The trend towards driving electric cars is upwards, and has been for years. Now, it seems the marketplace is shifting from “start-up” status to “primary” status with more and more manufacturers creating e-car models. Everyone I know who’s already bought one is truly happy they did so. Without an engine, spark plugs, muffler, etc. the annual maintenance costs are far less. Now, there’s a sales strategy that brings initial prices way down.
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The Electric Car Revolution Now Faces Its Biggest Test
Will people still buy them when the subsidies are gone?
April 24, 2017
Are electric cars ready to stand on their own?
If you took a spin down to the New York International Auto Show last week and saw the $37,500 Chevy Bolt (electric) parked next to the strikingly similar $17,500 Chevy Cruze (gasoline), the answer is probably a hard no.
The Bolt is arguably a better car than the Cruze – but not $20,000 better. Edmunds, the car research company, recently weighed in with a hard no of its own, warning that the elimination of a $7,500 U.S. tax credit is “likely to kill (the) U.S. EV market.” Edmunds pinned its argument on what happened in Georgia, a state that became an unlikely leader in electric cars thanks to an extra $5,000 incentive. At one point, almost four percent of new cars being sold in Georgia were electric. Then they pulled away the punch bowl.
But a very illuminating thing happened after Georgia’s incentives expired. Unlike the Nissan Leaf, which made up the majority of the EV market there, sales of electric-luxury Teslas were barely affected by the loss of the tax credit. In fact …
More people are buying Teslas in Georgia
today than during the subsidy years.
The Tesla exception shows what happens when an electric car reaches parity with fuel-burning competitors in both price and function. Unlike the Leaf and the BMW i3, the Tesla Model S is quicker than similarly priced gasoline cars, has a long driving range, extensive fast-charging network, and is packed with unrivaled tech advances like Autopilot and wireless software updates.
As a result, the Model S is now the best-selling large luxury vehicle in America. Changes to state or federal initiatives are unlikely to alter that fact. But those Teslas are premium cars that start around $70,000. For plugins to really pass the subsidy test and take over the auto industry, they’ll need to prove themselves in cheaper classes of car, and there will have to be more manufacturers besides Tesla.
When might that happen?
The primary cost for an electric car is its battery, responsible for almost half the price tag of a mid-sized plugin. It you take that away, electric cars are much cheaper to produce and maintain than internal combustion vehicles. (That’s why French carmaker Renault sells its popular Zoe without a battery, which customers pay a monthly fee to lease.) The battery lease changes the way customers think about the price of their car. Consumers view the battery lease like a monthly fuel charge, which encourages them to consider the gasoline savings in the total cost of ownership.
For true mass market appeal, the up-front sticker price is what matters most, and battery prices must come down further. Fortunately, prices are falling fast – by roughly 20 percent a year. The manufacturing cost of electric cars will fall below their gasoline counterparts across the board around 2026, according to a recent analysis by Bloomberg New Energy Finance. Some vehicle classes will take a bit longer, including compact economy cars and SUVs in Europe.
The question of when electric cars will cost the same as their combustion counterparts isn’t academic. The $7,500 federal incentive is set to taper off as each manufacturer reaches its 200,000th U.S. sale. For Tesla, that day will arrive sometime next year. Nissan and GM won’t be far behind – and any extension of the subsidy by the Trump administration seems unlikely.
Another thing that makes electric cars more expensive is that, at lower volumes (less than 100,000 a year of the early models), even the traditional components of a car come at higher costs. Low production numbers and high battery development costs created a valley of despair for EVs that lasted decades, which is why subsidies have been critical to giving the sector enough breathing rom to eventually stand on its own.
Government incentives were crucial to the birth of the EV industry, and many countries and local governments will continue to offer them because of the critical role electric cars play in reducing pollution and combatting climate change.
But even where governments are less enlightened, the valley of despair is coming to an end. Tesla, the first to approach price and function parity in the Model S sedan and Model X SUV, will attempt to recreate the magic later this year with the Model 3, a $35,000 entry-level luxury sedan.
