Until very recently, consensus opinion has viewed electric cars as at best a niche market and at worst a passing fad.

That’s changing as production and sales take off:

Electric Car Sales Are Surging, IEA Reports

(Bloomberg) – The number of electric vehicles on the road rocketed to 2 million in 2016 after being virtually non-existent just five years ago, according to the International Energy Agency.

Registered plug-in and battery-powered vehicles on roads worldwide rose 60 percent from the year before, according to the Global EV Outlook 2017 report from the Paris-based IEA. Despite the rapid growth, electric vehicles still represent just 0.2 percent of total light-duty vehicles.

“China was by far the largest electric car market, accounting for more than 40 percent of the electric cars sold in the world and more than double the amount sold in the United States,” the IEA wrote in the report published Wednesday. “It is undeniable that the current electric car market uptake is largely influenced by the policy environment.”

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A multi government program called the Electric Vehicle Initiative on Thursday will set a goal for 30 percent market share for battery power cars, buses, trucks and vans by 2030, according to IEA. The 10 governments in the initiative include China, France, Germany, the U.K. and U.S.

India, which isn’t part of the group, said last month that it plans to sell only electric cars by the end of the next decade. Countries and cities are looking to electric vehicles to help tackle their air pollution problems.

After struggling for consumer acceptance, Tesla Inc. has made electric vehicles cool and trendy, and is pushing into the mass market with the new Model 3 sedan.

Consumer interest and charging infrastructure, as well as declining demand for diesel cars in the wake of Volkswagen AG’s emissions scandal, has spurred massive investments in plug-in cars. An electrical vehicle “cool factor” could spur sales to 450 million by 2035, according to BP Chief Economist Spencer Dale.

Volkswagen, the world’s largest automaker, plans to roll out four affordable electric vehicles in the coming years as part of a goal to sell more than 2 million battery-powered vehicles a year by 2025. Mercedes-Benz accelerated the introduction of 10 new electric vehicles by three years to 2022 to take on Tesla as the dominance of the combustion engine gradually fades.

It appears that the arc of the above chart will extend for another couple of decades, with results straight out of the “creative destruction” chapter of an economics textbook. Here’s here’s an excerpt from a long, speculative-but-plausible analysis on the impact on Big Oil and Big Auto:

This is how Big Oil will die,

(Medium.com) – It’s 2025, and 800,000 tons of used high strength steel is coming up for auction.

The steel made up the Keystone XL pipeline, finally completed in 2019, two years after the project launched with great fanfare after approval by the Trump administration. The pipeline was built at a cost of about $7 billion, bringing oil from the Canadian tar sands to the US, with a pit stop in the town of Baker, Montana, to pick up US crude from the Bakken formation. At its peak, it carried over 500,000 barrels a day for processing at refineries in Texas and Louisiana.

But in 2025, no one wants the oil.

The Keystone XL will go down as the world’s last great fossil fuels infrastructure project. TransCanada, the pipeline’s operator, charged about $10 per barrel for the transportation services, which means the pipeline extension earned about $5 million per day, or $1.8 billion per year. But after shutting down less than four years into its expected 40 year operational life, it never paid back its costs.

The Keystone XL closed thanks to a confluence of technologies that came together faster than anyone in the oil and gas industry had ever seen. It’s hard to blame them — the transformation of the transportation sector over the last several years has been the biggest, fastest change in the history of human civilization, causing the bankruptcy of blue chip companies like Exxon Mobil and General Motors, and directly impacting over $10 trillion in economic output.
And blame for it can be traced to a beguilingly simple, yet fatal problem: the internal combustion engine has too many moving parts.

Here is a list of the most common vehicle repairs from 2015:
1. Replacing an oxygen sensor — $249
2. Replacing a catalytic converter — $1,153
3. Replacing ignition coil(s) and spark plug(s) — $390
4. Tightening or replacing a fuel cap — $15
5. Thermostat replacement — $210
6. Replacing ignition coil(s) — $236
7. Mass air flow sensor replacement — $382
8. Replacing spark plug wire(s) and spark plug(s) — $331
9. Replacing evaporative emissions (EVAP) purge control valve — $168
10. Replacing evaporative emissions (EVAP) purging solenoid — $184

None of these failures exist in an electric vehicle. An internal combustion engine drivetrain contains about 2,000 parts, while an electric vehicle drivetrain contains about 20. All other things being equal, a system with fewer moving parts will be more reliable than a system with more moving parts.

And that rule of thumb appears to hold for cars. In 2006, the National Highway Transportation Safety Administration estimated that the average vehicle, built solely on internal combustion engines, lasted 150,000 miles. Current estimates for the lifetime today’s electric vehicles are over 500,000 miles.

Today there are anecdotal stories of Prius’s logging over 600,000 miles on a single battery.

The story for Teslas is unfolding similarly. Tesloop, a Tesla-centric ride-hailing company has already driven its first Model S for more 200,000 miles, and seen only an 6% loss in battery life. A battery lifetime of 1,000,000 miles may even be in reach.

This increased lifetime translates directly to a lower cost of ownership: extending an EVs life by 3–4 X means an EVs capital cost, per mile, is 1/3 or 1/4 that of a gasoline-powered vehicle.

Better still, the cost of switching from gasoline to electricity delivers another savings of about 1/3 to 1/4 per mile. And electric vehicles do not need oil changes, air filters, or timing belt replacements; the 200,000 mile Tesloop never even had its brakes replaced. The most significant repair cost on an electric vehicle is from worn tires.

Here is the problem with electric vehicle economics: A dollar today, invested into the stock market at a 7% average annual rate of return, will be worth $15 in 40 years. Another way of saying this is the value, today, of that 40th year of vehicle use is approximately 1/15th that of the first.

If you think this reasoning is too coarse, consider the recent analysis from the consulting company RethinkX, which built a much more detailed, sophisticated model to explicitly analyze the future costs of autonomous vehicles. Here is a sampling of what they predict:

• Self-driving cars will launch around 2021
• A private ride will be priced at 16¢ per mile, falling to 10¢ over time.
• A shared ride will be priced at 5¢ per mile, falling to 3¢ over time.
• By 2022, oil use will have peaked
• By 2023, used car prices will crash as people give up their vehicles. New car sales for individuals will drop to nearly zero.
• By 2030, gasoline use for cars will have dropped to near zero, and total crude oil use will have dropped by 30% compared to today.

The driver behind all this is simple: Given a choice, people will select the cheaper option.

The conclusion: Big Oil is today’s film-based photography, a venerable industry destined to be pushed off the field by superior tech. With at least one big difference: The cumulative market values of oil and conventional car companies is in the trillions of dollars worldwide, so their demise will be catastrophic for investors who own these “blue chip” stocks for safety and dividend yield.