Global X's research shows they were on their way 100 years ago before Ford's Model T delayed their future
When advisors talk about investing for the long-term, particularly in thematic ETFs, such as some of Global X’s, they don’t usually figure on it taking a century, as it has with the electric vehicle that is finally making its big break-through.
“I don’t know if everyone realizes it, but the electric vehicle was actually more popular than some other vehicles in the early twentieth century,” Warner Wen, Global X’s Research Director for Canada, told Wealth Professional, after discussing the 1920s and 2020s investment parallels in a webinar.
“Back, more than 100 years ago, people liked electric vehicles over gas-powered or steam-powered vehicles at the time because of some of the same reasons that we love them today. They were quiet and they didn’t emit pollutants,” he said. “It was something our society wanted 100 years ago and, 100 years later, we still want it!”
Wen’s research showed that electric vehicles debuted in the U.S. between 1889 and 1891 when William Morrison from Des Moines, Iowa, created the first successful one. It was little more than an electrified wagon, but soon gained popularity – especially among urban residents, particularly women – because it was quiet, easy to drive, and didn’t emit smelly pollutants. By the turn of the century, electric vehicles were all the rage in the U.S. and accounted for about one-third of all the vehicles on the road.
Thomas Edison even thought the electric vehicle was the superior mode of transportation and tried to build a better battery. By 1901, Ferdinand Porsche, founder of the sports car by the same name, had also created the Lohner-Porsche Mixte, the world’s first hybrid electric car. The vehicle was powered by a gas engine and electricity stored in a battery.
Henry Ford’s mass-produced Model T then debuted in 1908. Produced on his infamous assembly line, it soon made gas-powered cars affordable and widely available and dealt electric vehicles a blow. Ford introduced the electric starter in 1912, which increased gas-powered car sales even more, especially since people who worked on the assembly lines could afford to buy them. Wen found that, in 1900, there were just 8,000 motor cars registered in the US, but there were 9 million in 1920 and 23 million by 1929.
By 1920, better roads and the discovery of cheap Texas crude oil contributed to the final decline in electric vehicles. By 1935, Wen discovered that they had all but disappeared. They didn’t start to reappear until the mid-2000s, when Tesla began redefining the electric vehicle for the modern consumer.
“Ford’s Model T was the start of the dominance of the internal combustion engine,” said Wen. “The majority of our cars on the road are still gas-powered automobiles. We may feel like electric vehicles are everywhere and the talk of the town these days, but if you look at the numbers, they’re still in the early stage of adoption. Under 5% of new car sales in 2020 were electric vehicles.”
Now, Wen noted, environmental concerns about emissions and government policy support for this “new” technology have caused numerous major automakers to announce ambitious plans for electrification with plans to make more of them available within the next five to ten years. He added that even Mercedes Benz has announced that its brand will go all electric by the end of the decade.
Even though electric vehicles still cost more than internal combustion engine (ICE) vehicles, cheaper batteries are contributing to declining costs and the total cost of ownership for electric vehicles is cheaper than ICE. Global X, which has an electric vehicle fund, believes supportive government policy and shifting automaker priorities will help to further decrease prices and increase electric vehicle penetration.
“There is definitely competition among the car manufacturers to shift their product strategy to capture this boom in electric vehicles,” Wen said. “I think if you look forward from here, over the next decade, two decades, even multiple decades, electric vehicles will come back. I think you can look at this as potentially the start of what I’m calling the great comeback of the electric vehicle.”
