U.S. policymakers are going all-in on electric vehicles (EVs), but the supporting infrastructure will require vast upgrades to be ready for the giant changeover.
President Biden recently announced an objective of increasing U.S. EV production to 50 percent of the U.S. fleet by 2030. It’s a very aggressive goal.
Current production sits at just 3-4 percent. Even to reach a more realistic 10 percent, the industry must undergo a massive transformation. We’ll need hundreds of thousands of new charging stations. We’ll need more electricity and better ways to store it. And though Biden is providing $3.1 billion in grants to seed the process, the private sector will need to step up in a major way.
Regardless of pace, automakers are fully on board. They know this is their future. There is no Plan B. The only question is how fast we get there. Here’s an assessment of the challenges ahead:
The state of EVs
The dawn of the automobile era offers a sense of what’s to come. From 1909 to 1918, the number of cars on the road grew nearly 20-fold. Yet the only place to buy gas was at a pharmacy or hardware store, which sold fuel in five-gallon jugs alongside the road.
By 1935, however, more than 200,000 gas stations were built to handle the new vehicle surge. Expect electric charging stations to experience similar growth over the next decade.
U.S. drivers can see the EV future in Norway.
Due to its aggressive credits and tax structure, EVs now constitute 75 percent of Norway’s auto sales. To serve that many drivers, the country installed 313 charging stations for every 100,000 people. The U.S., by comparison, has just 30. To reach Norway’s availability, we’ll need over 1 million more.
We’ll also have to reimagine the way we power cars, lest we revisit those horrendous queues we saw in California on Thanksgiving as drivers endured long waits for a charge. Today, America has about 145,000 gas stations. Yet peddling electricity is an entirely different animal. It takes just five minutes to fill up a tank. Recharging a battery runs 25-30 — at best.
To serve EVs, the gas station model requires reinvention. Drivers will need somewhere to wait. Some even envision adding mini-business centers to keep motorists occupied.
Then comes the problem with electricity itself. Or more accurately, the industry’s glaring inefficiency.
Take renewable energy. It now constitutes 20 percent of U.S. production, but only 12.6 percent of that is actually consumed. The U.S. must get better at the storage of renewable energy. If expanded generating capacity arrives only with a comparable expansion of energy waste, then the entire purpose of the green car is defeated.
The tipping point
The auto industry won’t transform overnight. The lifespan of a typical gas-powered car is more than a dozen years. The tipping point won’t likely arrive until the early 2030s, when wholesale change will begin to appear.
It starts with repair and maintenance. Few do-it-yourselfers know how to fix an EV. The neighborhood Pep Boys is wholly unequipped to handle the change. Service will shift more to the manufacturer’s shop, which has the tools, mechanics and advanced diagnostics.
Gas stations, which rely on high volume and small margins, won’t survive as presently constituted. The upside is that you can fit more charging stations on the same plot. The downside is that they’ll need to accommodate those half-hour waits. Yet the real estate remains valuable.
Today’s charging stations tend to be in out-of-the-way places, behind buildings or someplace you wish to not tread at night. Gas stations already possess visible, convenient locales, essential to consumer confidence. People need to know a charge is always nearby. Moreover, there’s little chance the BPs and ExxonMobils of the world will leave this burgeoning market in the hands of someone else.
The federal government has agreed to spend $73 billion on power grid upgrades. Though studies suggest $125 billion is required, EVs’ surge will nonetheless mean added volume for electric utilities. An equal boon awaits suppliers in battery and battery management software who develop ways to charge at faster rates.
Yet think of public money as just a stimulant. The true driver in all this is the consumer. In 2021, EV and hybrid sales nearly doubled. As younger, more green-conscious buyers arrive in the market, that’s only bound to accelerate.
Change will be slow and fragmented at first. Yet autos constitute a $1.5 trillion industry in the U.S. With such a massive transformation, there’s simply too much opportunity for the private sector to linger on the sidelines. Expect investment to be significant, and the competition fierce.
Mark Barrott is a principal and leader of the Mobility Intelligence Center at Plante Moran.