160: Is The Future Electric?

Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.

Austin Wilson:

All right. Hey, hey, hey. Welcome back to The Invested Dads Podcast, the podcast where we take you on a journey to better your financial future. I am Austin Wilson, research analyst at Hixon Zuercher Capital Management.

Josh Robb:

And I’m Josh Robb, Director of Wealth Management at Hixon Zuercher Capital Management. Austin, how can people help us with this podcast?

Austin Wilson:

We would love it if you would subscribe. If you’re not subscribed already, just hit that follow plus whatever button that is on your podcast player, and we would love for you to visit our website and subscribe to our weekly newsletter to get notified each and every Thursday when a new episode drops, as well as get a nice little email that has a little bit of a summary of what we’re going to be talking about that week. So that’s how you can help us. But today, we are here to help you. We’re going to be talking about electric vehicles.

Josh Robb:

Oh, yeah.

Austin Wilson:

Because I recently hosted a webinar on a big research project I’ve taken on over the past year to dig into what electrical vehicles are, where the growth is, some of the technology behind it, and we’re going to talk about some of the highlights of that. But we will link the actual replay of the webinar so you can go watch it in its entirety if you would like.

Josh Robb:

Yeah. And unlike an electric vehicle, Austin, you did not charge for this.

Austin Wilson:

Nope. It’s free of charge. Oh, man. The jokes are already starting.

Josh Robb:

I’ll tell you what.

Austin Wilson:

You’re going to be just driving this episode.

Josh Robb:

There it is. Driving you crazy.

 

[1:30] – The History of Electric Vehicles

 Austin Wilson:

Driving me crazy. All right. So, let’s start with talking about how electric vehicles are older than you think. So, Josh, what would you think if I told you that, I don’t know, 50-60 years after the Revolutionary War, the first electric vehicle was created?

Josh Robb:

I wouldn’t believe it. I would’ve said no, the first one was at stinking Prius or whatever. It’s the only one I know of, right? That’s the first one I think of.

Austin Wilson:

Yeah. Well, we’re going to get into that. Robert Anderson, he’s a Scottish inventor, he developed the first electric carriage in the 1830s.

Josh Robb:

1830s.

Austin Wilson:

So that’s pretty incredible.

Josh Robb:

The Model T is not even …

Austin Wilson:

This is 80 years before that. So, the first American electric vehicle, that was developed by an Iowa-based chemist named William Morrison, and that was around 1890, another 60 years ahead of that. Even the founder of Porsche developed his own electric vehicle and the world’s first hybrid in 1898.

Josh Robb:

Ooh, I love Porsches.

Austin Wilson:

It was a long time ago. Between 1890 and 1900, there were many electric vehicles on the road. In New York City specifically, they had a fleet of electric vehicle taxis in 1890-1900. So, by 1900, electric vehicles actually accounted for about one-third of vehicles on the road, 33%, which is about 33 times the proportion that there is today.

Josh Robb:

Yeah, because they’re less than 1%.

Austin Wilson:

There’s 1% today, and it was 33% back then, so that is incredible. Now, things changed. In the early 1900s, it was actually Henry Ford himself who dealt the major blow to the electric vehicle, because when he introduced the Model T in 1908, it was revolutionary. It was mass produced, it only cost $650 in 1912 compared to $1,750 for an EV.

Josh Robb:

So more than half the cost.

Austin Wilson:

Less than half for … Yeah, exactly. So also in 1912, the electric starter was invented, so you didn’t have to crank the engine over, which removed a barrier to gasoline vehicle ownership for some, and quality roads were growing, so connection to cities was more prevalent as Americans wanted to get out, as well as finding crude oil here in the United States and, specifically, Texas made gasoline very, very affordable. And in fact, electricity wasn’t very popular in rural America, so you couldn’t have an electric vehicle. It would do no good.

Josh Robb:

You could have it for just the first charge.

Austin Wilson:

Yeah, exactly.

Josh Robb:

You’d charge it on your way home.

Austin Wilson:

With the gasoline engine becoming more popular and gas stations starting to pop up, you can start to have people have vehicles out in rural America as well. So that is kind of the way things were for 50 years. But it wasn’t until the late ’60s and early ’70s where things started to change again, because at that point, gas was cheap. It was abundant, but we had oil shortages and issues in the ’70s, which led up to the 1973 Arab oil embargo, which caused gas prices to go crazy. So this really put another round of interest into electric vehicles.

