The EV tsunami – is it really a huge wave, or is the emperor/clothes thing again?

Apologies for the apparent Tesla fixation these days, but it really is the energy story of the summer. Tesla’s wild ride is far and away the most interesting development in the auto industry, and for that matter the business news in general. It’s an interesting story because it’s a bit iceberg-ish; there is the surface story that has everyone’s attention, and there’s the below-the-surface machinations that have some very large industrial players watching intently.

As with a well done rock concert, a lot of exciting stuff happens right on cue, a magically exhilarating experience that creates an illusion of effortlessness. Massive amounts of planning, choreographing, and practicing all go into the experience we pay for. The same goes for electric vehicles – it may be exciting beyond words to hop into the fresh new design of a Model 3, but…where are the materials for all those millions of battery cells going to come from? Tesla is building a massive factory to supply its own needs, but as even Elon Musk has pointed out Model 3 production at 500,000 units per year will use the entire world’s supply of lithium ion batteries. That’s one model, from one manufacturer. If EVs captured 10 percent of the global market, that would be something like 8 million vehicles per year. That is a fascinating scenario, but it’s not math, because it’s an equation that doesn’t work. Not even close.

Many facets of industry will be impacted if Tesla sales go supersonic. The energy infrastructure world will be in turmoil as electricity demand would change significantly from the traditional paths. Those traditional paths have built up over the past 100 years, and won’t be simple to rewire. For example, residential loads and equipment are built for reasonably well known loads that would change substantially if a material percentage of suburbanites and condo-dwellers installed fast chargers.

And finally, auto manufacturers are announcing brave plans for various e-models, but few (not even Volvo) are wholeheartedly jumping to that ship. Tesla and the upstarts are the only ones. The main reason is that auto manufacturers have been caught out before, anticipating trends that never materialized. Several oil shocks since the 1970s sent manufacturers scrambling to develop small cars in anticipation of market demand for fuel-efficient options. By the time the vehicles made it to market en masse, fuel prices had fallen and demand switched back to fuel hogs. The same is happening again; despite all the hoopla about EV sales, the entire planet is switching to SUVs or so-called crossovers. Many are stuffed with small turbocharged engines that promise great efficiency, but as anyone who’s ever owned a turbo knows the second you use that power, fuel-efficiency plummets.

Ultimately, the economic world is going to have to react to some incomplete information. If Tesla 3 sales take off on the trajectory that many expect, the existing energy and automotive world order will be in chaos. Infrastructure to power tens of millions of EVs isn’t there yet; battery demand will overwhelm supplies, and auto manufacturers will be apoplectic trying to develop cars for the new order while simultaneously not really believing it. If Tesla sales don’t explode beyond the initial rush, then automakers will be again caught charging off towards a cliff, and it’s a mistake they are getting more skittish about making.

It’s going to be fascinating.