The electric car can change the world and the economy

The electric car is going to come, sooner or later. There are many doubts as to whether this will be imminent (2020, 2025) or more distant, whether there will be transition periods (hybrid or plug-in hybrid cars) or whether the switch to electric will be straightforward.

There are still some technical challenges (availability and speed of charging, autonomy) and economic challenges (price of batteries) but there are sufficient reasons for a push for the electric car (energy efficiency, ease of maintenance and above all, pollution) that will make them a reality. And this will change the world.

The automotive market

It is clear that the first to be affected by such a change will be automotive-related companies. The market for combustion vehicles is quite stable, there are quite a few brands and a few suppliers. There is competition, it is true, but you more or less know where you stand.

However, the switch to electric vehicles brings a real revolution to the sector. First, new players like Tesla appear who can take a major piece of the pie.

And they may not be the only ones (there are rumors of Apple launching a car). This can revolutionize the market for manufacturers and suppliers, market shares can dance significantly.

Another important aspect of electric vehicles is that their engine is significantly simpler than the combustion engine. Many companies in the industry can be completely displaced: no spark plugs, radiators, cooling oils, etc.

And companies that are involved in the creation of electric motors, batteries, charging circuits and a long etcetera can benefit greatly if they know how to get on the trolley.

Car service companies will also be affected. The maintenance of an electric car is much less on the engine side, so workshops will have less work, much less. It would not be uncommon to see massive closures of this type of business.

But all these changes are normal. When PCs first appeared, typewriter companies collapsed (or changed) and the new companies were the queens. But what is really interesting is how the economy of the rest of the world changed the widespread use of PCs. And that’s what we’re going to see now with electric cars.

Oil and electricity

The biggest consequence of the widespread use of electric vehicles is in the oil market. Currently 50% of the world’s oil consumption is used to create fuels for vehicles. And if we replace fueled vehicles with electric ones, that part of consumption disappears.

Wait a minute, we will have to generate electricity for these vehicles, won’t we? Yes, but oil is not just used to generate electricity. Let’s look at the case of Spain: we have the capacity to generate about 100 GW, of which less than 10% would come from fuel.

It is true that a large percentage (25%) is gas, but that is not oil, is a similar market but is not the same (different producers, for example).

In general the biggest energy consumers in the world have a similar structure, maybe we have more wind and hydro capacity, but others have more nuclear capacity. The conclusion is that with a massive migration to electric cars the oil market would collapse.

It may seem catastrophic, but there are people who move a lot of money and are very clear about it.

For example, at the last conference of azValor (Spanish investment fund) they said they were investing in raw materials so they had fallen but they frequently monitor the number of units sold of electric cars around the world in case they have to undo their positions in oil companies.

On the other hand we have the opposite trend. The electric companies are going to grow a lot in sales. What is now consumed by the petrol pump will be consumed by the electricity grid.

This means that we will have to increase generation capacity (maybe not in Spain, we have a brutal overcapacity of generation, that’s why our bill is so high) and improve the distribution networks. The challenge for the electricity grid is fast charging, which requires very high and short instantaneous consumption.

It is also being commented that electric cars can backup the network.

If there is a generation shortage at any given time and there are cars plugged in and charged 100% (normally when the cars are parked they are charging) they can sell their electricity to the grid to avoid blackouts. This would make us, in part, producers.

Pollution and health

Another change that the electric car will bring to the world economy is in the pollution of the cities. The biggest source of pollution right now is precisely combustion vehicles. It is estimated that in large cities 80% of the pollution comes from vehicles.

With the mass arrival of electric vehicles, cities will surely prohibit the entry of other types of vehicles in the most congested areas, and this will trigger the replacement rate even more.

Many will think that replacing the combustion vehicle with an electric one only takes the pollution out of the cities, to the generation plants.

But two things are being ignored: firstly, that power stations are more efficient than combustion engines and therefore for the same amount of energy they pollute less; and secondly that the electricity network is cleaner than combustion engines.

We are talking about that in Spain we have a large amount of hydro and wind power, apart from nuclear, reaching many months of generation without CO2 emissions.

Furthermore, once cars are electric, they can be migrated to an increasingly green network, which has a direct impact on pollution and emissions, unlike now.

Replacing combustion engines with electric ones will therefore have an impact on pollution, which in turn will have a positive effect on health. And let us not forget that better health is not just a good thing for citizens, it also has a direct relationship with health expenditure.

Another important economic aspect is that CO2 emissions will be considerably reduced and if we manage to stop global warming the electric vehicle will be the big driver. Economically the difference can be very important (such as extinction or not), although the consequences of the temperature increase are so long term that nobody really takes them seriously.