1. The Future
    of Mobility

    Part 3 – Electrification

    Thaiha Nguyen, Investment Manager
  2. A wave of revolutionary new technologies is set to transform the way we travel from A to B. In this short series, Thaiha Nguyen, a Baillie Gifford investment manager, takes an in-depth look at the business of personal transport on the brink of change.


    April 2021

    The value of any investment can fall as well as rise and investors may not get back the amount invested.

  3. Surprisingly enough, it was electric motors and battery engines, not the internal combustion engine (ICE), that had the upper hand in the early days of motoring. The first electric carriages were built in the 1830s in Scotland and the Netherlands. Subsequent breakthroughs in battery storage capacity led to the commercialisation of battery-powered cars in France and Britain in the 1880s and in the US in the 1890s.

    The vehicles were quiet, clean and simple to operate. ICE vehicles by contrast were complex, noisy, dirty and dangerous.

    What happened? A remarkable convergence of ICE technology, particularly the invention of the electric self-starter, which eliminated the hand-crank, made ICE vehicles easier and safer to start. Henry Ford’s low-cost mass production techniques, the discovery of oil in Oklahoma and Texas, road development, public policy and consumer demand all conspired to enshrine ICE as the predominant power. EVs were banished to the fringes.

    Over the years, there were sporadic attempts to revive EV technology, but they never surmounted high production costs, limited range (particularly in cold weather) and lengthy charging times. The most notable attempt was by General Motors (GM) in the late 1990s. It leased, and then promptly took back and crushed all its electric EV1 vehicles. Looking back, the former head of R&D at GM who was responsible for EV1 programme said:

    “We blew it with the EV1…because of the short-term pressure of rewarding shareholders with appropriate returns, the health care and pension costs hamstringing us in the early nineties and the need to do a whole lot of spending on our fundamental business to get back in the game.”

    GM later regretted it, believing Tesla’s first car, the Roadster, 16 years after EV1, was less innovative and that electric car technology would be a lot further along than it is today if GM had kept the programme going.

    GM’s troubles encapsulate the innovation dilemma faced by traditional carmakers and explain the slow transition to EVs. It was the challenge from Tesla and the tightening of CO2 emissions rules around the globe that made the difference.

  4. Roadblocks: barriers to breakthrough



    Support from regulators can transform the pace of adoption. China has led the way by subsidising EV buyers and mandating the car industry to produce EVs. By contrast, under President Trump, the US Government loosened emissions standards and reduced tax rebates on EVs.

    Battery technology

    Spurred by the limited range and high cost of lithium-ion batteries, the search is on for better batteries, including smaller, lighter ‘solid-state’ electrolyte alternatives. If manufactured at scale, EVs could compete on cost with petrol-powered equivalents.


    Proliferating charging stations and higher charging speeds will help reduce ‘range anxiety’. The next technology leap will be around charging on the go, either wirelessly or by conductive rails.




  5. Regulatory Support

    China has been at the forefront of promoting EVs. Whether its aim is to address a rapidly increasing pollution problem, to reduce reliance on imported oil, or simply to stake a leadership claim on the next era of global mobility, China is currently leading global EV sales, accounting for more than half of the total. It is also driving the electrification of other types of vehicle, such as buses and two-wheelers, accounting for more than 99 per cent of these two modes of electric transportation stock globally. To meet its goal of becoming the undisputed EV champion by 2025, China is implementing a two-pronged approach: offering subsidies to EV buyers while mandating automotive companies to amass credits on the sales of EVs that can be transferred or traded.

    India is another country heavily reliant on imported oil. In an effort to manage its massive oil bill, the government intends that by 2030, EV sales will account for 30 per cent of all new vehicle sales.

    EV adoption is picking up in Europe. In the EU-15 nations (broadly, the western European countries) alone, the share of diesel engine-based vehicles declined from 56 per cent in 2011 to 45 per cent in 2017. This was set off by consumer reaction to the Volkswagen “dieselgate” scandal in 2015, when it was discovered the company had been rigging diesel-powered vehicles to cheat on government emissions tests. The subsequent decision by the German federal court to allow individual cities to ban diesel vehicles and the imposition of additional taxes on diesel vehicles in countries such as the UK are causing buyers to think twice before committing to ICE.

