Is investing in electric vehicles actually a good idea?
Electric vehicles and their purported benefits are having a moment. But are they everything they're cracked up to? We're looking at their pros and cons and exploring the realities of driving these next-generation vehicles.

What you need to know

  • Electric vehicles, though they might seem like they come from the future, are in fact nothing new having been around since the industrial revolution.
  • While their benefits purportedly scream green, they often come with the hidden cost of ownership.
  • Their production process poses a big challenge for the automotive industry that now clearly needs to change its business model.
  • Overall, an electric vehicle isn’t as green as you might believe and with EV technology is changing so quickly, these vehicles might not be everything they’re cracked up to be.
Innovation Published on Simple December 1, 2021

Electric vehicles are the trend du jour, as far as media coverage is concerned. We see them on the streets, we hear about them on TV, we read about them every day in newspapers, car magazines, social media and we talk about them while chatting with friends and family. The accounting departments of corporations like Pepsico, Kraft, Nestle and all others whose core business depends on moving sales reps from Client A to Client B are hard at work, trying to calculate the pros and cons of purchasing the next-gen fleet cars based on fully electric engines.

The rise and fall of the original electric vehicles

Why have combustion engines fallen out of favour, and why do we all think that electric vehicles are the future? Is it possible that this trend has been created by regulators who have been pushed into a one-way street as a consequence of global warming issues?

Historically the first moving automobiles were powered by steam engines. Obviously due to the weight and complexity of the system, (first heat the water for 45 minutes then use pressure valves to create momentum) engineers in the mid-19th century began looking for other apparatus that would allow swift and effective movement. The first electric-powered vehicle, a carriage,  was built in the UK around 1850 by an English inventor, Robert Anderson, followed by the US chemist William Morrison who introduced the six-passenger vehicle in 1890 powered by an electric engine capable of speeds up to 14 miles/per hour.

Due to the industrial revolution in the 1800s, the world changed dramatically. Millionaires emerged out of nowhere and the aristocratic hegemony was cracked. Now anyone with skills, stamina and new ideas could make a fortune. This created a need for personal transportation. Internal combustion engines based on gasoline (otto) and oil (diesel) were an offspring of crude oil that came into play when oil was discovered around the world and the process of refining petroleum to achieve kerosine and lamp oil was a definite dealbreaker in the early 1800s. With the electrification of cities and the increase of automobiles, came fuel.

New York in the early 1900s was flooded with electric cars. They were simple to operate, easy to maintain and quiet. The only disadvantage was the battery – even though its capacity could give the driver a 100 miles radius per charge, safety was a major issue. The lead-acid battery that’s still used in car batteries today, with 12 or 24V to power the auxiliaries, was invented in 1859 by Gaston Plante, a French physicist. The first electric-driven car batteries were of similar design and were unstable, with many of them exploding due to lack of proper maintenance. Even today, gas fumes are highly explosive.

When Henry Ford introduced his first mass-produced Ford T vehicle in 1908 it killed the market for electric vehicles. The price difference was 3-fold and with the introduction of the electric starter designed by Charles Kettering in 1912 and the elimination of hand cranks, it was the beginning of the end for electric vehicles. Added to this, they were naturally highly dependent on electricity and outside of big cities, there was little to no electricity in the first 20 years of the 20th century. So an automobile that could be fueled manually with petrol from a pump, without the need for electricity was a no brainer for an increasing group of consumers.

EVs return

Discussions about electric vehicles restarted when the oil crisis hit in the mid-1970s but despite the world’s development over 70 years, the battery industry still relied on lead-acid platforms. Japanese engineers began developing new, more efficient batteries based on Zinc-carbon but these were used for household equipment. There are many different battery platforms available. Nickel-Cadmium (a Swedish design from 1899), Nickel-Metal Hydride and the one used in Evs today: Li-Ion (Lithium-Ion battery).

With the rise of technological understanding, Japanese manufacturers invented the first hybrid vehicle – the Toyota Prius in 1997. The idea behind the car was to introduce a green vehicle with very low fuel consumption and emissions, that was also independent of an electric power supply. This concept proved successful, and today most of Toyota’s product portfolio is hybrid-driven and seen by their officials as the bridge between internal combustion engine-driven and fully electric-driven vehicles.

