This coming week, on the 28th of July, Tesla is expected to deliver the first 30 Model 3's - with a further expectation to deliver 100 cars in August and 1,500 in September. This will no doubt trigger a great deal of media interest and continued reporting on forecasted uptake of electric vehicles. Both the Chevrolet Bolt (for which the first deliveries were in December 2016) and the Tesla Model 3 are considered to be mass market electric vehicles. These are long range electric vehicles (383 km for the Bolt, 346 km for the Model 3) that are considered to be reasonably priced - compared to other electric vehicles such as the Model S, Model X or BMW's i series.
Other car manufacturers are following suit with electric vehicles being added to the ranges in a number of companies. At the start of July, Volvo announced that all models from 2019 "will have an electric motor" - though it is worth noting that this includes pure electric, plug in hybrid and mild hybrid vehicles. If nothing else, this is a very symbolic move from a major car manufacturer and one might reasonably expect similar announcements from other manufacturers to be made in coming years.
Recent analysis from Bloomberg New Energy Finance suggests that, by 2040, electric vehicles will account for over 50% of new car sales. Furthermore, it is expected that electric vehicles will be cheaper to buy than traditional internal combustion vehicles by around 2025 - 2029 in most countries. Bloomberg is not alone in predicting rapid uptake of electric vehicles. The International Energy Agency and OPEC, as well as BP, Exxon and Statoil, all have forecasts showing strong growth in electric vehicles. OPEC in particular have revised their 2040 forecast by almost 500%.
At the same time that costs are decreasing for electric vehicles, driving consumer behaviour and uptake, there are changes occurring in the technology space that could also have a profound impact on personal mobility. In coming years, there may be a confluence of sustainable transport, in car technology and mobile technology that could change things again. Specifically, the rise of autonomous vehicles and uptake of on-demand transport services may result in decreases in personal car ownership.
So what does this mean for climate change and climate strategy for companies. From a pure emissions basis, the improvements gained through using electric vehicles may be negated - depending on the source of electricity used for charging. Countries such as Australia, with a high reliance on coal for power generation may not realise emissions abatement through uptake of electric vehicles. It is widely recognised that decarbonisation of the power generation system is an enabler for increased electrification in the rest of the economy - reducing overall emissions. Countries with low carbon electricity will see a benefit in overall emissions footprint from a move to electric vehicles.
With regard to climate strategy, different types of companies will be affected in different ways. There is the potential for a very large impact to be felt on oil and gas companies for example. There is a direct correlation between the uptake of electric vehicles and global oil demand. Various analysts have explored different scenarios showing different levels of electric vehicle uptake. In general however, a decrease in overall demand should be reflected in lower oil prices. These sorts of scenarios should be explored in the scenario analysis that forms the basis of calculations that quantify climate risk. It is foreseeable that policies to promote the use of low emissions vehicles in transport are put in place to assist with meeting country emissions reduction targets so companies that are affected should definitely be taking electric vehicle uptake into account when examining risks associated with climate change.
Electric, autonomous vehicles - that are summoned on demand by users - have the potential to cause rapid disruption to the automotive and oil industries. It remains to be seen how rapid and how widespread these changes will be but the key is that businesses need to explore scenarios and determine the potential impacts.