So, in 1976, Congress passed the Electric and Hybrid Vehicle Research Development and Demonstration Act.

Josh Robb:

So, hold on, pause.

Austin Wilson:

You’re making an acronym out of that?

Josh Robb:

No, I’m saying that must have been prior to them realizing that they could create cool acronyms off of their bills.

Austin Wilson:

That’s useless.

Josh Robb:

Because now they have the Heroes Act.

Austin Wilson:

Nope.

Josh Robb:

Nope? Or the IRA Act, which doesn’t stand for IRAs.

Austin Wilson:

No, it’s different.

Josh Robb:

That’s a whole other thing.

Austin Wilson:

Exactly. So yes, so we had that, which authorized the Energy Department to support research and development of electric vehicles and even hybrids. So there were some electric vehicles that started to pop up in the ’70s. However, they had a slew of problems. One of those was they had really low top speeds, so often they couldn’t even go 45 miles an hour. That doesn’t really work in most instances.

Josh Robb:

So pretty much they developed those little power wheels that you had as a kid, let’s you drive around.

Austin Wilson:

Yep.

Josh Robb:

Here’s your battery. Go for it.

Austin Wilson:

That’s exactly it because the ranges were typically less than 40 miles. It was pretty useless at that point. Supply and demand worked itself out with oil, gas became more prevalent and cheap, and we kept going with the internal combustion engine. Then we get into the 1990s, and new federal and state regulations began to change the way people were thinking about emissions. So in 1990, the Clean Air Act Amendment and the ’92 Energy Policy Act, in addition to new transportation emissions regulations in California, once again, you reintroduced some increased thought looking at electric vehicles.

Some automakers really thought about them more seriously, including GM where they launched the EV1. So, the EV1, actually a pretty cool looking car. If you could find one today and gut it and start over, but just keep the outside, it’d be kind of a fun, fun project. But the EV1 accelerated to 50 miles an hour in seven seconds, had a range of about 80 miles, so most people might be able to do okay with that. It was not commercially viable, however, and the project was ended in 2001. And again throughout the ’90s, a growing middle class and low fuel prices really kept interest in EVs pretty low.

Josh Robb:

The other problem with that is the EV1, the luxury version of that one, the acronym was EV1L, looked like evil. No one wanted to buy it, so that was probably the problem. It was just bad marketing.

Austin Wilson:

Bad marketing. So then flash forward to the late ’90s. This gets to what you were already talking about. Japanese automakers in the late ’90s, they were in their prime. They were selling and developing some of the most popular vehicles. In fact, 1997, Toyota released the Prius. Prius was released in Japan in 1997. It was released globally in 2000. Now, this was actually a hybrid, so it was gas and electric vehicle together. Then in 1999, Honda introduced the Insight, which was really the first commercial hybrid in America. And then in 2000, Prius came also to the United States. That was kind of a big move for electrification in general. Now, those were not pure electric vehicles, those are hybrids, so they had an internal combustion engine doing some of the work and the gas and a battery kind of supplementing and stuff like that at the same time.

However, in 2006, the world kind of changed. In 2006, a small Silicon Valley startup, I don’t know if you’ve heard of, it’s also known as Tesla, they started in an effort to create a luxury electric vehicle sports car, which was known as the Tesla Roadster. It had a range of over 200 miles. And in 2010, the company received a $465 million loan from the Department of Energy’s Loan Programs Office, which, by the way, people give Tesla a hard time about this, but it paid off nine years early. It was a loan. They paid it off nine years early.

Josh Robb:

So it just wasn’t taxed.

Austin Wilson:

Correct.

Josh Robb:

They actually paid it back.

Austin Wilson:

They did establish a manufacturing facility in California. And since then, they’ve become the largest auto industry employer in California and are the single biggest player in the electric vehicle market. Their technology is widely viewed as state-of-the-art. Their success along with further acceleration into climate change and political incentives has led other major auto manufacturers to accelerate EV adoption that we see today. So, wow, electric vehicles older than you think, right?

Josh Robb:

I didn’t realize that they predated the Model T.

Austin Wilson:

They did.

Josh Robb:

So, they pretty much went from a horse, take the horse out, plug it into something, and let’s do this. Ford’s like, “Hey, we can modernize the gas engine.” Because you’re right, they had the cranks and that was a headache.

