The first brand-new car that your grandchildren will buy will be electric or hybrid — whether they like it or not.
And that’s because they won’t have a choice…
I learned to drive with a manual transmission. And to this day, I still prefer to drive a stick shift. It makes me feel like I’m more in control of the car, and I like the experience better than driving an automatic transmission.
But today, brand-new cars with manual gearboxes are rare. In fact, only 3% of the cars sold in the U.S. come with manual transmissions.
Why?
Because Americans wanted the convenience of manual transmissions. And so, auto manufactures stopped selling them.
The same thing is happening with electric vehicles (EVs) right now.
Soon, carmakers will completely stop selling cars with traditional combustion engines (CE).
Now, I’m sure there will be holdouts. There will likely always be some demand for CEs from gearheads and car collectors. I mean, I guess I’m a holdout for manual transmission. But soon, the majority of car sales will be electric or hybrid because that’s what automakers will be offering.
Ford recently announced that it would stop producing sedans, leaving only two cars: the Mustang and the new Focus Active. The company is keeping its full line of trucks, SUVs, and commercials vehicles. But it will completely stop producing Fiestas, Fusions, and Tauruses. And Ford said it would more than double its investment in EVs.
Ford said it will spend $11 billion on the technology and will roll out 16 fully electric cars over five years. The first of these cars is expected to arrive in 2020.
Meanwhile, the largest auto seller in America, General Motors (GM), said it plans to bring 20 new electric cars to market by 2023.
And most of the other big automakers around the world are doing the same thing, too.
Daimler AG, the parent company of Mercedes-Benz, said it would have electric versions of all its cars in production by 2022. Volvo announced it would phase out gas-only car production by 2019. And Volkswagen will make everything electric in some shape or form by 2030.
In fact, Volkswagen recently made headlines with a $25 billion contract for EV batteries. That’s about half of Tesla’s entire market cap.
Automakers around the world are making the shift to electric. But it’s not because they care about emissions or the environment. They’re simply following the trend.
According to a recent Frost & Sullivan report, Global Electric Vehicle Market Outlook, 2018, worldwide sales of EVs are set to climb from 1.2 million in 2017 to 1.6 million this year and up to an estimated 2 million in 2019.
And looking forward, the Energy Information Administration (EIA) expects some 40 million EVs to be sold around the world annually by 2040.
Much of these estimates are related to new government regulations on emissions, particularly in China and Europe. But with such a rapid rise in projections, you probably understand why auto manufactures are making the switch.
But there still might be another reason…
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Oil is a finite resource. And while it’s unlikely the world will ever completely run out of it, there’s no doubt that sooner or later, oil and refined gasoline will become so expensive that no one will be able to afford it. And expensive oil is bad for carmakers.
There’s no doubt that high gas prices bring down auto sales. We’ve seen this happen time and time again. And there’s little to nothing that carmakers can do about rising oil prices.
But they can increase the fuel efficiency of their vehicles, making them less expensive to operate. And that might be part of the plan.
Let’s face it, there’s no stopping rising oil and gas prices. If automakers want to continue selling cars, they’ll have to bring better fuel efficiency to the market. And that’s exactly what they’re doing with the shift to electric cars.
Personally, I don’t drive anymore. I moved much closer to work so I can walk. And I take Uber to go everywhere else. But if I did drive and was looking to buy a car, I’d go electric.
Twenty years ago, electric vehicles were a dream.
But today, they’re a reality.
And tomorrow, they’ll be the standard.
Until next time,
Luke Burgess
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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