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There are setbacks, hurdles and costs to consider as part of this transition.

Electric vehicles: Four reasons for a reality check

The electric vehicle is here… and it will spawn utopia in the next decade! Or so some of the headlines claim. In reality, the situation is much more complex.

On the surface, the switch to electric vehicles makes sense from an environmental standpoint. After all, the new technology is expected to help wean us off of fossil fuels, in turn cutting carbon emissions and reducing pollution. But there are setbacks, hurdles and costs to consider as part of this transition. Here are four to keep in mind.

Reason #1: We have a long way to go

The production of electric vehicles has taken off, but we’re still far from a place where everyone can afford them. Electric vehicle prices have even begun rising over the past few years, although this may not be all bad news because the distance that these vehicles are able to travel has increased (as shown in the chart below). This is likely an acceptable tradeoff for those going the electric route, but higher prices at the time of purchase may discourage cost-conscious buyers.

Based on IEA data from the Energy Snapshot © OECD/IEA 2017, http://www.iea.org/newsroom/energysnapshots/average-ev-price-and-range, License: www.iea.org/t&c as modified by Aberdeen Standard Investments.

Furthermore, of the 30% of U.S. consumers who consider an electric vehicle when buying a new car, only 3% actually purchase one. While government subsidies may encourage consumers to change their behavior, these incentives vary greatly from country to country. For now, they are less the transportation for the masses and more the toy of the rich.

Reason #2: The cost of cobalt

In order to make electric vehicles mainstream, drivers need to be able to recharge them easily. This has led to the development of lithium ion batteries for cars that are similar to ones already used in smartphones, tablets and laptops. Cobalt is a key ingredient in these lightweight batteries.

Auto manufacturers will face many challenges from an environmental, social and governance (ESG) standpoint as they navigate their supply relationships for cobalt. While there are substantial cobalt reserves in Canada, more than half of the supply of this metal is sourced from the Democratic Republic of Congo (DRC). Twenty percent of this supply is mined by hand, with both adults and children (some as young as four years old) working in brutal conditions. It is estimated that at least 80 workers die in the cobalt mines each year, according to a study conducted by the United Nations in the DRC regarding accidental mining deaths between September 2014 and December 2015.

While some car companies have begun improving their supply chain policies, most haven’t addressed the risks of being linked with human rights abuses. Few, if any, have provided any transparency regarding their suppliers. And the rapid rise in cobalt prices isn’t forcing any kind of change at this point. If anything, it may make matters worse as companies ignore these issues in their fight to get the cobalt supply they need for their products. The cost of cobalt is rising – both in terms of monetary value and the toll on human lives.

Reason #3: “Range anxiety” reigns supreme

In 2013, the term “range anxiety,” or the nervousness electric car drivers may feel about running out of charge while on the road and not being able to recharge, was added to the Oxford Dictionary. Several years later, we are still far from a place where global infrastructure can support a full-scale switch to using electric cars. A lack of convenient charging stations will be a significant hurdle to widespread adoption of electric vehicles, particularly for those without garages or those who are traveling a long distance away from home. According to Bloomberg, Morgan Stanley estimates that the world will need to spend $2.7 trillion on infrastructure for car charging in order to support 526 million electric vehicles by 2040. While car companies are developing longer-life batteries and “super charging” stations that cut down charging times from hours to minutes, the current system of charging stations is in need of dramatic expansion in order to support the projected growth of electric vehicles.

Reason #4: Fighting climate change - with coal

One reason for people to switch to an electric vehicle is to cut carbon emissions and fight climate change. But this assumes that the primary sources of electricity being used are clean ones. Sadly, this isn’t always the case. In the Netherlands, India or China, electricity often comes from coal-fired power plants. Going from gasoline to coal for fuel doesn’t help much to limit carbon emissions and, in some cases, it may even increase carbon emissions.

A reality check

While there are many reasons to be optimistic about electric vehicles, nothing is perfect. We are bound to hit bumps in the road along the journey to cleaner energy and greater independence from fossil fuels. But we need to recognize that this won’t be a free ride.

Image credit: iStock.com / SrdjanPav

ID: US-121217-53953-1

1 Source: Amnesty International, November 15, 2017.

2 Nishazawa, Kana. “The World Must Spend $2.7 Trillion on Charging Stations for Tesla to Fly.” Bloomberg, October 11, 2017.