 

[8:41] – All You Need to Know About the Electric Vehicle Industry 

Austin Wilson:

So, let’s talk about the industry in general. So, Deloitte is a very big institution with a lot of data and a lot of clients. They do their own industry reports. Deloitte believes that electric battery vehicles already outsell plug-in hybrid electric vehicles, and predicts that by 2030, battery electric vehicles will account for 81% of all new electric vehicles sold up to 25.3 million. Plug-in hybrid electric vehicles, on the other hand, they’re only expected to sell around 5.8 million units by 2030. So, there’s a shift there as you can see, full battery becoming more prevalent than plug-in hybrids.

Josh Robb:

Interesting. I would’ve thought it’d go the other way.

Austin Wilson:

Traditional internal combustion vehicles should return to growth coming out of COVID-19, because that obviously put a slump in traditional car sales, and may peak around 2025 at around 81.7 million, which at that point, they will have a decline in market penetration as EVs continue to gain adoption. So, their global EV forecast predicts that electric vehicles will grow at a 29% compound annual growth rate over the next 10 years. So, from two-and-a-half million in 2020 to 11.2 million in 2025 to 31.1 million by 2030, and this ends with electric vehicles representing nearly a third of market share for new vehicles.

Josh Robb:

So they’re only just getting back to where they were before. They just dropped the ball back in 1890.

Austin Wilson:

The lost century. So, it is noteworthy that the annual total car sales not expected to reach pre-COVID levels until 2024, except EVs are going to be growing during that time, so it’s internal combustion engines that are tailing off there. A key estimate is that Deloitte expects China to have 49% of the global EV market by 2030, followed by Europe with 25% and US at only 14%. So, US not expected to be everyone, that’s all they ever have at that point. After 2030, the company expects electric vehicle growth rates to slow, which you can’t grow fast forever. There will be a divide, however, between wealthier nations and developing countries due to the support needed to support the transition from internal combustion engines to electric vehicles. One of the key factors will be the growth and implementation of a charging network. As we know, it’s going to cost billions of dollars to build out and even more to maintain, and this is the reason that internal combustion engine vehicles are going to be around for a while.

Josh Robb:

Yeah, you’re right. That’s probably their biggest hang up right now, the network.

Austin Wilson:

I will note that while we’re seeing a lot of growth in electric vehicles here in the US, the US is actually behind places like Europe in terms of electric adoption. So it’s just not quite as popular here as it is there. But yeah, it’s very, very interesting. So that is a little bit about where we’re headed. There’s a lot of growth coming is what we’re talking about here.

 

[11:27] – Range & Towing 

Austin Wilson:

Now, let’s talk about range, because this is the biggest item and issue that people have with electric vehicles. So right now, if you were to go out and buy a run-of-the-mill electric vehicle, you can find them from 100 miles of range all the way up to 500 and some miles of range. The average roundtrip commute in America is around 41 miles per day.

Josh Robb:

Round trip.

Austin Wilson:

Round trip, to work and back. Therefore, based on simple math, most people would be generally quite fine with even the lowest-end electric vehicle in terms of range, only having to charge every couple of days. Most people. Now, there are some kinks in the range discussion that we need to address here. So think about what cold weather does to car batteries. Your battery to start your car, not near as happy in zero-degree weather than it is in warm weather. Right? Takes longer to crank. Many, many winters are going to wear that thing out, and it’s not good. So cold weather can actually impact range by 20% or more.

Josh Robb:

Wow.

Austin Wilson:

A lot of that is actually because a lot of the electricity in the battery is used to keep the battery at an optimal temperature. So, you’re using some of your electric just to maintain temperature so that the battery doesn’t degrade, so you can’t use that to drive. It’s 20% there.

Now, where it gets even worse, and I think there’s a lot of growth opportunities, towing. So electric semis is kind of a discussion, but even electric pickup trucks are growing right now. Tesla’s Cyber-truck is on hold it seems like forever, it looks weird, but it will be able to tow. That Rivian R1T can tow, Ford F-150 Lightning, Silverado EV coming out, all these things, the numbers are staggering. If you were to hook up a big trailer, under limit, but a big trailer to a Rivian R1T, which is one of the first available EV trucks, your towing range can be impacted by 45% to 50%. So, if you have a 400-mile range normally, you have about a 200-mile range once you hook up that trailer. Now, when you’re driving, other than range, performance is fantastic for towing, because you have instant torque, lots of torque, everything’s great. However, that range is a killer. So that is really unfortunate.

