla’s case, this was the Mannequin Y, a car that Elon Musk expects would outsell the Mannequin S, Mannequin 3, and Mannequin X mixed. Volkswagen additionally launched the ID.3, a automobile that, if profitable, might very effectively be the second coming of the ever-present Beetle. Failure on the Mannequin Y and the ID.3’s half might have resulted within the EV motion getting set again once more. That didn’t occur.
Peak Oil
To state that 2020 was difficult could be a gross understatement. Amidst lockdowns in a number of nations, the world modified. Air journey all however stopped and dealing from dwelling turned the norm. Then in September, British oil agency BP Plc introduced one thing exceptional: peak oil could have very effectively occurred, and the demand for oil may never return to its prior ranges. Granted, oil costs rose in November as vaccine trials continued and demand recovered considerably in Asia. However even because the world approached a return to some kind normalcy, it was evident that issues would not be the identical.
US Federal Reserve Chairman Jerome Powell echoed this sentiment final month. “We’re not going again to the identical economic system. We’re recovering, however to a unique economic system,” he mentioned. Powell has a legitimate level. Within the post-pandemic world, extra individuals will seemingly proceed to make money working from home. A great variety of individuals will seemingly journey much less as effectively. BP’s estimates famous that about 2/3 of the pandemic’s impression on oil demand shall be from opposed results on the worldwide economic system, and 1/3 shall be on account of everlasting adjustments in human conduct. This conduct, it appears, features a shift to electrical vehicles.
A Level of No Return for the Inner Combustion Engine
The transportation sector accounts for a big a part of the world’s oil consumption. Bloomberg notes that over half of the world’s crude is utilized by the transportation sector, and three/4 of that quantity is taken up by wheels on the street. With automobile consumers going for sustainable automobiles throughout a pandemic, and with gross sales of ICE vehicles dropping steeply, it’s beginning to look like the transportation sector’s demand for oil is barely certain to get much less within the coming years. With this drop in demand comes the tip of the inner combustion engine.
Indicators of the ICE extinction truly began changing into notable earlier than the pandemic hit. As early as 2018, EVs began bucking the pattern in auto gross sales, leading to some analysts speculating if gross sales of gasoline and diesel-powered automobiles will not return to ranges seen in years prior. The concept of “peak oil” taking place appeared farfetched then, however amidst the pandemic and the collapse of ICE gross sales, the tip of the oil age is wanting very believable.
Batteries and a Path to ICE Extinction
The electrical automobile age shall be powered by batteries. It’s then lucky that batteries are a know-how, not a consumable gasoline. Which means as battery manufacturing reaches larger ranges, battery costs are certain to get decrease. Information tracked by BloombergNEF revealed that each time battery provides doubled worldwide, the price of batteries declined by about 18%. And contemplating that firms like Tesla are actively pursuing plans to produce batteries at unprecedented volumes, there’s a good probability that battery costs will decline to such a level that electrical vehicles could attain worth parity with gasoline and diesel-powered vehicles before anticipated.
Value parity will seemingly be the ultimate nail within the ICE coffin. Price, in spite of everything, is the one space the place the inner combustion engine nonetheless has an edge towards EVs. As soon as this edge is taken away, and as soon as fast chargers change into as ubiquitous as gasoline stations, there’ll fairly actually be no extra purpose left to personal a car geared up with an inner combustion engine.