"Each day we go to our work in the hope of discovering."
--Nikola Tesla
A friend, Norm Warner, took me for a ride in his silver Tesla X, my first in a battery electric car (BEV). The Model X is a mid-size luxury crossover SUV introduced by Tesla in 2015. This vehicle was developed from the full-size sedan platform of the Tesla Model S.
Tesla X is notable for its falcon-wing passenger doors and panoramic windshield. But, as we soon experienced, the car has power and quick acceleration.
Are this plug-in design and government-subsidized business model (low-interest loans and tax credits) what Stellantis CEO, Carlos Taveras, calls a "technology chosen by politicians" the future of the automobile industry? Selling electric vehicles with rechargeable batteries as a way to significantly reduce CO2 emissions?
Although 100% EVs are not a zero carbon solution. The electricity used to charge most electric and hybrid cars often come from non-renewable resources.
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| (C) Greentech Media |
With visually appealing designs and the latest software, EVs continue a 137-year-old industry that began in Germany when Karl Benz received a patent for the first automobile powered by an internal combustion engine (ICE). The U.S. auto industry got its start ten years later, in 1896.
Electric vehicle sales were around 10% globally in 2022, led by Europe and China. EV sales in the U.S. were 6% last year, with a goal of 50% by 2030.
What are the critical factors for success in manufacturing and marketing a vehicle without a tailpipe?
Batteries
Everything anyone needs to know about EVs and their profitability can be found in battery technology. "EVs that make efficient use of battery supplies should be more profitable to manufacture--all else being equal." (The Wall Street Journal)
The advantage goes to those who can "squeeze" the most juice from their batteries located at the bottom center of the car. But, for the longer term, battery costs have to come down. A next-generation battery, known as LFP, will make it possible to build affordable electric cars. Unfortunately, the downsides are cold weather charging and less driving range. (Recurrent)
The Eagle Mine near Marquette in Michigan's Upper Peninsula is the only place in the U.S. where nickel--the mineral in lithium-ion batteries boosting electric car range on a single charge--is produced. (MLive.com) Meanwhile, 75 percent of lithium is mined in South America, specifically in Chile, Bolivia, and Argentina. (Green Cars)
Currently, Chinese companies make up 56% of the EV battery market, followed by Korean companies (26%) and Japanese manufacturers (10%). The leading battery supplier, CATL, expanded its market share from 32% in 2021 to 34% in 2022. One-third of the world's EV batteries come from that Chinese company. (Oil Price)
Announced investments in battery and battery recycling plants in the U.S. totaled $40 billion in 2022. (Electrek) Georgia, Kentucky, and Michigan are likely to dominate battery plant production. With Kansas, North and South Carolina, Ohio, and Tennessee, among other key sites. (U.S. Department of Transportation)
Charging
About 80% of EV charging happens at home. This works for those who live in single-family dwellings but not multi-family units, which make up nearly 32% of all U.S. housing.
At the end of 2022, about 140,000 public charging units were up and running in the U.S., according to government reports. Plans call for a 500,000-station national network over the remainder of this decade, a ninety billion-dollar investment, most of which is expected to come from the private sector.
In the U.S., Tesla has more than 1,400 Supercharger stations (40,000+ globally) and 7,000 charger stations. Superchargers take 15 minutes to recharge up to 322 miles. (U.S. News and World Report, Tesla.com)
The U.S. Transportation Department approved electric vehicle charging station plans for all 50 states, Washington, D.C., and Puerto Rico, covering roughly 75,000 miles of highways. Early last year, the Biden administration allocated $5 billion to states to fund EV chargers over five years along the interstate highway system. (CNBC)
Yet many U.S. public charging stations fail to work when electric-vehicle drivers need them, according to a new J.D. Power report that underscores the Biden administration's challenge in building out a network of stations nationwide. In a survey of more than 11,550 drivers, the firm found that one in five didn't manage to charge their vehicle during a visit to a station. Of those that didn't get their cars set up, 72% blamed faulty equipment. (Bloomberg)
Affordability
The EV market is dominated by luxury cars, with Tesla controlling 65% of the U.S. market. Regrettably, the cost of these cars is still well beyond the reach of many Americans. (Forbes)
According to the U.S. Census, the median household income was $70,784 in 2021, the most recent year for which data is available. The average price for an electric vehicle in July of 2022 was over $66,000. (Kelly Blue Book) Non-EV cars averaged $45,596. (Edmunds) Average monthly car payments for new vehicle loans reached $691 at the end of 2022. (Center for Auto Research)
"Car buyers love EVs but not the prices."
--Reporting from the Washington D.C. Auto Show, Jeanne Whalen, The Washington Post
28 January 2023
The cheapest electric car in 2022 was the Nissan Leaf, which retails for $27,400, with Chevrolet's Bolt at $31,000. More lower-priced EVs are on the drawing board than in dealer showrooms. The problem is that EV prices continue rising, with batteries costing more.
With solid demand among higher-income groups, there's little incentive to reduce the cost of upper-end EVs. Although Tesla recently dropped prices by 6% to 20% on a range of vehicles in response to slowing demand for some of its products. Tesla's move to cut prices on its Model 3 and the Model Y SUV is igniting a potential price war that rival Ford Motor Co. is joining.
