On Wednesday, Volvo became the first mainstream automaker to say that all models it introduces in 2019 will be either electric-gas hybrids or powered solely by batteries. It is a bold move to lead a wave of electric-powered cars. Every global vehicle maker is mounting its own electric-car push and a Bloomberg Report, “The Electric Car Revolution is Accelerating,” last week predicted that electric cars will be as cheap as gasoline models by 2025 and will outsell fossil-fuel powered cars within two decades.
Automakers have been induced to manufacture electric cars by customer concerns over the environment, cheaper prices for batteries, and tighter emissions rules and lucrative incentives from the governments in the U.S, European Union and China.
While Volvo has a long history of innovation, why has it taken a leading role? Michelle Krebs, an analyst with the auto-research site Autotrader.com, wrote that: “Chinese ownership of Swedish-based Volvo probably played a role in the automaker’s announcement. China’s air pollution problems have prompted a more serious push toward cleaner automobiles.”
Other automakers are close behind. Daimler, the maker of Mercedes-Benz cars, has said it will invest $735 million in a new battery factory. BMW plans to introduce an electric version of its popular 3 Series cars in September, according to Handelsblatt, a German business news outlet. General Motors, which began selling the Chevrolet Volt hybrid in 2010, last year began selling the Bolt, an all-electric model priced at about $35,000 before government incentives are applied.
Nissan says it is the world’s largest electric vehicle manufacturer, with global sales of its all-electric Leaf model surpassing 240,000 all-electric vehicles as of the end of 2016. The Toyota Prius hybrid has been sold in some markets since 1999.
The most famous all-electric automaker is Tesla Motors, which introduced the Roadster in 2008, followed by luxury cars sold in the $70,000 range until last week, when it began production of its Model 3 cars with a starting price that is half as much.
The interest in electric cars has been stunted by the low price of gasoline. Hybrids accounted for slightly more than 1 percent of U.S. car sales in 2016. Cars that run solely on battery power are also rare because of high purchase prices, lengthy charging times and limited range.
Volvo is aware that moving its entire line away from internal-combustion engines is taking a risk. “While Volvo’s strategy has risks, a much bigger risk would be to stick with internal combustion engines,” Hakan Samuelsson, the company’s chief executive, told the New York Times.
Optimists point to the fact that Tesla has received more than 350,000 orders for its Model 3, which has a listed price of $35,000. The development of self-driving cars will encourage a shift to battery power because it is simpler to link self-driving software to an electric motor.
And one alternative type of engine that produces high miles per gallon, diesel, has suffered a major self-inflicted wound. The political fallout in Europe following the emission cheating scandal at Volkswagen has slashed sales of diesel cars, which had accounted for half of Europe’s auto market.
Because of electric cars, I believe that the upward spiral of oil demand will taper off over the next decade. The Bloomberg Report predicts that cars with a plug will account for a third of the global auto fleet by 2040 and displace about 8 million barrels a day. This drop-off in demand for oil should, at a minimum, limit future price increases and even lead to further price declines.
Growing up in Texas, I thought oil was king because it dominated our economy. Black gold turned a poor agricultural state into an economic powerhouse. Oil tycoons’ outsized political donations not only shaped Texas politics but influenced national policy.
We are witnessing the dawn of a new age. The king is dead! Long live the king!
Originally published in the Sarasota Herald-Tribune
