Sep 27, 2018

The race for the next billion cars

Illustration: Rebecca Zisser/Axios

When the world's automakers are scrambling to retool into electric and driverless mobility companies, they are thinking about this number: 1 billion.

That's how many cars it is estimated will be added to the global fleet as early as 2030, igniting a frenzy over who will capture the sale of these probably much cleaner, higher-tech vehicles.

Why it matters: 1 billion is a large number. It will double the current number of cars on the road. And, at a rate of 80 million cars sold annually around the world, it is sufficient to build and sustain numerous trillion-dollar companies, a geopolitically defining scale of wealth.

  • What very few analysts are considering: The actual prize may be much higher — at least some of the existing global fleet may be up for grabs, too, in a gigantic future, one-time-only bout of automobile obsolescence.

What's going on: By the second half of the next decade, the cost of electric and combustion drive trains will converge, and then cross over, according to Bloomberg NEF, which studies renewable energy tech. Electric cars will become cheaper than conventional combustion systems, BNEF says.

  • At that point, electric car sales will boom, BNEF and other analysts forecast.
  • BNEF estimates that there will be 30 million electrics on the road around the world in 2030, up from 4 million today, and 560 million, a third of the global fleet, in 2040.
  • The International Energy Agency forecasts 125 million electrics by 2030.

There is no estimate for sales of self-driving cars, as commercial models do not exist yet. But almost every major automaker on the planet is pouring billions of dollars into creating electrics, driverless cars or both, often combined.

  • Daimler explicitly targeted this future yesterday by setting in motion a succession in which it will elevate Dieter Zetsche, director of its electric and driverless car efforts, to CEO, reports the WSJ's William Boston.

Driving the news: The developing world, chiefly China and India, will account for about 85% of the 1 billion cars to be added to the global fleet, analysts say.

  • Given government policy, at least in China — which is promoting electric vehicles — many of those cars may be electric.
  • If sales so far are any indicator, a lot of them won't be the type currently made or planned by BMW, Tesla or GM. Instead, they are likelier to be dominated by "micro-EVs," tiny electrics costing as little as $1,000, which accounted for two-thirds of the 2.5 million EVs sold in China last year.
  • At least at this stage, Chinese and not Western companies seem likeliest to dominate those 1 billion vehicle sales.

Be smart: The surer market for the planned high-tech vehicles is advanced countries — those that currently have the least growth. But if they are to sell in the expected volumes, the market needs to start retiring cars a lot faster than the current dozen or so years they currently stay on the road. And there is reason to believe they will.

The argument: At some stage, AI-infused sensors and other self-driving features will make such cars much safer than conventional, human-driven vehicles, analysts say. When that happens, they could trigger a change in social perception in which, for instance, a critical mass of parents are no longer willing to allow their children to drive in less-safe conventional cars.

  • At this point, a large number of the conventional car fleet could become obsolete.
  • As of now, Tesla sells the most self-driving electrics, a trend that could continue. It is delivering on 400,000 orders for the mainstream Model 3. That dwarfs every other electric — last year, BMW sold 33,000 i3s. GM sold 26,000 Bolts.

Reality check: Colin McKerracher, head of advanced transport at BNEF, cautions that while fleet obsolescence could happen, it does not mean conventional vehicles vanish. Instead, they may be sold to drivers in another country.

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