So, here’s a question for you, Josh. What range would you consider to be kind of what you would like to see in an EV before you’d consider buying one?

Josh Robb:

Yeah. I think the range is less important than the ability to quickly recharge or have back up to full capacity.

Austin Wilson:

Yeah, we’re getting there.

Josh Robb:

But I’m saying between the two, if you said you have a 200-mile range, but you can be fully charged in 10 minutes, I’d be okay instead of a 500-mile range, but it takes two hours to charge. I’d be happier with a quick recharge time. I got four kids, so our vehicles are bigger in that you’ve got to fit six people in them. So my range already is, our SUV that we have gets about 400, a little more when you have a full tank. I’d be happy with that. I’d be getting the equivalent, but the difference is when I stop at a gas station, I’m filling the whole tank up in a couple minutes as opposed to charging.

So, to answer your question, the range is fine. Like you said, when I look at my commute, it’s less than 41 miles a day.

Austin Wilson:

Much less.

Josh Robb:

It’s about four miles a day. But in general, if I just think about in-town driving in a normal day, if I’m going to the store or going to sporting events, things like that. Even if it was the low end, that 100 miles that you said between the range of 100 to 500, even 100 miles, most of my normal activities are fine in the day. I don’t have to charge it. So I would say the range is fine. It’s the capacity to quickly recharge.

 

[15:14] – Electric Charging Infrastructure 

Austin Wilson:

Well, let’s talk about that, because charging infrastructure has come a long way. However, it’s still not near the amount of chargers that we do gas stations, and that makes sense, because there’s not near as many electric vehicles as there are gas vehicles at this point. Fill up times. It all depends, again, on the battery size and which vehicle and which type of charger, but generally speaking, if you’re using a standard, three-prong, plug-in wall charger that you can plug into your house, it may take days to charge your battery. And if it’s cold, you might just be keeping it alive. That’s unfortunate, but that’s the one that typically comes with the vehicle. Now, you can upgrade and get-

Josh Robb:

Can I get a really long extension cord? If I have a two-mile commute, can I just like … Nobody will mind that along the road, will they?

Austin Wilson:

Well, you can upgrade. So that was a standard 120 wall outlet. Now, you can upgrade, like your dryer outlet, to a 240.

Josh Robb:

Yeah. The ones you don’t want to get shocked by.

Austin Wilson:

And that is actually very interesting. So that, you can usually in a handful of hours get a significant amount of charge.

Josh Robb:

So ideal for overnight charging. Plug it in, wake up in the morning, it’s already good to go.

Austin Wilson:

And you don’t need to do that every day. Once a week, maybe. It depends. So that is one option. And then, if you think about Findlay, Ohio, and if you drive by Denny’s, over there by Walmart, there is a row of Tesla superchargers, and the Tesla superchargers are what’s called fast chargers, and those actually, within about a half an hour, can get you up to 80% charge. Now, the last little bit takes a while, takes more time to get the last little bit than it does to get the bulk. Even though you really shouldn’t charge them all the time anyway. Just like your phone, you shouldn’t charge it up every night.

Josh Robb:

Oh, you shouldn’t?

Austin Wilson:

Yeah. It’s bad for your battery. Josh is like, “Dang it.”

Josh Robb:

I leave mine on my charger all day here. Is that bad?

Austin Wilson:

It is.

Josh Robb:

Is it bad just to leave it? I keep it up there.

Austin Wilson:

Now, iPhones specifically and iPads have software built in to know your typical charging pattern and only charge it to 80% until right before you need it, and then they’ll charge it all the way. But Android probably doesn’t have that technology.

Josh Robb:

They actually have technology to prolong your battery life for charging, so they’re designed to keep it. If you do charge it, they do are designed not to overcharge. But you’re right, that’s a whole other thing.

Austin Wilson:

We digress, but if you’re interested in learning about iPhone versus Android, we have an episode we talk about that for an hour.

Josh Robb:

Austin realized I was right.

Austin Wilson:

I don’t know about that, but all of this compared to filling up a gas tank, which is about 5 to 10 minutes, maybe. It depends on your gas tank size. So the question then, Josh, is the follow-up. What charging time do you see as ideal?

Josh Robb:

The equivalent to filling a gas tank.

Austin Wilson:

10 minutes? 5, 10 minutes?

Josh Robb:

Yeah.

Austin Wilson:

Because your kids are screaming in the back.

