Elon Musk recently said that what we're seeing might be a result of ICEngines hitting their limits. I'd take it with a grain of salt, as he obviously has an interest in electric engines, but it is a pretty compelling argument all the same.
Yeah I'd call that a bit of a conflict of interest. VW wasn't doing what they were doing to increase efficiency (not primarily anyway). They were keeping NOx emissions down, which can be dealt with, just not at the price that VW wants to sell cars. I imagine most of the discrepancy is due to the fact that people drive like assholes most of the time. The way we accelerate and break can easily bump the fuel efficiency down a lot. Maybe not 50%, but easily 20, 30%. Anyway, there's no way that electric cars will ever be more efficient than gas/diesel cars. Electric cars require a minimum of three energy conversions, so even if there are zero emissions at the tail pipe, most of your dollar savings is due to coal being dirt cheap, not greater efficiency. Electric cars have the potential to be less emitting than IC engines should we all be using solar and wind eventually, but they won't be more efficient, because the physics don't really support that. Musk risks his own credibility when he says stupid shit like that, even though people want to fellate him even more every time he does. It's not a compelling argument, because it's not true (which I take as a standard of compelling). We could all drive Corollas and we've hit our fuel efficiency standard overnight. But so long as people want 5-Series and Model S we're not anywhere close to reaching the limit of fuel efficiency.
To split hairs, Musk doesn't argue that electric is more efficient, but ICE must go the efficiency route, and there are diminishing returns. Electric motors don't necessarily have to be more efficient to be a better choice. In fact, the extra conversion step can actually be an advantage. For example, electric allows for multiple energy inputs so they could technically use the most attractive (clean and/or abundant) source available (solar in Arizona, geothermal in Iceland, natural gas in South Dakota, etc.) to produce electricity, whereas gasoline must come from oil, and it must be refined and shipped.
Mmmm, careful with that axe, Eugene. Internal combustion engines make peak efficiency at peak RPM. Electric motors make peak efficiency at zero RPM. That's why electric cars can forego transmissions and transmissions are teh suck from an efficiency standpoint. Combine that with the fact that thermal efficiency on Diesel runs 50-70% on herkin' big mills; otto cycle will be less than that. Electric motors on the other hand can hit 95% efficient all day long. Assume your battery conversion is only 65% efficient and you're still at 61% efficiency (and you don't have a transmission to worry about). What's the efficiency of hauling gas to the station vs. powerlines to your house? What's the efficiency of refining diesel out of petroleum vs boiling water in the desert? There's a lot of places where the electric system stands to gain efficiency while the petroleum system is pretty much stuck at state of the art.Anyway, there's no way that electric cars will ever be more efficient than gas/diesel cars.
Engineering wise ICE engines really are hitting their limits. There is only so much you can squeeze out of an interrupted combustion before reliability starts to suffer. Getting more power out of ICE is easy, getting more efficiency is not easy at all. The current alley of improvement seems to be increasing the compression ratio, the higher the ratio the higher the efficiency. The limitation here seems to be the piston getting too hot and melting. It is the only component in the engine that can not be cooled sufficiently. Heat pipes inside the piston might help but haven't been tried afaik.