Unfortunately for Toyota, the technological advancements made by Tesla and the rapid learning curve in the EV industry could well make hybrid vehicles obsolete in less than a decade. This is probably the reason Toyota has waived all of its patents to anyone who would like to build hybrids using Toyota’s 24 years of know-how.

Should we all buy an electric vehicle now?

The Germans have a saying: jein – which is a combination of ‘ja’ and ‘nein’ (yes and no), which sums up this complex question. Firstly, electric vehicles are much more expensive, because of the large offset of new tech and parts that cost much more than those of a traditional vehicle. To counter this, studies show that by 2027-2030, the prices of new electric vehicles will be equal or cheaper to the ones using fossil fuels.

Today, however, if you compare the price only, electric vehicles are much more expensive. Even with state support and tax waivers as well as some bonuses like free parking in cities and low-emission zone free passes, the price tag is still exponential.

Electric Vehicles

The technology

The engine is a state-of-the-art piece of engineering and little know that a 200kw (300HP) electric engine is as big as a pizza in diameter, as thick as a coke can and weighs around 30kgs. Despite this, the number of moving parts is as low as 20. In comparison, a 4-cylinder turbocharged petrol engine with similar power output can weigh between 150 and 250kgs and has over 2000 moving parts. You need water coolants, fans, pipes, wires, harnesses – all of which are prone to fatigue and failure. An electric engine can be changed through a plug-and-play design and is simple to maintain.

The components of an electric vehicle

There are elements required in an electric vehicle that you do not have in an internal combustion engine bay. Inverters that transfer AC power to DC, an intuitive battery management system, an electric power control unit that controls how much power the motor puts on the wheels and the battery to name a few. Previously, most of the batteries were 400 volts, today the industry is producing 800-volt platforms that increase charging speed and provide a more efficient power output at the same battery capacity level. All of these components are expensive as they rely on electronics and rare earth elements (REE).

The battery itself presents another concern. With the introduction of lithium-ion batteries in the 1990s, the industry faced a serious problem. On the periodic table of elements, lithium is on the far left and high up – this is where the most unstable and powerful elements are placed. Meaning that if a li-ion battery ignites, it is practically unstoppable. Lithium does not need oxygen to implode, as its chain reaction is created by heat itself, so the only way to prevent a battery from catching alight is to prevent it from heating up. Fire departments all over the world are looking for the best way to mitigate any danger in case of an electric vehicle blowing up. Tesla, for example, has issued special instructions for owners to follow in case of fire, as well as how fire brigades should extinguish a fire in any Tesla vehicle.  Imagine skyscraper living, with an underground parking lot full of EVs, if there’s a risk they could explode and catch fire, this poses a serious safety threat. The reality is that as long as the battery is not 100% safe consumers will be hesitant about buying these cars.

The second issue is the price per kWh of the battery. The more kWh capacity a car has the bigger the range. It is amazing how marketing has changed in recent years – if you look at car ads 10 years ago they were about comfort, power and luxury. Today’s ads are about eco-friendliness and range. Each EV is powerful (400 HP in a medium-sized EV is considered standard), comfortable ( they have more legroom due to smaller engine compartments) and luxurious (the amount of electricity flowing allows for the most energy-consuming add-ons usually reserved for luxury vehicles such as massage or heated seats). 10 years ago, the price of $200 per kWh was the norm, today $137 per kWh are the average and the race for cheaper energy doesn’t end here, as the price is predicted to drop to $60 per kWh in the next few years. An average EV has a battery capacity of 60 to 80 kWh which means the raw cost of batteries (just the cells stacked in a container) is $8220 – 10960 USD. With a price of $60 per kWh, the EV will be cheaper to build than a combustion-driven car.

The third issue is the weight and size of the battery. Today electric vehicles are built on special platforms that stretch the wheelbase (more space inside for passengers) and place the battery packs as low as possible (which offers better handling in corners and more stability). But the size and weight are cut on gross weight allowance and costs “electric” gallons per every 100 miles. The lighter the battery, the more miles you can run and the smaller it becomes, the more boot space or cabin space is available.