Josh Robb:

Yeah. If you’re talking changing from a gas vehicle to an electric vehicle, the long trips are my biggest hang up. Like I said, in town I could probably charge this thing 120 or 240 a couple times a week and be happy with life and never have a problem. It’s those trips where you’ve got four kids, you’re already tired because you’ve been on the road all day, and now, if I’m going 300 miles each charge, man, I don’t want to wait a half-an-hour every time at minimum to get going again.

Austin Wilson:

Now, I will say that I’ve done the math breakdown, real calculations based on real average gas vehicles and real average electric vehicles and real average gas prices and real average electric prices and the miles you get out of them and all this stuff, and the cost per mile per fuel, “fuel,” it’s either electric or gasoline, it is 65% cheaper per mile to drive an electric vehicle. That’s just an average, but that is an interesting thing.

Josh Robb:

It’s interesting.

Austin Wilson:

So, while you’re driving … Buying them is expensive, it’s a whole other topic for a different day, but while you own it, very affordable.

Josh Robb:

Interesting. And one thing that you may talk about, you may not, is life expectancy versus battery versus a combustion engine.

Austin Wilson:

Well hey, I need to get people to watch this webinar. If you want to learn about that, you need to go listen to the webinar.

Josh Robb:

But you’re asking me the things that I would need, and I would need to see the average lifespan of those vehicles. Because you can assume you can get probably 150,000-200,000 miles on a gas engine. You’ll have repairs along the way, but it’s going to last somewhere in there. Right? What’s the range, what’s the mileage that you get out of your battery before that needs replaced? And that’s the other question.

 

[19:26] – Dad Joke of the Week

 Austin Wilson:

All right, Josh. I’ve done a lot of the talking here. It’s time to bring it, bring up the dad joke of the week.

Josh Robb:

Okay. There’s a cartoon, Cars. You’ve seen it?

Austin Wilson:

I love Cars.

Josh Robb:

Yeah, right. Great movie. They’re kind of live vehicles, I guess, a personality. Right? Do you know what their favorite meal is?

Austin Wilson:

Gasoline.

Josh Robb:

Brake-fast.

Austin Wilson:

Brake-fast.

Josh Robb:

Brake-fast. That was a car joke for you.

Austin Wilson:

I appreciate car jokes, I really do. Because I’m talking about electric vehicles right now, but I’m a car guy.

Josh Robb:

You are a car guy.

 

[19:55] – Austin’s First Time in a Tesla 

Austin Wilson:

I’m a gearhead. I got motorcycles, and I grew up around hot rods and stuff forever. It took me a long time to even be semi-interested in learning more about electric vehicles, because I was just making bad jokes about them.

Josh Robb:

Until you sat in one and they accelerated, you’re like, “That’s cool.”

Austin Wilson:

The different point is that I recently spent a weekend riding in a Tesla, a very nicely loaded Model Y dual-motor. And then I had the opportunity to drive it.

Josh Robb:

To push the gas pedal down.

Austin Wilson:

Gas is, I guess, in air quotes.

Josh Robb:

Yes. What do they call it, just the pedal?

Austin Wilson:

The accelerator, I guess. I took a Tesla out for about a half-an-hour.

Josh Robb:

And maintained all speed limits.

Austin Wilson:

I will not incriminate myself, but I will say that I put it through its paces, and I was blown away. Now, I ride motorcycles all the time. I know what fast feels like, I really do. I’ve been in some very fast cars. This was faster than any car I’ve been in, and motorcycle fast, I would say, which is saying something.

Josh Robb:

Now, I’ve never driven a motorcycle.

Austin Wilson:

I’ll take you for a ride sometime.

Josh Robb:

I’ve been on a motorcycle, never driven one, but I have not eaten food for a while, so I know what fast feels like too. That’s no joke.

Austin Wilson:

Fast food feels like.

Josh Robb:

Now, I’m just wondering for people like you, do you think it takes actually being in there?

Austin Wilson:

Yes.

Josh Robb:

They’ve got to get more people in a car, an electric car to see some of that stuff.

Austin Wilson:

Absolutely.

Josh Robb:

You can hear your webinar, you can see all that stuff, hear the stuff, but it really takes sitting in one.

Austin Wilson:

Take a ride, but preferably, take a drive. It was really eye-opening.

Josh Robb:

Be the one behind the wheel.

