The Exponential View is usually worth a listen, and this was a really good interview. Here’s a highlight:
AZEEM AZHAR: … let’s look at the market for electrification. I was heartened to note that in the last few months Ford has started to bring forward its expectations gently about those levels of electrification in your sales by 2030. It was about 40 percent by 2030 in the last few weeks. The estimates have been heading to about 50 percent fully electrified vehicles. So what has driven that upward revision, and could those factors accelerate more in the coming months and years?
Electric Cars are Sticky
HAU THAI-TANG: I think it starts with the product is better. The reception that we’ve gotten on our Mach-E and the very strong demand based on the reservations that we have on the Lightning has really energized us. It’s coming in three-fold higher than what we had predicted, in terms of our planning assumptions. So that’s a really good sign. And then, we’ve been monitoring data from early customers, and 80 percent of customers who have switched from an ICE [Internal Combustion Engine] to a BEV [Battery Electric Vehicle] will never go back. We see this as a huge opportunity for us to capture those customers and have them stay with the Ford family for the entire consumer life cycle. And then the business model challenge is driving the cost down, improving the profitability. That’s normal business challenges, so we would rather work on that than trying to forecast how the compliance landscape will play out.
Tipping Points and Feedback Loops
AZEEM AZHAR: One of things that fascinates me about this transition from the ICE vehicle to the EV is how quickly it might really happen. I have written in previous years about how there are these self-reinforcing loops that might make a phase transition happen more quickly. In my own experience, where I live in Northwest London, the fuel stations are very marginal businesses. Actually, they make most of their money selling sodas and potato chips and chewing gum. It only takes a few of the local neighbors to move to electric vehicles for those to become unprofitable and they’d get turned into apartments. This has happened. And then, as the owner of a diesel vehicle, I now have to drive an extra eight minutes to fill up my car. It’s a bit more inconvenient. At the same time, I’m seeing more and more of my neighbors pick up the occasional electric vehicle, and I can see that the transition happens quickly. And I’ve observed what’s happened in ice-cold Norway. Twenty percent of new car sales were battery electric vehicles about six years ago. The latest six-month data is that it’s closer to 90 percent BEVs, and that’s well ahead of the Norwegian’s government’s plans to make the sale of internal combustion engine vehicles illegal. So there’s been a real phase transition in that particular market that’s happened much more quickly, I think, than any traditional carmaker forecast in its plan. Could that happen in other markets and in bigger markets, do you think?
Amplifying Incentives and a Generational Gearchange
HAU THAI-TANG: We believe the adoption curve will not be linear. It’s going to be exponential, and it’s the combination of all the things that you’ve touched on. You’ve got the incentives to create the demand, whether that’s congestion charges to get into Central London or tax incentives to buy a zero-emissions vehicle. Those things will certainly help with the demand side, as more and more products come out and customers can experience firsthand that it’s a better product, that it amplifies the attributes that they love. For us, the way we’re thinking about it, we’re leaning into our icons. Mustang, we’re going to use electrification to amplify performance. Transit, we’re going to use electrification to amply productivity for our commercial customers. F-150, we’re going to use electrification to amplify towing or torque — those types of things that those truck customers demand. That will certainly accelerate. And then, don’t underestimate the generational shift. I have two daughters. One’s just graduated from university. The other one is in university. They would never think of buying an internal combustion engine. It’s not something that they aspire to. So I think as more and more of those young buyers move into the marketplace, they will accelerate that transition. And of course, the economics will get better, right? The cost of the batteries, and the business attractiveness will improve, as well.
Towards a Richer Mix
AZEEM AZHAR: Right. I mean, I’m excited about that. My sense is that transition could — provided the suppliers can meet the demand — happen quite rapidly because there is that memetic effect. You talk to somebody who owns an electric vehicle, and they wax lyrical about it in the way that only the petrol heads used to was lyrical about their cars…
What is your feeling about when that happens? Is it when 15 percent of new car registrations, say, in the U.S. are electric vehicles? Or is it 25 percent? Do you have a sense of when we should look for that takeoff?
HAU THAI-TANG: I think it’s going to play out within the next five years. You will start to see that really exponential growth. You will start to see a lot more supply, a lot more choice — in terms of battery electric vehicles across many different markets and segments. And then the infrastructure will come online and, of course, the business case will improve. We’re all saying 40 to 50 percent of the mix globally by the end of the decade, but I think that acceleration will happen within the next five years.Azeem Azhar’s Exponential View / Season 6, Episode 3 The Future of the Car (with Ford’s Hau Thai-Tang)
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Econtalk, August 28 2017 – Benedict Evans on the Future of Cars
One of my favourite Econtalk episodes. Evans’ discussion of the evolution of cars is fascinating, and there’s a lot to learn from the way he thinks about the future.