Remember the 2012 film Trouble with the Curve, starring one of my heroes, Clint Eastwood. The basic storyline surrounded an upcoming rookie in a high school league who seemed to be able to literally hit anything out of the park. Our boy Clint, who was having vision issues, could hear that he would not be able to hit a well-thrown curve ball to save his life. Well, the baseline story was that it was difficult to get the emotional decision out of the way of science. While the rookie looked great on paper, Clint, a well-experienced baseball scout knew what was happening through his extensive experience. OK, I am getting to the point! Science shows us that the S-Curve is real for adopting new technologies. A typical S-curve adoption cycle looks like an S. All new technology follows an S-curve adoption cycle; some may be overtaken by a “better” or “better marketed” technology, like beta video vs VHS. Or they could just disappear because the technology issues or manufacturing issues could not be solved, like a personal hoverboard. But they all follow the initial adoption cycle until another overtakes it, or the tech does not pan out. Once the technology crosses the “chasm”, it generally follows a meteoric rise in adoption that nobody believes will happen. I want to look at how the S-Curve will play out in Battery Electric Vehicles (BEV) or Plugin Electric Vehicles (PHEV) vs the internal combustion vehicle (ICE).
Typical S-Curve adoption with stag [1]
Our current adoption of BEV/PHEV vehicles shows that we have just passed the inflection point by increasing our sales by more than 5% of new car sales. In January 2024, PHEV and BEV sales reached 16% of new car sales worldwide. This is well beyond the inflection point, where a function changes from concave to convex. Bloomberg states 19 countries have already hit the 5% tipping point.[2] However, try to tell that to someone who is a non-believer! The same ones said, “You can rip that flip phone out of my dying hands; I’m never using that iPhone!” or the one who said, “Come on, who doesn’t like to go to Blockbuster for a movie every night.”
If you want to view a great video discussing EV adoption and the S-Curve the Now You Know YouTube video will provide a great overview. The EV Adoption S Curve | Disruptive Investing News (youtube.com).[3]
I wanted to look at the adoption rate for the US based on S-curve adoption. To do this we took the actual adoption rate of the US and then overlayed other countries ahead of our adoption curve to model what our adoption curve could be. We lined up all countries on the year that 5% sales were achieved. Countries like Norway, China, and France are well ahead of the US on the curve. However, even though each country has some variation, and they hit the inflection point at different times, they all follow the adoption curve we see below. This allowed us to predict where the US might be in the coming years.
What does this mean for the US? In the next 2 years, EV sales will be more than 25% of new car sales in the US. So, by 2026, we will be adding over 25% of 14.6M new car sales in the market. Or we will be adding 3.65M vehicles to the market. Almost three times the number that was added in 2023. Let me break this down into a smaller Florida sample. In Orange County Florida, we have approximately 1.19 M Registered light-duty vehicles with new car sales of around 300,000/year. By 2027 we can expect 300,000 of these to be BEV or PHEV and we will be adding more than 75,000 annually. 300,000 BEV/PHEVs are the equivalent of adding 75,000 homes to our service territory, a 27% increase.
Electric vehicles (EVs) tend to last longer than traditional internal combustion engine (ICE) vehicles due to having fewer parts that can wear out. Analysts suggest that EVs today could easily be rated for 300,000 to 500,000 miles compared to 200,000 miles for their ICE counterparts. This means that by introducing more EVs into the market, we are essentially incorporating vehicles that have the potential to operate for 10-20 years, surpassing the typical 8-10-year lifetime of ICE vehicles. This trend contributes to a more durable automotive stock in our inventory, which may lead to a quicker increase in inventory density and a higher percentage of total inventory comprised of long-lasting electric vehicles.
The types of disruption that this adoption rate might pose are significant:
- Utilities must examine how BEV charging loads impact our transformers and make changes as needed. That means we need to know where the vehicles are charging and when. We also need to be able to track and predict EV growth down to the neighborhood.
- The availability of DCFC charging infrastructure needs to increase in density to follow the EV adoption curve. We must establish the appropriate EV-to-DCFC ratio to support the growth.
- DCFC charging reliability must improve. EV owners must be able to rely on charging stations just as they do gas stations. In many cases, this means that the current model of 2-4 DCFC ports at a charging hub is insufficient to handle temporary outages of single stations.
- We expect car maintenance services sales to increase as people maintain their ICE vehicles and wait for the right BEV to be produced, followed by a sharp decrease as ICE vehicles become less frequent.
- Gas stations will transition to gas and electric (or just electric) or go out of business. Check out Wa-Wa gas stations in the southeast. BEV charging presents a new opportunity for higher-end sales for lunches, such as handmade custom sandwiches vs. rotating hot dogs.
- Specialty shops like oil-change/brake jobs will lose business, making it harder to keep the doors open unless they can adapt and diversify their revenue sources. What are the regular services needed by a BEV? Certainly not oil changes. Perhaps A/C service, clean and lubricate brakes, cabin air filters, and brake fluid tests? The brakes will not wear out, but they still need some level of service.
- The oil industry will see reduced sales of gas and oil. I’m unsure what that will do to oil reserves and exploration of oil and gas. However, I don’t think it will be good. Oil and gas companies are reluctantly moving into the market by opening their BEV fueling departments. Big players like BP and Shell have EV charging organizations. All that is required is for them to answer successfully: “Am I in the gasoline business or am I in the fueling business”.
- Direct-to-customer sales models employed by Tesla will impact car dealership models.
- The number of new car sales may be impacted by several factors, including the expected life span of BEVs and an increase in rideshare options.
- New businesses will open, such as charger installation, power management software, and EV maintenance, among others.
- Automotive insurance must soon consider technologies that supplement human decision-making, such as anti-crash assistance and, ultimately, full self-driving.
This transition is not just about adopting new technology but has far-reaching implications for various industries and business models. Being prepared for this shift is crucial, especially for those in the utility or automotive services industry. The future is leaning towards a cleaner fuel type, with EVs becoming more mainstream. Embracing this change and adapting early will be key for businesses to thrive in this evolving landscape. The transition to a new transport era is indeed closer than we might realize, and being proactive in understanding and preparing for these changes will be essential. It’s an exciting time for innovation and transformation in the automotive industry!
[3] https://www.youtube.com/watch?v=sb7RmEFv3kQ