Austin Wilson:

Yeah. And some of the features I got to sample while driving were some of the autonomous vehicle features, like super hyper lane assist and all that stuff. So we’re going to talk about autonomous vehicles next.

 

[21:41] – Formula 1 Controversy Sidebar 

Josh Robb:

Okay. Now, one more question. This is a side note, because I don’t know much about Formula One.

Austin Wilson:

I do.

Josh Robb:

But my Twitter feed informed me that there was a little bit of controversy with what was the guy’s name?

Austin Wilson:

Max Verstappen?

Josh Robb:

Max Verstaffen?

Austin Wilson:

Verstappen.

Josh Robb:

Verstappen, all right. Did he do something that was considered possibly a little bit insulting to …

Austin Wilson:

His teammate? Yeah. You must be on the same Twitter I am.

Josh Robb:

I don’t know.

Austin Wilson:

People were very uptight. So we’re recording this the week after the Brazilian Grand Prix. So George Russell won his first race actually ever for Mercedes. I was glad to see that. I like George. He did a great drive. So anyway, earlier in the race, Max, on a safety car restart, tried to overtake Lewis Hamilton, which they had a very, very tight battle in 2021 for the championship, which Max won, which was controversial. So they’ve had a lot of experience from icing each other. So anyway, Max sent a very aggressive outside pass going into turn one. Turn one turns into turn two really quickly, so Max was going around the outside of turn …

Josh Robb:

On the outside of turn …

Austin Wilson:

Around the outside of turn one and Lewis did not give him any room at all, so he actually damaged Max’s front wing. So he had to go do an extra pit stop and get a new front wing and all this stuff. Lewis ended up finishing second. So anyway, the drama was that at the end of the race, Max is coming back through the pack, and his teammate, Sergio Perez, great Formula One driver, great teammate, he was sitting second in the championship to Charles Leclerc by a couple points, and Charles was ahead of him.

So, the Red Bulls had already clinched the driver’s championship, Max champion again, and the Constructor’s Championship Red Bulls team champion. So, the thought was, “Hey, Max, you just passed Sergio. Let Sergio back through to get more points than you, so that he doesn’t lose as many points to Charles in the championship,” so that they secure a one, two for sure at the end of the year, which is a bragging rights thing, right? There’s some money on the line, things like that.

Well, Max pretty much said, “No, I’m not going to do that.” He did not let his teammate back through, and now, Sergio Perez and Charles Leclerc go into the final race at Abu Dhabi tied on points for second. And Max has said that he had his reasons for not obeying team orders last race, but this race, if it comes down to it, he will help his team out. So that was the drama from the Brazilian Grand Prix.

Josh Robb:

Interesting. So, he channeled Ricky Bobby there and said, “If you’re not first, you’re last.”

Austin Wilson:

But it was so inconsequential.

Josh Robb:

He’s not letting anybody pass him.

Austin Wilson:

It was inconsequential, because he was fighting for sixth. So they finished sixth and seventh. Could have flipped him around. He already won the championship. It wouldn’t have changed anything. I don’t know. I’m a big Max Verstappen fan, and it was maybe one of my not favorite things to watch.

Josh Robb:

Okay. I just saw that. I was curious.

Austin Wilson:

It was drama.

Josh Robb:

Interesting.

 

[24:23] – The 6 Levels of Autonomous Vehicles 

Austin Wilson:

So, he was not on autopilot. They were driving their cars, but we are going to talk about autonomous vehicles now, and currently there are six, technically, levels of autonomy for automobiles, and technically, no vehicles sold in US qualify for anything higher than level two autonomy, but this is constantly changing. So level zero …

Josh Robb:

So, we’re going away from electric vehicles and talking about autonomous.

Austin Wilson:

Generally, the same. Generally, it’s the electric vehicles that have the autonomous technology built in. Some gas vehicles do, but we’re moving towards that. Level zero, shouldn’t even be a level, no driving automation technology, so in this case, the driver’s entirely in charge of operating the vehicle. It may include driver support systems, like stability control, emergency braking, lane-keeping assistance, the majority of cars out there are level zero. Level one, lowest rung of automation, technically, a vehicle has at least one driver support system that provides steering assistance or braking and acceleration assistance. The driver remains responsible for driving the vehicle and must be prepared to take control at any time and for any reason. Adaptive cruise control, you’ve used that. That is an example of level one driver assistance.

Josh Robb:

So which adaptive cruise control, if I’m driving the highway 65 miles an hour, and I have my cruise set for 65 miles an hour because it’s the speed limit.

