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December 21, 2023

Digging Deeper Holes: Predictions for 2024

Electric Vehicles
The Basics
Fast Charging
Nadim Maluf

Search the web for the “law of holes” and you will be inundated with explanations and interpretations touching on a wide range of topics from politics, business and decision-making – and some distasteful humor. To say that “one dug a hole” implies finding oneself in a self-inflicted dire situation with no clarity for recovery.

Recent news reports suggest that demand for electric vehicles is slowing. Some even bemoaned government incentives for electric vehicles. Yet, in 2023 electric vehicles sales reached a record 9% of all passenger vehicles in the US, still greatly lagging China and Germany both at nearly 35%, and a far cry from Norway where 90% of all vehicle sales are electric.

Overcoming denial of the imperative to decarbonize and to electrify wins the first spot in our list of deep holes for 2024. The year 2023 will go as the hottest year on record accompanied by extreme and deadly weather globally; for example, the shocking fires in northern Canada consumed 184,000 square kilometers of forests (about half the area of my home state of California). COP28 in Dubai took a step forward towards acknowledging that fossil fuels cannot power our economies indefinitely. Yet, we need a lot more. Worsening climate crises will prompt governments to commit more resources to accelerate our efforts towards decarbonization.

Our second hole goes to rising global protectionism, geopolitical tensions and deteriorating global collaboration. Thomas Friedman, renowned columnist for the New York Times, heralded in 2005 that the “World is flat,” as he described rapid globalization. I am afraid that the world is less flat in 2024. In an op-ed published earlier this year in TechCrunch, I described how the race to secure our next-generation of energy sources is ushering in a new era of energy sovereignty. This trend will amplify over the coming years. Trade barriers, protectionist policies, government incentives and growing nationalization will ensure a fragmentation of our global efforts to decarbonize.

Our third hole should rather be stated in plural as it involves hundreds of big holes in the ground, otherwise known as mine pits, to meet the demands of electrification. Demand for batteries needed for electric vehicles and battery stationary storage facilities will increase 10X by 2030 to reach nearly 4,000 GWh. This translates to an estimated 384 new mines for lithium, graphite, nickel and cobalt by 2032, with a few hundred additional mines for copper and aluminum (we will need lots of electric cables!). Studies have shown that California’s Salton Sea contains rich deposits of lithium, prompting Governor Newsom to support the development of a new “Lithium Valley.” Yet, mining needs to be environmentally safe, and its operations must become carbon-free. It won’t be an easy feat prompting deeper investments in this sector.

Our fourth hole is rather a shallow trench that extends across wide swaths to guarantee that we can deliver electrical energy where it is needed. Building an infrastructure that can support vehicle charging and the geographical redistribution of clean energy will be critical to the success of electrification. The lack of an extensive and reliable network of chargers is often cited as an impediment to the adoption of electric vehicles. McKinsey estimates that 1.2 million new chargers will be needed by 2030 for public use in the US. If we were to magically electrify every vehicle presently on the road in the US, the country would need to generate annually an extra 1,700 TWh of electricity, or 40% more electricity than we currently produce. Investing in infrastructure is expensive and will touch every aspect of the electric network globally. Ratepayers and taxpayers will foot the biggest portion of this remake of our infrastructure.

Our fifth and last hole of this list is metaphorical; it relates to the growing size of the hole in the pockets of many investors and legacy auto manufacturers. Tesla trades at a market capitalization of nearly $800 Billion, while GM and Ford cumulative market value stands at less than $100 Billion. Financial markets have been punishing many legacy automakers for their inability to build profitable EV businesses. Unable to invest more capital to accelerate their electrification, these automakers are caught between a rock and a hard place. In a recent interview with Automotive News, the CEO of Volvo Cars, Jim Rowan, said, “Can you really become an electric car company by 2030? Well, somebody else has already done it, and they seem to be doing OK.” In other words, if you can’t build electric vehicles and build them profitably as Tesla has shown, then your future may be bleak. Morgan Stanley’s stock analyst, Adam Jonas, advises Detroit’s legacy automakers to either white-label Chinese EVs, work with Tesla and other new EV startups, or work with each other, all being very bitter pills to swallow. So, in my final prediction, I expect a painful trend of consolidation to emerge in the auto industry.

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