The fourth issue is governmental tax exemptions that were previously quite generous and included free charging. Well, that’s in the past now. Governments are waiving any tax exemptions as electric vehicles grow in popularity and charging is anything but cheap ranging from €2 to €5 per 100 km driven (average consumption of 18kwh per 100km taken into account). Amazingly, in 2020, Europe surpassed China as the biggest EV market, with more than 3 million vehicles registered. The number of sales increased by 43% between 2019 and 2020 and this number would be higher if not for the COVID-19 pandemic.

And what about the effect on the environment?

If I buy a green car today am I at the forefront of environmentally-conscious citizens? Or is this a myth? First and foremost, any car is built using fossil-driven energy. You can have solar-powered assembly lines like Tesla, but to cast any alloy or iron elements you need steelworks and these require gigawatts of power that usually come from fossil- or atomic-based power plants. According to a study by the Society of Motor Manufacturers and Traders (SMMT), manufacturing an EV produces 59% more CO2 emissions in comparison to a traditional vehicle. Then you need to take into account the cost of scrapping an electric vehicle. Today there is no regulated or structured process to scrap or recycle EV parts but manufacturers predict that by 2040, 97% of its parts will be reusable. The biggest contributor to pollution here is the battery cells as they use rare earth elements i.e. lithium. The good news is that the prices dropping suggests sufficient supply in the long term. One way to make good business is to encourage the re-use of old car batteries for off-grid home solar installations, where you could use them as power storage. Even though the battery’s capacity would be too low for a car, it’s more than sufficient for home appliances and due to a low level of power volatility (low charging during daylight and low discharging at night), these batteries could work forever if connected to a clever house inverter.

So does it make sense to buy or invest in electric vehicles?

The answer is a mixed bag after all. On one side, governments are pushing to ban new allowances for combustion vehicles from 2030 onwards, which creates a demand for cars still in an experimental phase. On the other hand, we all want to see our grandchildren living in a safe world years from now. But EVs are still not the perfect solution because they still share similar environmental issues to regular cars. For example, they also contribute to smog and as a result, greenhouse emissions, due to the friction produced by their brakes and brake pads, as well as their tires. In contrast, some modern diesel engines are so clean they emit cleaner air than they suck in. This is one reason not to abandon diesel or petrol-driven cars entirely.

Another consideration is the time it takes to charge your vehicle. Do you know what a Tesla hotel is? It is when your car transformed into a two-bedroom when you a) wait in line for the charger or b) when you charge your car at a lower power charging station that can take between 2-4 hours. Even a house socket can take as much as 17 hours. At present, there are 43 000 charging stations in the US, 42 000 in the UK, 75 000 in the Netherlands and 46 000 in Germany compared to 150 000 gas stations in the US and more than 100 000 in the EU. This isn’t bad when taking into account that 10 years ago charging stations were very rare across the globe, but the key issue is still time. Depending on your personal charging/fuelling set-up, recharging could eat up 30 times more of your time. If you have a small EV that you mainly use for driving around the city and you have access to a home charger or public quick charger then the difference might only be double what it takes to refuel. But if you’re often driving out in the countryside in an area with few charging units, trying to recharge such a big battery can become a serious issue. And it’s worth noting that charging is not free of recharge anymore, and in certain areas, 1 kWh can be very costly. Additionally, if a country’s power grid infrastructure is very old, this often means the electricity comes from coal-operated power stations, which negates the entire point of driving an electric vehicle, to begin with.

There’s also the matter of reselling an EV for a reasonable price in several years, as the next generation will likely have smarter and lighter batteries with a much higher range and a lower price tag. So residual values for electric vehicles are much worse than for traditional cars and this will be a trend as long as the level of technological advancement continues to double each year.

The bottom line is there are certainly a number of benefits to owning an electric vehicle, and their advancement paints a positive picture for a greener future. However, they’re not going to solve the world’s environmental problems at the turn of an ignition. Like all trends, it’s worth taking a step back to examine them from all sides before diving in headfirst.

About the Authors

Maciej Janiszewski

Maciej Janiszewski

Business strategy & venture capital

Connect with Maciej Janiszewski

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