    A few countries, including the UK, Norway, France and the Netherlands, have already announced plans to ban the sales of vehicles that run on conventional petrol and diesel fuel. This is planned over the next two to three decades, which should bode well for EVs.

    North America, however, is likely to lag for some time. Consumers there prefer to drive vehicles with petrol (gasoline) engines, as the price of ‘gas’ is significantly lower there than elsewhere. Further, US Government policy has shifted to looser emissions standards and the government is tightening the screws on tax rebates. Together these policies have dampened EV adoption.

    For example, President Trump wanted to end the federal tax credit of up to $7,500 on new electric vehicles and plug-in hybrids, to save (the White House claims) $2.5 billion over the decade. Right now, the credit is phased out to buyers once the manufacturer has sold 200,000 electric cars, removing some of the incentive for that company to further expand its EV offerings. Only Tesla and General Motors have breached that cap so far.


    Development of battery technology

    Customers’ biggest concerns about BEVs are the driving range and the price premium, both related to the state of battery technology. The lithium-ion batteries in use today are iterations of a technology developed almost 40 years ago and commercialised by Japan’s Sony Corporation back in 1991. As the years go by, we’re squeezing more juice from the pack: energy density is rising by up to 8 per cent per annum, thanks to the continuing optimisation of existing lithium-ion cell chemistries, as well as the introduction of new battery cell materials. At the same time, advances in battery management systems contribute towards extending vehicle range while simultaneously improving safety and extending battery life. Many original equipment manufacturers (OEMs) have announced planned new BEV models with ranges more comparable to their ICE counterparts.

    Battery prices have dropped by more than 80 per cent since 2010, from $1,160/kWh to $156/kWh in 2019. Battery prices are inversely correlated with production volumes. Historically, for every doubling of cumulative volume, there was an 18 per cent reduction in price. Based on this observation and battery demand forecasts, it is expected that the average price will be approximately $90/kWh by 2024 and $62/kWh by 2030. Experts believe that when battery costs fall to $100/kWh, EVs will be cheaper than ICE vehicles.

    These are the average price figures. Tesla/Panasonic’s batteries are believed to be roughly 20 per cent cheaper. On Tesla’s recent ‘Battery Day’, Elon Musk unveiled a plan to produce a newly designed battery in-house to dramatically reduce costs, and ultimately allow the company to sell its vehicles for the same price as gasoline cars. Musk anticipates that Tesla will deliver a compelling $25,000 passenger electric vehicle within the next three years.

    But the ‘super battery’ hasn’t yet been invented. At some point, we will run into the limitations of chemistry as well as of manufacturing efficiencies. Academic researchers and companies are racing to come up with new battery technologies.

    Of all the possibilities, the solid-state battery is often the most cited and has received the most investment. This involves substituting out the liquid electrolyte found in lithium-ion batteries in favour of a solid electrolyte. For example, in 2019, Toyota announced a joint venture with Panasonic for a solid-state design; while Hyundai, Samsung, Ford and BMW all invested in Solid Power (a solid-state battery start-up). Interest is high because solid-state batteries are smaller and lighter, provide 50 per cent more power density and are less flammable than lithium-ion batteries based on liquid electrolytes.

    An electric car with a solid-state battery could simplify the thermal management systems in favour of a larger battery, and thus achieve a longer range. However, the main barrier to its widespread adoption has been the search for a solid electrolyte with enough conductive capacity for large batteries, as well as a manufacturing method allowing economies of scale.



    Although many breakthroughs are being claimed, we shouldn’t underestimate the time it takes for a new technology to be fully commercialised in the car sector. Historically it has taken four to five years to develop a new vehicle model. The move to electrification is shortening these timelines but safely getting below three years is very difficult, even after the battery has been rigorously tested. Hence it is likely to take more than five years for any new battery technologies to reach commercialisation. J.B. Goodenough, one of the lithium-ion battery’s creators, was criticised over his claims about a superior solid-state battery developed in his lab. Even Elon Musk, a specialist in bold claims, is a sceptic on battery development:

    “When somebody has like some great claim that they’ve got this awesome battery, you know what? Send us a sample. Or if you don’t trust us, send it to an independent lab where the parameters can be verified. […] everything works on PowerPoint. If you like, I’ll give you a PowerPoint presentation about teleportation to the Andromeda Galaxy.”

