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Technology/Services

The Future Is Electric and Self-Driving

Gas will decline and cars will soon drive themselves, McKinsey adviser contends
Photograph: Shutterstock

ATLANTA The rise of electric vehicles (EVs) and autonomous vehicles (AVs) is inevitable, according to Jacob Schram, senior adviser for McKinsey and Co., New York.

Before his time at McKinsey, Schram spent 22 years as the group president and CEO of Circle K Europe in Norway. He said he became convinced of the inevitability of EVs and AVs after his time there.

“Norway went from zero to approximately 60% EV [cars on the road] in seven years. Nobody, absolutely nobody, believed it would happen when it started,” he said. He acknowledged that Norway is a small country and that EVs are subsidized there. “But I really don’t care,” he said. EVs are better cars and consumers prefer to drive them, he said, citing the acceleration, extra space, cool designs and abundance of models to choose from.

Norway, he said, is aiming for 100% of cars on the road to be EVs in the 2020s, and he believes it will reach that goal. One reason is because EVs are quickly reaching price parity with gasoline-powered cars, and that mostly comes down to battery cost. In 2015, Schram said the battery made up 57% of the total cost of building an EV. In 2019, the battery is 33% of the cost of building an EV. By 2025, he said the battery will represent 25% of the cost of construction.

He also argued that automobile manufacturers are already moving to produce more EVs to keep up with regulation and consumer demand coming from the European Union (EU) and China. For instance, he said General Motors recently announced that it will introduce 20 new EV models in the next four years. Today, Schram said, there are 70 EV models across brands. In 2021, that number will reach 220, he said. Then, in 2025, there will be 340 models of EVs.

One of the biggest factors holding the United States back from mass adoption of EVs, he said, is a lack of charging infrastructure. He encouraged attendees to think of this gap in infrastructure as an opportunity for U.S. businesses. Not only should convenience stores build charging stations, he said, but they also should develop home car charging services.

Circle K did just that in Norway, Schram said. First, Circle K Europe focused on on-the-go charging in cities and high traffic corridors, he said. “The best thing about quick charging is that you can charge a really high margin,” he said.

Then, once Circle K Europe built that charging infrastructure, the company decided to bring its charging tech straight to its customers. The company installed car chargers in customers' homes, which he said allowed them to market straight to customers through those devices to remind consumers of Circle K Europe each time they charged their vehicle at home.

China is the leader in EVs, according to Schram, and automakers are working to deliver EVs to that market. He said Renault is making an EV for Chinese consumers that will cost the equivalent of $8,700. “So don’t talk about price parity being far out in the future. This is coming,” he said.

Furthermore, as EVs become more common, AVs will also rise due to the massive public benefits, Schram said. He cited data from McKinsey showing that the U.S. government would save $800 billion in 2030 due to the increase in safety and efficiency. “How can politicians look away from that?” he said.

China is also leading in AVs, he said. Schram said the Chinese government will have approvals for a fleet of AV taxis by the end of 2019. “Chinese consumers are the most interested in trying AVs if you look at it by countries,” he said.

Looking further, Schram claimed that the rise of EVs and AVs will completely change the way we think of car ownership. He said private ownership of AVs will mostly be limited to high-income consumers. Others will share cars. Schram claimed that 60% of people ages 18 to 29 would be willing to trade in their care for a shared robo-taxi. He used his 18-year-old son, who does not have his driver’s license yet, as an example.

“This is a huge business,” he said of the alleged rise of EVs and AVs. “Don’t let others take that opportunity. You own the space. You are that kind of business.”

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