Are we about to have an Osborne Effect moment?
In 1983 the Osborne Computer Corporation announced two new models - the Osborne Executive and the Osborne Vixen. Founder Adam Osborne touted these new computers as being significantly better performing than the company’s first personal computer, the Osborne 1, which debuted in 1981. It’s widely believed that as a result of the new product announcements, sales of the Osborne 1 declined to such an extent that the company went into bankruptcy and never recovered.
Some have doubted the veracity of the story citing stronger than expected competition at the time, and the company’s reluctance to cut Osborne 1 production and focus on the new machines. However, the narrative has become apocryphal. The Osborne Effect is now known as the ‘social phenomenon of customers canceling or deferring orders for the current soon-to-be-obsolete product as an unexpected drawback of a company announcing a future product prematurely.’
Some people think that we’re about to have an Osborne Effect moment.
A big one.
And it’s to do with your car. Your ride. Your wheels. Your whip.
For the majority of people, EVs are superior to internal combustion engine (ICE) vehicles. They’re cleaner, faster, cheaper, easier to live with, and more fun. You can also get thousands of dollars off the price due to federal and state incentives, financial help with setting up the electrical charging equipment at home, and free road-side charging when you’re out and about. A lot of manufacturers are coming to market with new models and the milestone of $100/kWh for the cost of batteries is not far away. This figure represents the point when battery-powered vehicles are as cheap as ICE cars to make, sell and buy.
Yesterday Volkswagen, the second largest car manufacturer on Earth, laid out ambitious plans for its EV future.
Six new battery gigafactories in Europe, eventually reaching 240GWh by 2030
A unified battery cell that will reduce costs by up to 50%
Charging station construction in Europe, The US, and China
Car to grid technology that will allow you to use your car battery to power your house
Recycling 95% of spent EV batteries
They’re not doing things by half. Neither are GM and Ford or the huge number of new EV companies. You’ve probably heard of them - Lucid, Rivian, Polestar, Lordstown, Nio, Nikola, Fisker, Faraday, Canoo, Li, Xpeng, Arrival, Alpha, Rimac, and Lightyear among others.
More importantly, as Herbert Diess VW’s CEO stressed yesterday, electric propulsion has won the race for the future. Governments around the world are planning for tomorrow’s mobility to be carbon-free and incentivizing EV production and use will play a huge role.
So, with all these push and pull factors are people going to do an Osborne and put off replacing their older ICE cars with a new EV? Are current manufacturers like VW shooting themselves in the foot by leaning so hard into the EV future that they can’t sell their current ICE cars? Is EV chatter creating a demand that simply can’t be fulfilled?
Perhaps.
Professor Ray Wills from Future Smart Strategies reckons we’ll have a fully electric fleet by 2026/7. He references the relative unpopularity of plug-in hybrid cars versus EVs as an indicator of people never wanting a plug-in option and much preferring pure EVs. Respected motor analyst Adam Jonas from Morgan Stanley agrees. He believes that the simplicity and low cost to manufacture of EVs will win out:
‘Based on our frequent discussions with OEMs (car makers), suppliers and domain experts in the EV business, we would not be at all surprised to see the prices of many EVs eventually fall to below $5k/unit...In the not-too-distant-future, we believe the internal combustion automobile may be so expensive to buy and maintain that it will be extremely difficult to justify its continuing role in the mobility ecosystem.’
However, change is hard. And generally happens slowly, then suddenly.
Abdullah F Alarfaj from Carnegie Mellon University writing for Environmental Research Letters firmly believes that we’re still in ‘things happening slowly’ part of change. His recent research paper, Decarbonizing US passenger vehicle transport under electrification and automation uncertainty has a travel budget, lays out a much more conservative timeline on EV adoption in the US.
You can read the whole thing here and here. The graph below illustrates his central thesis:
EVs currently make up less than 1% of all cars and light trucks.
25% of car sales by 2035 to be EV means only 13% of cars on the road will be EV as the average car bought today will be on the road for nearly 15 years.
EVs are projected to be 60% of vehicle sales by 2050 but ICE cars would still be the majority because of this longevity. To get close to an all EV fleet by 2050 (President Biden’s stated aim), all ICE vehicles sales would have to end by 2035. Currently this is only scheduled to happen in California.
I’m biased as I work in the EV industry, but I’m with Professor Wills and Adam Jonas. The enthusiasm I see everyday for EVs leads me to believe that we’re reaching a tipping point where change happens quickly. Also, money talks and if EVs become so much cheaper to produce than their ICE cousins, then it'll be the manufacturers who force the shift at the behest of their shareholders.
This, I think, will lead us to an interesting time in which EVs will be what the majority of people want. Those companies in a position to benefit from this change will do very well, while those who still have factories tooled for ICE cars could face problems. I suspect we’ll see all manner of deals and offers on final run ICE products. And also some truly outrageous chimeras of cars that will be created to try and maintain the ICE status quo for as long as possible. They’re starting already - Ram TRX, Hellcat, Mustang GT500, Lexus IS500, Jeep V8, Gordon Murray T50, Bugatti Chiron, Defender V8, - absurdly powerful and desirable cocktails of noise and fury. A final last hurrah death throe. One last fix of gasoline. An orgiastic ortolan-like napkin over the head guilty pleasure.
What a way to go out...