Austin Wilson:

And of course, Josh would never go any faster.

Josh Robb:

And I come up to the car in front of me, because it’s driving 63 miles an hour, my vehicle adapts and slows itself down so it doesn’t bump into the back of it. Adaptive cruise control.

Austin Wilson:

Yes. Or vice versa, or it could go faster if the guy in front of you goes faster.

Josh Robb:

If my cruise is set 65, and at 63, it speeds me back up to 65.

Austin Wilson:

You could, or you could set it to the car in front of you and just say, “Maintain the distance,” a lot of times, where if that car goes 80, you go 80, that car goes 60, you go 60. Don’t do that.

Josh Robb:

Don’t do that.

Austin Wilson:

Okay. Level two, it applies to vehicles with advanced driving systems that can take over steering, acceleration and breaking in specific scenarios. But even though level two driver support can control these primary driving tasks, the driver must remain alert and is required to actively supervise the technology at all times. An example of this is highway driving assist, so if you have lane assist, essentially, you can kind of take your attention off a bit. You have to have some input once in a while, but you can take your attention off. I experienced it in a Tesla, and it was fantastic.

Josh Robb:

My vehicle has that.

Austin Wilson:

Yeah, exactly. So it won’t let you veer too far offline or whatever.

Josh Robb:

It keeps you in your lane.

Austin Wilson:

Kind of handy for the highway.

Josh Robb:

So, if you have your lane assist and your adaptive cruise control, in a sense, it adjusts your speed up and down and keeps you in your lane, and that’s what you’re talking about. It still wants you to hold onto the steering wheel, but it’s actually moving your steering wheel slightly to keep you at where you want to be.

Austin Wilson:

Yep. And then there’s level three, and this is a big move. So there are no level three systems legal on American roads yet. This is conditional driving automation. It uses various driver assistance systems and artificial intelligence to make decisions based on changing driving situations around the vehicle. People inside the vehicle do not need to supervise the technology, which means they can engage in other activities. However, a human driver must be present, alert, and able to take control if an emergency or system failure occurs. Level four, we’re getting out there, high driving automation is what’s this referred to. It does not require any human interaction in the vehicle’s operation, because it is programmed to stop itself in the event of system failure. Since a human driver’s never needed, a level four vehicle may not even have a steering wheel and pedals.

Josh Robb:

Crazy.

Austin Wilson:

There’s more. How could there be more? Level five, the highest classification. This means a vehicle can drive itself everywhere in all conditions without any human interaction.

 

[28:08] – Would You Feel Safe in a Fully Autonomous Vehicle? 

Austin Wilson:

So Josh, the question is would you feel safe riding in a fully autonomous vehicle in a city?

Josh Robb:

Not right now. Not yet.

Austin Wilson:

Okay, and we’re not quite there yet. What about on a highway?

Josh Robb:

Definitely not.

Austin Wilson:

Definitely not, okay.

Josh Robb:

I think I’d first go to the city, because a crash at 20 is different than a crash at 70.

Austin Wilson:

I’m not surprised that you’re not an early adopter of technology, look at what phone you use, but I don’t know. I think I could of the level three, four, where you have to be present.

Josh Robb:

If I don’t have a steering wheel, I’m still hesitant without a steering wheel.

Austin Wilson:

If I have a steering wheel as a backup …

Josh Robb:

At level five, I can’t do it. If it’s a level three, I’m in. Four, you said it may not have a steering wheel or pedals.

Austin Wilson:

So the question is, all this discussion about electric vehicles, it seems to be with all the billions and billions of dollars that the government or auto manufacturers are investing in this space, that kind of seems to be the direction we’re headed in terms of personal vehicles in the future.

Josh Robb:

I would not disagree with that, I think.

 

[29:06] – Effects on Fossil Fuel Demand 

Austin Wilson:

It’s going to continue to gain market share in personal vehicles sales over time, infrastructure’s going to get better, all these things. Now, what I want to point out is that I believe and experts believe that fossil fuel demand is still going to remain. And if you think about all those internal combustion engine vehicles that are out there now that are still going to be out there and still new ones that are going to be built that are going to be out there, that’s a lot of demand. So according to the International Energy Agency, the IEA, peak oil demand will not be until 2035, according to the world energy outlook, and even peak coal demand, which is what’s going to be used to generate a lot of the electricity for these vehicles, it’s not going to be reached until later than ’20s. So that is fossil fuel demand remaining.

