A few short years ago, it was reasonable to believe that the future of electric vehicles was in Elon Musk’s hands.
Existing only as a niche product for self-sacrificing green activists, the world’s stock of all-electric vehicles (EVs) in 2012 stood at less than 200,000 cars, a mere 0.02% of the world’s passenger vehicles,. Most of the EVs were short range, relatively expensive compact cars like the Nissan Leaf. These vehicles worked just fine, but almost nobody wanted one apart from environmentalists motivated to make a political statement.
Then along came the Tesla Model S. Very stylish, blazingly fast, and loaded with features, this car was – and still is – a sexy set of wheels. The price point of $80,000+, high but attainable for some, arguably added to the appeal. If you were lucky enough to afford a Model S, you could not only cut your environmental footprint, but more importantly you could make a statement about your financial success. Even better, if you could spring for the various upgrades, you could put yourself into an even more elite class of Teslarati. Musk had transformed the electric vehicle into an object of desire.
Elon Musk was busy defying naysayers in other ways too. SpaceX had moved into the forefront of space missions, achieving a number of firsts for private rocketeering. Some of these have dramatically and permanently lowered the cost of space launches, and SpaceX now routinely undertakes missions that previously only governments could aspire to.
By the time the Tesla Gigafactory (now Gigafactory 1) was announced in late 2013, Musk had achieved Visionary status with a seemingly unshakable following. For a young auto company to consider more than doubling the world’s output of lithium-ion batteries with a single colossal factory might have been just too far fetched – if it had been championed by anyone other than Elon Musk. It’s much harder to bet against an ambitious idea when its proponent is successfully putting rockets into orbit. A successful Gigafactory would put to rest concerns about the availability of batteries, and clear the way for Tesla’s mass market offering, the Model 3. Although Gigafactory 1 will remain under construction for years to come, its early success has shifted the world’s view of the practicality of replacing internal combustion (ICE) vehicles with EVs.
The shift in perceptions took hold just in time for another momentous event in the auto world: Dieselgate. In 2015, when Volkswagen and others were caught cheating on pollution controls, it threw into question the long term viability of ICE vehicles. After 100 years of continuous improvement of fossil fuel cars, had we finally hit the wall of diminishing returns? European governments, increasingly confident that EVs would become a viable alternative, starting signing onto long term targets to reduce or eliminate ICE vehicles.
For its part, VW had a serious crisis on its hands. Its corporate reputation hanging in the balance, the decision was made to rehabilitate its image by announcing a bold shift in favour of the new energy economy. Fully 25% of its production was to be all-electric by 2025, a whopping 2.5 million vehicles per year. EVs were no longer a hypothetical proposition – they were the mainstream.
Beijing was paying attention too. Faced with choking air pollution and a geopolitical imperative to reduce China’s reliance on foreign crude oil, the government of China went all-in on EVs. Providing support and incentives up and down the supply chain, China now makes more EVs than the rest of the world combined, and is aggressively expanding capacity to maintain exponential growth in production. Chinese EV production in 2017 alone stood at over 400,000 vehicles, and for 2018 they appear to be on track for at least 700,000.
The world as a whole has now surpassed 2 million EVs on the road, and the figure is growing rapidly. Auto companies around the world are no longer grappling with whether EVs will replace ICE vehicles; but rather how quickly they should execute the transition. Key questions now revolve around who should be filling the various roles in the supply chain, and where all the battery raw materials will come from. For some of those materials – graphite included – existing production capacity is far too small to support even the most conservative estimates for EV adoption.
For much of this, the world has Elon Musk to thank. While we cannot know for sure how quickly the shift away from fossil fuel cars might have been without him, he was an important catalyst at a critical time. This cannot be taken away from him, no matter how things turn out for Tesla in the long term.
Jamie Deith is the CEO of Eagle Graphite (TSXV:EGA), a company that stands to benefit greatly from increased demand for graphite.
Torey Marshall, Bsc (Hons), Msc (Geology), MAusIMM(CP), a “Qualified Person” as defined by NI 43-101, has approved the scientific and technical information in this post.