4/3/2019 | 3 MINUTE READ

BEVs and the Risk of Ignoring Them

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Making it easier and more accessible for consumers to purchase BEVs means making the batteries both less expensive to produce, as well as more effective for their cost.

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While I’ve talked extensively about the death of the internal combustion engine and the onset of automotive electrification, it can be a struggle for some to visualize this industry-wide change as battery electric vehicles (BEVs) have not yet experienced widespread adoption.

The primary reason for this, of course, is cost: BEVs are still more expensive to manufacture, making it burdensome for the average consumer to foot the final bill, no matter how environmentally conscious or tech-savvy they may be. But same reason mainstream adoption isn’t in play right now is the same reason it will be in play soon—sooner than most think—and that is the cost of the battery.

BEV cost parity and mainstream adoption completely revolve around the battery. Making it easier and more accessible for consumers to purchase BEVs means making the batteries both less expensive to produce, as well as more effective for their cost. In other words, they must last longer and allow vehicles to travel further on a single full charge than they currently do.

Thanks to the investments being made by major automotive companies, this two-pronged improvement is not as far off as one might think, especially in regions where the rising cost of gasoline is driving automakers to produce this better battery much more quickly.

Europe, for example, could see the equalization of cost between BEVs and traditional vehicles as soon as the next four to five years, with North America and China not far behind at seven to eight years.

The convergence of these improvements, resulting in a cheaper yet higher quality BEV battery, is going to be one of the single biggest drivers of the mainstream adoption of electric vehicles. The reduction in cost, as well as the increase in driving range, will be a huge factor in shifting consumer perception of BEVs from being expensive or impractical alternatives to traditional cars to being the preferred vehicle of choice.

Compound this with the actions being made by governments and the handful of major automotive companies that are investing in a cleaner and more efficient global environment, and you have the entire automotive industry turned on its head (and on a much shorter timeline than some experts have been suggesting).

Automakers are being encouraged to make this shift as quickly as possible by more than one factor, but the primary influence seems to be that of global governments. With a few significant exceptions (perhaps the biggest being the United States, whose environmental policies have only gone backwards in the past three years), several countries with the world’s largest automotive markets have declared an intention to ban the production of internal combustion engines completely, and within the next 50 years at most.

For many automakers who’ve been operating within the same business model and in a relatively stable industry for the past 50 years, time is running out to make the necessary moves in order to stay relevant.

Some automakers, however, are making the right shifts now, knowing that they’ll reap the rewards very soon. GM, for example, has committed to a fully electric line-up, while also laying off 7,000 mechanical engineers. That’s a lot of jobs (and they’re not the only jobs eliminated by GM), but odds are, they’ll be replacing those mechanical engineers with electrical and software engineers in order to help bring their vision to life: they’re completely investing in what they see as the writing on the wall. Traditional vehicles with internal combustion engines are on their way out, and the arrival of cost parity with the battery electric vehicle, I predict, will be the final nail in the coffin for many automotive businesses.

Of course, there are some OEMs and automotive supplier companies who can’t or won’t perceive this massive shift; and I believe that this refusal to acknowledge where the industry is headed is indicative of fiduciary irresponsibility. Responsible strategic action must be taken now in order to be prepared for the BEV’s cost parity with traditional vehicles, whether it’s a plan to slowly wind down production, a bid to be acquired, or a complete shift to a new industry more adjacent to the production of electric vehicles. The fact is, millions of people will be impacted by this shift (both directly and indirectly), and when CEOs and boards of directors choose not to take preventative measures in light of the huge sign-posts pointing toward a different future, they are gambling in a losing game.