Cars

Electric cars are upon us

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Now, the electric car has gone from novelties such as the Nissan Leaf with a range of only 130km, or the Tesla Model S, which was a breakthrough but very expensive, to an absolutely central part of future car making. Every major car maker now has plans to build a mass-market electric car that will be available at around the cost of an existing car. Improvements in battery quality and production have removed the remaining impediments to the change, “range anxiety” and comparative expense. From dominance not five years ago, the internal combustion engine now looks like a dinosaur.

What are the consequences? How will the enormously complex distribution chains that are now part of the global car industry change? How will mass-market electric cars be adopted by customers? Are they profitable? All these questions that were once speculative have become pressing.

For SA, this might seem a developed-market obsession, but changes are absolutely critical. If the change is total, SA’s platinum industry will disappear. Platinum and palladium constitutes about 10% of SA’s exports; cars constitute about the same amount.

But opportunities abound too: manganese, of which SA has plenty, is a major component of new-generation lithium-ion batteries used in electric cars.

How disruptive will this technology be? This is a question that cannot yet be answered, but its potential is huge. Car manufacturing is perhaps the single largest industrial effort. Its trajectory has shaped nations. It is no accident that the moment of emergence of new industrial powers typically coincide with innovations to how motor vehicles are made.

Nothing illustrates this better than the US, where Henry Ford revolutionised the industrial process, making cars affordable for ordinary citizens. The impact of Ford’s moving assembly line is evidenced by the fact that his system is still the basis for making cars, including the new electric cars.

But business is a game of winners and losers — and the biggest loser is likely to be the oil industry. At the moment, electric cars make up 1% of global car production, so it is understandable that the oil industry has no plans to reduce the 6-million barrels of oil it produces daily. But, according to a Bloomberg study, assume a 60% annual growth in electric car production and the oil industry will have to reduce production by 2-million barrels as early as 2023. That is much, much sooner than most people would guess. Assume a slower rate of adoption — say 30% a year – and collision point hits in 2028. On the other side of the equation, by 2040, electric cars will draw 1,900 terawatt-hours of electricity. That is about 10% of global electricity production.

A different government in SA concerned with different issues would long ago have established a task group to look at the changes electric cars will bring to examine the dangers and seek opportunities. It is not too late to do so.

Over to you, Minister Rob Davies.

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