The long road for electric vehicles

Electric vehicles need continued investment, innovation and effective communication before they will be adopted by mainstream consumers. Victorian Government

After a much-hyped return to the market in 2011, the shine has again worn off electric vehicles. High profile failures (such as the bankruptcy of charging infrastructure company Better Place) and poor sales of the vehicles themselves have bolstered the opinions of naysayers, who have variously referred to electric vehicles as “welfare wagons” and “green carpetbagging”.

But I would argue that we’re simply at the beginning of a journey: electric vehicle (EV) technology will one day have a meaningful role in a more sustainable transport future.

In line with a report released by the Victorian Government on World Environment Day, I can point to a body of both theory and evidence that allows me to make this claim with confidence.

In 1962 Everett Rogers released his seminal work, Diffusion of Innovations. In it he describes how the adoption of new technologies follows a trademark S-curve – a theory that has been proven to be correct for numerous innovations over the past century.

Adoption lifecycle for new technologies. The brown line represents the increase in market share with time, and the green-blue line represents the market share distribution among buyer types. Victorian Government
Technology adoption curves for a range of modern innovations. Victorian Government

Electric vehicle technology is on this journey. It is worth remembering that Australia’s first mobile phone and supporting cellular network were launched in 1987. At around $11,000 in today’s terms, the Walkabout TM was about the size of ten smartphones and had an hour of talk time between recharges. Seven years later the one millionth subscriber joined the network, and by 2007 subscriptions outnumbered people in Australia – 20 years after launch and not without some challenges along the way.

An important feature of this theory relates to the early adoption phase before the technology provides a financial return for adopters. During this phase, uptake is driven by the social prestige accrued by “early adopters”; after all, people are human rather than reliably rational economic beings.

Early adopters make purchase decisions the majority would view as crazy, so this phase of new market development is often portrayed with disdain for the innovation. In this phase you’ll hear a lot about high prices, low sales and proof that the innovation is a bad idea.

The longer-term view would recognise this as an unavoidable stepping stone in the adoption of new technology. Continued investment, innovation and effective marketing are required to move along the adoption curve, particularly in the lead-up to the “take-off point” for mainstream market adoption.

In the case of electric vehicles we may already be in sight of take off. California, the most advanced electric vehicle market in the world, benefits from investment by both state and federal governments who offer purchase subsidies. Combined with the effects from global investment in design and manufacturing, Californian car-buyers can now get behind the wheel of an electric vehicle for the same price as a gasoline (petrol) equivalent. Californians buy one in three plug-ins sold in United States, despite buying only one in ten vehicles overall.

Electric vehicle sales are increasing as awareness and understanding grows about their suitability for most driving tasks. At the start of this year the US Department of Energy compiled sales numbers that showed plug-in vehicles are well ahead of those of hybrid vehicles when compared at the same point in time from their introduction to the market. Note also how the resultant chart below resembles the start of those describing the theory and history of technology adoption shown above.

New plug-in vehicle (PEV) sales compared to hybrid electric vehicle (HEV) sales over their respective 24-month introductory periods in the US. PEV sales 12/2010 to 11/2012; HEV sales 12/1999 to 11/2001. US Dept of Energy, 2013

The good news doesn’t end there. After years of being pilloried as a prime example of the Obama administration’s cleantech incompetence, high-end electric vehicle company Tesla recently paid back their US Government loan nine years ahead of schedule. Investors clamouring for a piece of the action drove Tesla shares up to the point where the company valuation was 25% of General Motors.

And this momentum seems unlikely to stall. Industry reports suggest that 19 new plug-in models from 15 manufacturers are scheduled to be introduced to the US market in 2013-14. The increased availability of public charging infrastructure, especially in workplaces, will convince more and more car buyers to say “goodbye to gas”.

But what of Australia, where plug-in vehicles sales appear to be stuck in neutral?

Hope exists for our infant electric vehicle market, primarily through the spill-over benefits from uptake elsewhere. As more plug-ins are sold globally, costs will come down – so long as manufacturers bring their products to our shores.

Economic modelling from the Victorian Government has shown the most prudent path to be one where other markets bear the “first-mover” costs before we make the switch to electric vehicles once they make financial sense. But the real world is not an economic model and so more needs to be done to protect and enhance our economic competitiveness.

Mandating the installation of electric vehicle charging circuits in new housing developments is a low-cost intervention that the same modelling shows makes sense right now. For around $100 in parts and about the same amount in labour, a new home can be made EV-ready for about one-tenth the cost of a retrofit. If building rating schemes clearly recognised this, it could convince developers to make these installations where otherwise they are not.

Commitments such as these may help persuade vehicle manufacturers to bring plug-in models from their global portfolio into the Australian market.

And if we’re going to be car dependent, let’s make it easier to move towards lower cost, more environmentally friendly vehicle options.