They also anticipate road transport oil demand will increase by 1.5 million barrels per day between 2021 and 2030, while aviation and shipping oil demand will grow by 4 million barrels per day between ’21 and 2030. Chemical demand, it’s set to account for a rising share of oil use with about 70% of oil used as a petrochemical feed stock to produce plastics. So, lots of oil gets used to produce plastics, we use a lot of plastics. So that’s a lot of demand for oil going forward here.

Here’s a quote, “Rising demand and declining output from existing sources of production mean that new conventional upstream projects are required to ensure that supply and demand stay in balance. Around $470 billion annual upstream investment is spent on average to 2030, which is 50% more than has been invested in recent years.” So, oil investment is even going to continue to support the increased demand that we have. And according to Statista, which is a data provider, US crude oil energy production is forecast to remain above 2021 levels through 2050, peaking around 2028. So again, this is ensuring that fossil fuel demand will remain elevated for decades to come. That is definitely a case for fossil fuels going forward.

 

[31:02] – Do You Plan to Purchase an Electric Vehicle in the Future? 

Austin Wilson:

Now, a couple of final thoughts that you may have some opinions on. Do you plan on purchasing an electric vehicle in the next five years? I know what you’re going to say.

Josh Robb:

I would consider a hybrid. I think that’s where I’m at right now, just based on, again, what we talked about, where we’re at.

Austin Wilson:

Like the plug-in Jeep.

Josh Robb:

Yes, but price is the key, and I think technology advancements will help bring the price down. If they want to get more people heading that direction, which when you talk about our environment and all those factors, that’s another positive that you get. Even though the energy to create to charge these is still not as clean as you’d like it to be, it’s still cleaner. If that’s the push, you need to make it more affordable, and they have the tax credits and stuff, but it’s still not close enough. You could buy a cheap gas vehicle, base model car, and then what you get as an electric vehicle is still twice as that.

Austin Wilson:

The average new electric vehicle costs about $66,000. That’s not in the realm of most working people’s money. And even if you take off $7,500 tax credit from that, you’re still not even … It’s a luxury item.

Josh Robb:

I would consider it, and I think I would still be in the hybrid camp, but I don’t have any plans to.

Austin Wilson:

My final question, what is your biggest concern, Josh, with electric vehicles?

Josh Robb:

My biggest concern is they regulate faster than the infrastructure can handle. They say, “Hey, look how clean these are. We want to move this way, so we’re going to mandate companies produce X amount that direction.” And then they’ve yet to find any incentive or force the infrastructure to be ready for the increase. If you go to 33% of the vehicles electric, you need to have the ability to charge all those consistently and then also have the power available for everything else you use electricity for. That’s my biggest concern, because they’re going to get the cart in front of the horse, even though those things are obsolete now with electric vehicles.

Austin Wilson:

The funny example of that is California. So, California already has an electric grid that can’t sustain itself during really high usage periods, right?

Josh Robb:

Rolling brownouts.

Austin Wilson:

So much to the point where they’re telling people with electric vehicles not to charge them during peak hours. I’m not anti-California, I love going to California, but they are the state that also is saying no new internal combustion vehicles from 2030 on.

Josh Robb:

So, you’ve got eight years to figure it out.

Austin Wilson:

You can’t have it both ways. You’ve got to fix your infrastructure, and the country and the world in general has to beef up the infrastructure for increased demand. I’m with you. Wow. That was a very brief summary version of is the future electric? And I would say generally, yes-ish. There’s a lot of moving towards that, but I think there’s a lot of hurdles at this point.

Josh Robb:

So, if you really like this episode, make sure you check out Austin’s webinar. It’s free.

Austin Wilson:

It’s free.

Josh Robb:

There’s a link in the show notes. You can go to The Invested Dads Podcast. We’ll have a way of getting it where this podcast is. So please listen to it. If you didn’t listen to it live, it’s recorded. Watch it.

Austin Wilson:

And if you had someone asking you about electric vehicles, feel free to share this episode with friends and family. Again, love it if you would subscribe. You get new episodes every Thursday and leave us a review on Apple Podcasts or Spotify or wherever you’re listening to us. Until next Thursday, have a great week.

Josh Robb:

All right. Talk to you later.

Austin Wilson:

Drive safe.

Josh Robb:

Yep.

Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all of the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.

Josh Robb and Austin Wilson Work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.