The Future Of Electric Vehicles In Australia
As the twentieth century was marked by the proliferation of vehicles using internal combustion engines (ICEs), it is quite likely that the twenty-first century will come to be known as the time when electric vehicles finally displaced their ICE counterparts and ushered in a new age of sustainable transportation.
Although the world’s leading automotive manufacturers have been working on developing electric vehicles for the past few decades, we are only now seeing EV models launched into different markets and hitting the roads in places like Australia, the U.S., Canada, China, and Europe. There are a few key factors driving the rapid uptake of EVs in developed nations: the drastically reduced cost of manufacturing batteries - a core component of every EV, and a global commitment towards tackling climate change and achieving net-zero emissions within the next decade.
In fact, several countries including China, the U.S., the U.K., and Norway, have already set a date on when they will ban sales of ICE cars, with most planning to become all-electric by 2030. Some are already well ahead of the curve in this regard: 70% of new car sales in Norway are EV sales.
Reacting to these regulations, leading automotive manufacturers such as General Electric, Renault, and Volkswagen have joined Tesla in producing a wide range of affordable EV offerings for different customer segments, meeting the demand from locals and getting ready to end the production of ICE vehicles by 2030.
Australia is playing catch up
If we zoom in closer to home, however, the EV situation does not look very promising, at least right now. In Australia, only 0.78% of new car sales are attributed to EVs, indicating that Australia is lagging far behind other developed nations in pursuing the goal of 100% EV adoption.
This seems surprising, given the huge benefits of shifting over to an EV - a round trip that would cost an average Australian $500 in fuel costs with an ICE vehicle can be completed with a total spend of $100 with an EV. The option of using solar panels to partially charge the vehicle only adds to the cost-effective nature of EVs. On a more national level, 100% EV adoption (without changing anything in the grid) will slash Australia’s net carbon emissions by 30%.
The majority of Australians recognise and appreciate these benefits, with surveys showing that huge proportions of the population in Australia (and not just the wealthy) are willing to shift over to EVs.
A missing game plan
Why, then, have EVs made up only 0.78% of total car sales? It seems that the major fault lies with the federal government’s lack of regulation and policy-making with regard to EVs. In other developed nations, governments have instituted strict limits on the maximum allowable emissions, such as the U.S. requiring vehicles to have less than 161 grams of CO2 per mile by 2026. Along with that, governments have also incentivized the direct purchase of EVs, making it easier for citizens looking to purchase EVs to actually do so such as by offering tax breaks.
To fill in the policy gap left behind by the federal government, individual states are setting their own goals and regulations, with New South Wales investing $500 million as part of its Electric Vehicle Strategy to encourage EV uptake. Along with that, NSW and Victoria are aiming to make EV sales constitute 50% of new car sales by 2030. Although these efforts will increase EV adoption in those states, they will not do enough to persuade EV manufacturers to make better options available to Australians.
A future full of change
Despite the slow start, Australia is among the countries in the world that major EV manufacturers such as Tesla, Renault, Nissan, and Hyundai are looking at as major markets for EVs. Analysts, institutions, consumers, and businesses alike are speculating about the future of transportation and infrastructure as more and more EVs start showing up on roads.
For gas and service stations, this is a particularly concerning issue. According to a recent BCG report, about 30% of new car sales will be made up of EV sales by 2030, and around 80% of current gas stations will no longer be profitable by 2035. In other words, gas and service stations are soon to have their own ‘Kodak’ moment, i.e. they will be forced to pivot their businesses in line with the needs of the future, or risk going out of business.
Similarly, the manufacturing industry will also have to transform its operations to meet the new demands of an EV-driven market. To remain profitable, incumbent automotive suppliers will have to shift production from ICE-specific parts such as conventional transmissions, engines, and fuel injection systems, to EV-specific parts such as batteries, electric motors, and various types of sensors. In particular, battery manufacturing will face the greatest pressure to meet the rapidly increasing local demand for EV batteries, and this will require the setting up of multiple battery giga-factories across Australia.
As manufacturers evolve in the face of these pressures, the industry will experience a drastic change in the kind of jobs available in the automotive manufacturing sector. There will be greater demand for operators, engineers, and scientists who are knowledgeable about and experienced in EV technology and manufacturing. This will pose a significant recruitment challenge to manufacturers, one which they must tackle upfront to drive their own growth and transformation.
If we look at the big picture, one thing is clear: the transportation industry of Australia has already started its journey towards an all-electric future, and only those who are willing to evolve with it will find themselves still in business in the upcoming decades.
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