A longer-range Nissan Leaf will be unveiled in September, and depending on the price tag, it could begin to approach the parity zone in the sub-$30,000 market. The 2017 Leaf has been outselling the new Chevy Bolt this year thanks to massive discounts by the automaker that have brought the subsidized price of the car down to less than $15,000. Nissan hasn’t disclosed the price of the longer-range 2018 Leaf yet.
And they watch out: In 2018, Volkswagon plows into electrification with an Audi SUV and the first high-speed U.S. charging network to rival Tesla’s Superchargers. Jaguar and Volvo both have promising cars on the way too, and by 2020, the avalanche really begins, with Mercedes, VW, General Motors and others releasing dozens of new models.
When the U.S. incentives begin to expire next year, don’t expect a Georgia-sized collapse in the market.
The period of greatest peril is ending for EVs,
and the time of greatest promise is beginning.
All the top carmakers are investing billions of dollars to electrify their drivetrains, and the smart ones will compete aggressively on pricing in the short-term in order to establish market share for the long haul. Incentives are important, but they won’t define the market for much longer.
The battery lease changes the way customers think about the price of their car. Consumers view the battery lease like a monthly fuel charge, which encourages them to consider the gasoline savings in the total cost of ownership. Some vehicle classes will take a bit longer, including compact economy cars and SUVs in Europe.
Tesla Doubles Number of Superchargers Available to Public.
Tesla is going to need more chargers. Lots of them.
The company is preparing to launch its $35,000 Model 3 electric car later this year, with plans to make 500,000 EVs in 2018 (up from 76,000 a year ago.) This audacious timeline has left many current owners worrying about wait times throughout the company’s U.S. Supercharging network. Well, Tesla has a plan. This year, the number of Superchargers available for public use will double – from 5,000 to 10,000.
Note: Tesla’s 10,000 Superchargers refers to the number of charging spots, not the number of charging locations. For reference, the average station currently accommodates about six cars charging simultaneously.
This year the company will expand both the number of locations and the number of cars that can be served simultaneously at each station, according to a blog post Tesla published Monday. That’s 39 percent more Superchargers than CEO Elon Musk promised for 2017 when he unveiled the Model 3. Musk previously promised 7,200 Superchargers by the end of 2017. The company will also increase the number of so-called Destination Chargers located at hotels and restaurants from 9,000 to 15,000.
Some of the new stations for these Superchargers will be powered by solar panels, have customer centers, and enough chargers to accommodate “several dozen Teslas” at the same time. Tesla said in the post …
“Many sites will soon enter construction to
open in advance of the summer travel season.
We’re moving full speed on site selection.”
Tesla also gave a first glimpse into its strategy for boosting charging options in urban centers like San Francisco, Chicago, and New York, where it’s common to have multiple residences with no dedicated parking. The Supercharger network was originally designed to enable long-distance travel between cities and are mostly located adjacent to major highways. Most drivers do their daily charging at home. Now, Tesla will be expanding charging locations into city centers as well.
Tesla, based in Palo Alto, said it’s also building bigger stations along its busiest routes and will add more than 1,000 Superchargers in California alone. The North American network will expand by 150 percent this year.
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About three years ago, we bought an electric SMART car. The lease idea is brilliant. Not only did they drop the sales price, but if anything goes wrong with a battery, whoever owns it must fix it, which is the company that leases it to you. (In the case of SMART, it’s Mercedes.) And … if new batteries come out with a longer range, they automatically upgrade you to the newer batteries.
We pay about $80/month to lease the batteries … around $2.60 a day. And we do have solar panels, so power for driving costs us nothing. Maintenance is $223/year … a fraction of what we pay for our gas car.
It’s comforting to know that we’re producing zero emissions. It’s comforting to know that the e-car market is growing, which bodes well for eventual resale. But it’s even more comforting to know how inexpensive e-cars are to own and operate … now.