    Overall, my take on this is that while it is important to track the development of solid-state batteries, they are not needed to enable electric vehicles to be competitive with petrol cars. Such a technology will arrive and push EVs forward, but in the meantime current incremental improvements in lithium-ion batteries will be sufficient to make EVs highly competitive and desirable.


    Development of charging infrastructure

    Over time concerns about a lack of EV charging infrastructure will decrease for three reasons. First, the next generation of BEVs will have a greater range; second, charging infrastructure is rapidly being built; and third, charging time is falling dramatically.

    Tesla has been building its proprietary charging network across the globe for years. Currently, there are over 20,000 individual Superchargers at over 2,000 stations. Last year, Tesla introduced its V3 Superchargers, which support a peak rate of up to 250kW and can charge up to 1,500 electric vehicles a day. This means that up to 180 miles of range can be added to the battery in just 15 minutes on a Model 3 Long Range. In June 2020, the German government mandated every filling station in the country to provide charging for electric vehicles.

    But charging technology can go much further. A special route called eRoadArlanda has been built in Stockholm that charges modified electric vehicles as they drive along, thanks to a conductive electric rail. This is part of the Swedish government’s plan to move from petrol and diesel and achieve a fossil fuel-free transport system by 2030. Another example comes from the European Union-funded FABRIC, which investigates the feasibility of wireless charging spots at car parks, road junctions and at traffic lights.



    I started researching the automotive industry back in 2015 when I first looked at BMW. My conclusion at the time, gathered from conversations with BMW executives and industry experts, was that the time was not right for EV technology. I felt that fuel efficiency could be achieved largely through better engineering and aerodynamics, without the need for electrification. At that time, no major OEMs were committed to EVs.

    Fast forward to 2020: BMW plans to mass produce 12 EV models by 2025. Daimler plans to unveil 130 electrified vehicles by 2030 and has budgeted $30bn for investment in batteries. Volkswagen will invest up to $91bn in battery and EV technology to electrify all 300 of its models by 2030. Ford will invest $11bn in green technology and has given guidance that it will produce 40 all-electric and plug-in hybrid vehicles by 2022. Volvo has committed to putting one million electrified cars on the road by 2025. The field is moving fast, and my conclusions of five years ago feel naïve and unimaginative.

    Global sales of EVs have risen significantly over the last few years and will continue to grow, driven by government policies encouraging vehicle owners, along with tighter emissions standards and advances in lithium-ion battery technologies and charging infrastructure. Five or so years since I first looked into the automotive industry, I am convinced that the world is shifting to EVs faster than we imagined.

  6. Thaiha Nguyen Investment Manager

    Thaiha is an Investment Manager who joined Baillie Gifford in 2014. She is an analyst in the US Equities Team and has been involved in running the North American portion of the Managed Fund since 2020. She is also a Portfolio Adviser to the Positive Change Strategy. She is a CFA Charterholder and graduated BA (Hons) in Economics from the University of Cambridge in 2014.

  7. Appendix

    New transport terminology: a glossary


    Advanced driver assistance systems such as automatic emergency braking, lane departure correction and adaptive cruise control


    Air traffic management


    Autonomous vehicles


    Battery electric vehicles


    Distributed electrical propulsion


    Electric vehicles


    Electric vertical take-off and landing vehicles


    Hybrid electric vehicle


    Internal combustion engine


    Light detection and ranging sensing system, which uses pulsed laser beams to measure depth and distance to build up a 3-D map of the environment


    Transportation schemes designed for short distances, using lightweight, usually single-person vehicles, such as scooters and bikes

    Non-internal combustion engine vehicles

    This encompasses battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs)


    Original equipment manufacturers (carmakers)


    Over-the-air updates for firmware and software, performed wirelessly rather than via cable


    Plug-in hybrid electric vehicles


    Small unmanned aircraft system


    Transportation as an asset


    Transportation as a service


    Urban air traffic management system


    Small airports for eVTOLs


    Airports for VTOL aircraft


    Pads for one or two VTOLs with minimal infrastructure


    Vertical take-off and landing vehicles

  8. Important Information and Risk Factors

    The views expressed in this article are those of Thaiha Nguyen and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect personal opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

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