- Battery electric cars do not meet the basic criteria for disruptive innovation.
- Small electric vehicles (SEVs), on the other hand, do have disruptive potential.
- Our urbanizing world with its rapidly expanding middle class and increasing resource constraints will reinforce this trend.
- Internal combustion engine (ICE) vehicles may lose substantial market share to SEVs, but will remain an important part of the transportation system.
“Disruption” is a word often associated with electric vehicles, especially when Tesla motors is under discussion. According to the formal definition of disruptive innovation, however, electric cars like the future Tesla Model 3 or the Nissan Leaf cannot qualify as disruptive technology.
The Harvard Business Review explains it nicely in this brief article. Basically, the primary issue is related to the first and most basic criterion for disruptive innovation: the product must either target overserved customers (by offering lower performance at a lower price) or create a new market (by targeting customers who couldn’t use or afford the existing product). Being more expensive than ICE cars (see part 1 of this article), standard electric cars certainly do not meet this criterion and are therefore unable to disrupt the internal combustion engine on a large scale.
Small electric vehicles (SEVs) such as neighbourhood electric vehicles and electric bicycles do meet this criterion (and the other criteria mentioned in the article). Simply put, these technologies can provide the most essential services currently delivered by ICE vehicles at a much lower price point, thus drawing many overserved customers away from ICEs and winning many additional customers who simply cannot afford to own a car.
As the global middle class rapidly expands, environmental constraints continue to tighten and society continues to evolve beyond the current primitive consumerist paradigm, this disruptive trend should accelerate. Indeed, an ever expanding range of SEV models with steadily increasing performance and features should do very well in this environment.
Why so optimistic about SEVs?
It is clear that the global trend is towards greater urbanization and higher population densities. One of the main practical drivers behind this trend is that higher population concentrations bring people, services and employment opportunities closer together, thus cutting down on time and resources required for transportation. Herein lies a large potential for SEV disruption of the internal combustion engine.
The vast majority of trips made in such densely packed urban environments are less than 10 miles in length (see data from the UK below as an example). Many people living in this environment will be able to meet their daily transportation needs with similar (often greater) speed and convenience at an order of magnitude smaller cost using SEVs as opposed to regular cars. As battery technology continues to improve, SEV performance may well reach the level where selection of an SEV over a regular car becomes a no-brainer for a large portion of the rapidly growing urban population.
Almost just as important as this order of magnitude reduction in cost is the order of magnitude reduction in space requirement. Dense urban environments cannot allocate large amounts of space to wide roads and extensive parking lots. As a result, traffic in such environments often becomes horrendous, leading to large economic inefficiencies and stress-related ailments. SEVs can essentially eliminate this problem by taking up an order of magnitude less space.
A third benefit, particularly applicable to electric bicycles, is harder to quantify, but perhaps the most important of all. It is becoming clear that moderate daily exercise can greatly reduce the risk of degenerative disease as well as significantly increase productivity, creativity and self-esteem. Given scary stats such as the US spending 1 in every 6 dollars of GDP on healthcare combined with soaring rates of debilitating mental disorders, this is a tremendously important point. It will be a while before society evolves to the point where people choose an e-bike over a car for health/wellness reasons, but the trend is definitely in the right direction.
Finally, the environmental benefits of SEVs over standard cars are obvious. Hauling around one order of magnitude less weight from point A to point B naturally consumes much less energy. Just as importantly, the compact city planning and healthier populations resulting from a transportation network heavily reliant on SEVs will bring large further improvements in economic efficiency, thus facilitating a decoupling of GDP and energy consumption.
A potential SEV future
The first thing to mention in this section is that standard cars will still play a major role in a future high-SEV transportation network. Naturally, SEVs will not be practical or safe for longer, high-speed travels or for situations where a large amount of cargo needs to be transported. That is why the title of this piece says “kind-of” instead of “yes”.
