February 21, 2020

Zombie Car Companies

By
Jim Harris
Magazine Article

Gas Cars are Dead: Here’s Why

Traditional car companies are zombies. They’re dead but they just don’t know it yet. By 2022, Electric Vehicles (EVs) will become cheaper to buy than gas cars.

EVs are already cheaper on operating cost and maintenance cost. The electricity to power EVs costs 80% less than the gas to power a traditional car and electric car maintenance costs are 80% lower. A typical gas powered car has 2,000 moving parts, while an EV has 20. With thousands of fewer parts and no oil changes, there’s very little maintenance required for EVs.

The largest cost of an EV has historically been the battery but battery prices are plummeting, having fallen by more than 90% since 2010, according to Bloomberg New Energy Finance (BNEF):

Plummeting Prices for EV Batteries

Source BNEF

In 2017 BNEF predicted that by 2026 EVs would be cheaper to buy than the average gas car in North America:

Source: BNEF

But battery prices have been falling so fast, that BNEF now predicts that cross over will happen in 2022.

Catherine Wood, CEO of New York based investment manager ARK, predicts the cross over will happen in 2021, and that by 2025 inexpensive electric vehicles in the US will be up to $11,000 cheaper compared to a gas powered Toyota Camry.

Why is this important?
Who is going to buy a traditional gas car when an EV is cheaper to buy, cheaper to run and cheaper to maintain?

Rise of Mobility as a Service (MaaS)
Using Uber or Lyft is already cheaper than owning a car for 25% of Americans, especially for those living in dense urban areas and people traveling fewer than the average 13,000 miles per year (in Canada the average distance traveled is 15,200 kilometers).

Autonomous vehicle fleet will completely change the face of personal transportation. The cost of personal travel was $1.70 per mile in 1871 by horse drawn carriage. The cost fell to 70 cents per mile by car and remained constant for 100 years when adjusted for inflation.

Once we have autonomous fleets (like an autonomous Uber and Lyft), the cost will plummet to just 26 cents a mile. At that point who’s going to want to buy an expensive gas clunker when they can get anywhere they want to go for a third of the price?

Source: ARK Invest

Micro Mobility
Finally micro mobility options will help to kill the traditional gas car. A staggering 60% of traditional car trips in the US are less than five miles. Bike and scooter sharing – which has taken off – provides FAR low cost solutions for short trips.

Source: CB Insights

In 2018 shared electric scooters firms Bird and Lime became the fastest ever US companies to reach billion dollar valuations – each achieving this milestone within a year of inception. Shared electric scooters provided 45.8% of all shared micro mobility trips in 2018:

Source: TechCrunch & NACTO

2019 Reality Check
For the fifth consecutive year, US car sales topped 17 million in 2019. So these trends are not being felt by traditional car companies yet (although GM’s 2019 sales are down 2.3% from 2018 and Ford’s are down 3%).

While ride sharing like Uber and Lyft are cheaper than owning a car for a portion of the population, the overall the number of cars on US roads is increasing. So traffic congestion in most US cities is getting worse, not better. Further, public transit use has been decreasing in cities where Uber and Lyft are popular. Because of these counter-intuitive consequences, traditional transportation experts may be tempted to dismiss or downplay how transformational the trends we’ve been discussing will be.

Here’s a staggering statistic: The average American spends more than five work weeks a year commuting (218 hours a year)! The shift to fully autonomous vehicles and fleets will liberate trillions of minutes of time every single year. So instead of driving, people in cars will be reading, writing a report, watching a movie, Skyping for work or with grandkids or even sleeping. One woman recently told me she’s going to put her exercise equipment in her car and get her work out on the way to work. So how we use cars – what we do inside them – will shift profoundly.

Worsening traffic in cities will further drive explosive use of scooters in shared mobility for short trips.

Here’s another staggering stat: Tesla is valued at more than General Motors and Ford COMBINED as of February of 2019. To me this highlights how profound the coming shift will be.

Summary
The death of the traditional gas powered automobile will be driven by three trends: EVs, the rise of autonomous vehicles and mobility as a service and the rapid rise of micro mobility solutions like shared electric scooters.

This also spells the end for most traditional car companies. I predict that two of the world’s largest car companies will go bankrupt by 2025.

Jim Harris is the author of the Blindsided which focuses on disruptive innovation. It is published in 80 countries worldwide and is a #1 international bestseller. You can follow him on Twitter @JimHarris or email him at jim@jimharris.com

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