The Auto Industry Can’t Ignore The Electric Vehicle Revolution Any Longer – Forbes

Nissan unveiled its new Leaf model, the next evolution of the zero-emission electric vehicle, on September 6, 2017 as it seeks to battle off competitors in a sector it once pioneered. (Photo credit: KAZUHIRO NOGI/AFP/Getty Images)

As automakers gather at the Frankfurt Auto Show next Thursday, an unprecedented transformation of the $1.8 trillion auto industry is already underway, whether it has been fully embraced by the industry or not. In addition to the new models and concept cars that will be on display at the show, the proverbial elephant will also be in the room, or convention hall, as you like. At Frankfurt this year, the impending threat of electric vehicles (EVs) to the internal combustion engine (ICE) will be on everyone’s mind.

Although EVs and Plug in Hybrid Electric Vehicles (PHEVs) account for only about 1% of the 95 million vehicles produced globally every year, leading auto industry analysts are, one by one, coming to the conclusion that EVs will substantially change the auto landscape as we know it.

For example, Bernstein, a well-regarded Wall Street research firm that closely monitors the industry, published a report earlier this year analyzing what it calls the coming Electric Revolution. In its authoritative 262-page report on the subject, the Bernstein research team cites declining technology costs and an expanding charging infrastructure, among other factors, as the principal reasons why EVs are quickly gaining traction. Bernstein predicts that in 20 years, EVs are likely to account for as much as 40% of all of the vehicles sold globally, causing sweeping changes at the assemblers and throughout the supply chain.

The industry on the whole has been slow to respond

However, the industry has been slow to respond — save for a few outliers. Tesla, of course, is widely credited with leading the Electric Revolution, but Volvo stunned when it announced in July that it would phase out vehicles powered solely by an ICE as early as 2019 and that all of its car models launched after that date would be EVs or PHEVs. No doubt, Volvo’s ownership by Geely, one of China’s leading car makers, was an important influence. As a country, China has made a large commitment to EVs in order to fight the country’s serious air pollution problem.

While the industry has been waiting for Tesla to fail and the EV trend to run out of steam, government leaders and investors have already made up their minds.

Government leaders have made up their minds

Established 50 years ago by then-Governor Ronald Reagan, the California Air Resources Board (CARB) has led the way in the United States by enacting strict emission standards and implementing a wide range of policies that encourage EV adoption, including production credits for auto companies that sell zero emission vehicles (ZEVs). California and 13 other so-called CARB States that follow its lead are presenting a powerful force for change in one of the world’s largest auto markets. Meanwhile, other countries have begun to take even more draconian measures in recent months.

In June, Norway said it will ban the sale of all fossil fuel-based cars by 2025. In July, France said it will end sales of gasoline and diesel vehicles by 2040, and Great Britain quickly followed suit with a similar announcement. At the city level, the mayors of Paris, Madrid and Mexico City have said they will ban all diesel vehicles in city centers by 2025. At the national, state and local levels, government officials all over the world are lining up behind EVs.

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