It is likely that many households will still own a standard ICE car in a future high-SEV scenario. This vehicle will be used for the small fraction of trips which cannot be made using an SEV. The internal combustion engine will be preferred because it should be fairly cheap (to justify the low utilization rate) and have a long range (to conveniently enable occasional longer trips).
Alternatively, car-share schemes could become much more broadly available and advanced. People will then be able to conveniently access any kind of vehicle they require at any given time for a modest price. It is also likely that people will leverage the large savings and overall economic efficiency gains brought by SEVs to pay for standard car transportation services such as grocery deliveries, taxi’s and couriers. The economics of these kinds of services can be further improved by smart use of IT (e.g. Uber).
As for the SEVs themselves, their low up-front cost can grant greatly enhanced mobility to literally billions of people who would not be able to afford a regular car. The economic development value of this alone is truly enormous and, not surprisingly, this potential is already being actively tapped in China (check out the numbers on the bottom right of this IEA link). As a potentially even more attractive alternative, city councils could decide to offer a public SEV service such as e-bike system recently launched in Copenhagen. Such a system would put cost-effective, green and healthy personal transportation at the disposal of all citizens. It can even be argued that such a system could be delivered free of charge due to the large economic benefits it will unlock, thus ensuring rapid and broad adoption.
Such a future of publicly available SEVs complemented by smart and efficient mechanisms to deliver the services of standard cars to customers on demand really sounds very attractive. As an added bonus, the transition to such a system does not require holistic overhauls of existing systems or the buildout of extensive new infrastructure (in most cases). When SEVs reach technological maturity, broad adoption by the public should therefore be quite rapid and smooth.
I live in Norway; one of the most progressive countries on Earth and a regular feature at the top of the Human Development Index. Here, almost everyone enjoys a moderate-to-high standard of living (primarily thanks to oil and gas from the North Sea), but wealth is not publicly displayed through status symbols and the general population possesses a relatively high level of environmental awareness. Norway is therefore a good indicator of possible future trends in a wealthier but environmentally constrained world.
It is quite common in Norway not to own a car. In fact, most younger people (under 35) in my research group don’t own a car even though they can easily afford one. Public transportation networks are well developed and many people (including myself) use a bicycle as a primary mode of transportation. With the recent advances in battery technology, however, electric bicycles are rapidly gaining in popularity.
Small neighbourhood electric vehicles (NEVs), mostly driven by senior citizens, are also becoming regular sightings on sidewalks and in bicycle lanes. Larger NEVs are still rare, but, since the speed limit in Norwegian towns is only 40 km/h (often a legal requirement for driving NEVs on the road) I expect this to change as soon as the enormous incentives for standard electric cars are phased out over the next couple of years. Even the greens are now advising against this very costly policy.
It also seems like e-bikes are finally going to get some incentives, something I reckon is better policy by some orders of magnitude than heavy subsidies for regular electric cars (incentives for 200 e-bikes will cost about the same as current incentives for a single Tesla). In addition, political momentum is gaining to transform the Oslo city centre into a carless zone and similar initiatives are brewing in other Norwegian towns. This development would obviously bode well for SEVs, especially e-bikes.
Personally, I have been using an e-bike for two years now. It certainly brings a lot of convenience relative to a standard bicycle and, even though it doubles the price of a bicycle, ownership costs easily remain more than an order of magnitude less than a car. Savings from my cycling habit have enabled me to buy a flat and achieve complete financial security very early in my career. The automatic daily exercise from cycling is also an important part of the reason why I have not been sick for a single day over the past 7 years.
When I really need a car, I rent one or simply borrow from a friend. Aside from that, the town I live in enables me to conveniently commute to work and reach all necessary service outlets by e-bike ride of 20 minutes or less. The occasional longer travel is mostly done by plane with an airport taxi providing a very convenient link between my front door and the airport lobby.
As far as I can see, this is our best shot at a sustainable transportation future in a world where the global middle class must quadruple in size within ever tightening environmental constraints. What do you think?