EV purchase profiles in major publications such as The New York Times point out that affluent households retain at least one internal combustion vehicle for long-distance travel.
New Internal Revenue Service income limits for the federal $7,500 electric-vehicle tax credit kicked in on 1 January this year. Those with an adjusted gross income of $150,000 for individuals and $300,000 for joint filers can no longer claim the tax credit.
Availability
Brand loyalty for cars, SUVs, and trucks could be a casualty of EV competition. Especially when it comes to availability. As more EVs enter the market, car makers realize that customers are willing to consider new brands, even turning away from dealers they've frequented for decades. A recent report in The Wall Street Journal says that has to do with EV scarcity.
According to data from J.D. Power, there are currently 53 electric vehicles on the market or soon to be rolled out, compared with 625 car models sold in the United States.
Safety
Cautions were raised recently by National Transportation Safety Board Chairwoman Jennifer Homendy about the weight and size of EVs. "I'm concerned about the increased risk of severe injury and death for all road users from heavier curb weights and increasing size, power, and performance of vehicles on our roads, including electric vehicles," Homendy said in remarks delivered Wednesday in Washington, D.C.
Electric vehicle batteries are heavy and expensive, and automakers can charge more for larger cars. Homendy called out General Motors Co.'s GMC Hummer EV as a particularly egregious example of the trend toward more oversized, heavier vehicles, noting it tips the scales at more than 9,000 pounds.
"The battery pack alone weighs over 2,900 pounds — about the weight of a Honda Civic," she said. "That has a significant impact on safety for all road users."
The transport safety regulator also mentioned that Ford's F-150 Lightning pickup is as much as 3,000 pounds heavier than a non-electric version of the same truck and that Ford's Mustang Mach-E and Volvo's XC40 EV weigh about 33% more than gas-powered equivalents. (Bloomberg)
Politics
Follow the money.
The White House has invested about $135 billion in electric vehicle development and creation and will now make available $350 billion in federal loans and loan guarantees for energy and automotive projects. In addition, tax credits included in the recently passed Inflation Reduction Act provide incentives for consumers to buy EVs.
Manufacturers require financial help as they transition to an indeterminate future with no guarantee of success. Federal and state regulations get baked into any assistance, including which vehicles qualify for tax credits.
General Motors, which announced a plan to sell only zero-emission cars and trucks by 2035, spent $9.1 million on federal lobbying in 2022; Toyota $6 million; Ford $4.2 million; Stellantis $3.9 million; Honda $2 million; and Telsa $400,000.
According to GM's public statements, government subsidies may be the only way the company can make decent margins on electric vehicles over the next three years. (Heard on the Street)
Margins rather than volume are driving the General Motors business plan, with vehicles like the GMC Hummer EV2 ($80,000), Cadillac Lyriq SUV ($60,000), and Chevy Silverado ($50,000 work truck version with higher-end prices for personal use), leading the way. Some refer to GM as "Elite Motors," with many of its current customers unable to purchase high-end products, ICE or EV.
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| Chevy Silverado EV (C) Electrive.com |
From 2016 to 2022, half of the foregone revenue associated with the plug-in EV tax credit went to corporations claiming the credit. Nearly 80% of individual tax credits were claimed by filers with adjusted gross incomes (AGI) of $100,000 or more. About 7% of credits claimed were on returns where the AGI exceeded $1 million. (Joint Center on Taxation, U.S. Congress) The handouts aren't free, as the cost of government largesse ultimately falls on U.S. taxpayers.
S Curve
One way to understand EV innovation and adoption is to see these proposed changes through the S Curve lens:
Everett Rogers’ work is important because it emphasizes that the innovation itself is not the only determinant of its ‘success’. There must also be communication channels, time and a social system in place to enable the innovation to be used and adopted more and more widely. Rogers also identifies the different categories of adopters: innovators, early adopters, majority (further subdivided into early and late) and laggards. (Boston University).
A spirit of ingenuity has yet to be fully tapped. As a result, more time is needed to see how technology and innovation contribute to reducing mobility costs.
Disappointingly, what the government sets in motion often fails to achieve its aims. Only 23% of power generation projects in the U.S. seeking grid connection from 2000 to 2016 were built. Wind completion was 20%, and solar was 16%. (Lawrence Berkeley National Laboratory)
While momentum builds toward electrification, numerous S Curve constraints are waiting around the bend:
- Customer Acceptance
- Charging infrastructure
- Chip shortage
- Battery shortage
- ICE job losses
- Reliance on rare-earth materials
- The strain on the electric grid
Fluid
Toyota Motor Corp. President Akio Toyoda says he is among the silent majority questioning whether electric vehicles should be pursued exclusively. Hybrids now account for 30% of the standard passenger vehicles sold in Japan.
Toyoda, who is stepping down as CEO on 1 April of this year to become board chair, notes the world's largest car manufacturers are underwriting commitments to electric vehicles with profits from combustion engine sales.
How risky is a once-in-a-century vehicle transformation with a single EV option?
Mark Twain, one of Nikola Tesla's best friends, offers this advice--
"What gets us into trouble is not what we don't know. It's what we know for sure that just ain't so."
Strategist.com
