Less than a month after Tesla became the United State’s most valuable automakerFinancial Post is reporting on a newly published study by Stanford University economist Tony Seba that is sending shock waves through the automotive and oil industries. After careful analysis of current market and economic trends along with technology investments and advancements, Seba’s forecast titled Rethinking Transportation 2020-2030 suggests that by the late-2020s the internal combustion engine will be all but extinct on the dealer showroom.

According to Seba, this revolution is being driven by technology and simple economics rather than government policies. Electric cars are currently the fastest growing segment in the global automotive industry. March 2017 saw a 134% increase in electric automobile sales over March 2016 and a 87% increase Q1 2017 versus Q1 2016. With this kind of growth, two things are occurring: 1) the economies of scale are making electric cars and their components cheaper to produce and 2) the automotive industry worldwide is pouring billions of dollars into battery and electric systems research and development.

Over the next 2-3 years battery ranges are predicted to meet and exceed to 350-400 mile range petrol powered vehicles typically reach and entry level electric vehicle prices are projected to break below $30,000. By 2022-2023 entry level EVs will be approaching $20,000. That is when, according to Seba, the avalanche will occur. “What the cost curve says is that by 2025 all new vehicles will be electric, all new buses, all new cars, all new tractors, all new vans, anything that moves on wheels will be electric, globally,” Professor Seba projects. With EV life expectancy in excess of 1 million miles, almost zero maintenance, and less than 7 cents per mile to operate, internal combustion will simple become obsolete.

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This shift is not without its challenges. The US government stands to lose up to $50 billion in fuel tax revenue, funds that are used for road construction and other surface transportation projects. “Certain high-cost countries, companies, and fields will see their oil production entirely wiped out. Exxon-Mobil, Shell and BP could see 40 percent to 50 percent of their assets become stranded,” the report states. Additionally, the traditional automakers with their large bureaucracies are at risk of being leapfrogged by nimble cash flush tech companies that are already making moves in the industry. That is a lot of economic and geo-political instability added to an already complex world stage.

While I feel like Seba’s projections are a little optimistic, the trends are clearly pointing in one direction. And with renewable energy constituting the majority of new energy production coming on line the news is all the sweeter. What are your thoughts on this? Comment below and let us know.

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