Do Tougher Gas-Mileage Rules Hurt Electric-Car Sales? We Think Not
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At the moment, plug-in electric car sales are chugging along between 3,000 and 4,000 a month.
So with the upcoming 2012 Tesla Model S added to the mix, it seems likely that 30,000 to 50,000 electrics will be sold in the U.S. this year--more than double last year's sales.
But lately, the auto press has taken up a new theme: As gas and diesel cars get more fuel-efficient, they will hurt sales of electric cars.
Ten years hence, that's almost surely true. But now? Not so much, we think.
First, the early buyers of plug-in cars--for the first two to four years--aren't buying them to save money.
Purchase reasons vary among groups, but they include being first on the block, loving the technology, being an uber-green, making a statement about your values, and worrying about energy security.
For these folks, saving money is a nice extra.
Second, most buyers care far more about initial purchase price than total cost of ownership.
Today, even if a cheaper, less-efficient car ends up costing them more to own over its lifetime than a more expensive electric, the initial purchase price rules out an electric car.
Sales of fuel-efficient cars tend to track closely to changes in gas price. But gas prices would have to go up to $6 or $8 a gallon to shock most buyers into considering a much, much pricier electric car.
We won't be able to assess any true interchangeability between gas and electric vehicles for many years yet.
For that to happen, batteries have to get cheaper and the real-dollar cost of gasoline cars will have risen with the more expensive technology (turbos, lightweight materials, hybrids) required to double fuel efficiency by 2025.
Finally, it's not an either-or, it's a both. Plug-in powertrains will start and build slowly (a point many commentators consistently miss).
Automakers have to increase the efficiency of their combustion powertrains 3 to 5 percent a year, so there's a steady focus on that for the short and medium term--through 2025.
By then--and perhaps well before--the cost of batteries will be low enough that in some markets, plug-in cars could become the preferred option.
That'll be because they're smoother, quieter, and just nicer to drive, with no (or far fewer) fuel station visits needed--and by then, electric cars will no longer be alien and suspicious but simply one of several choices in the showroom.
Overall, we think anything that increases the efficiency of the energy we use to move ourselves and our stuff around is good.
What do you think? Will vastly more fuel-efficient cars hurt prospects for plug-in sales?
Leave us your thoughts in the Comments below.
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Looked in another way, does the availability of 50 mpg Prius with all its green cred reduce people's desire to go electric? I certainly think so, at least among those who are motivated by energy, pollution, and foreign trade concerns.
But I think that the Prius may be seen as green-enough without taking on the limitations and concerns of batteries and range limits.
Plus in the US most folks have a second vehicle - With one EV and one ICE those 'limitations and concerns of batteries and range limits' are effectively non-existent. They'd only become a problem on days when both drivers needed to exceed the range of the EV - and how often does that really happen?
After three months, it hasn't happened to us once.
We've found that for the most part we're only using the ICE ('02 A6 Avant) when we need the cargo capacity - mileage has dropped off significantly as we both prefer to take the EV whenever possible.
I don't actually believe there is that much room for ICE improvement anymore. After more than a century that's well in the diminishing returns phase; at this point better MPG will just mean accepting less car or spending a whole lot more money which will slowly make plug-ins the more attractive option. Or maybe real fast once there really is that battery breakthrough ...
ICE improvement is hard to parse out from the package of engine efficiency improvements, start-stop, lightweighting, better aero, and various degrees of electrification (mild or full hybrid). Carmakers will choose those technologies that give best increase at lowest cost.
Still one has to wonder 6-8% compared to what. Only 2 years ago most experts pegged batterycost between $700-1200/KWH but today Tesla charges $400/KWH retail for extra batterycapacity in their Model S suggesting a 50 to 80% drop in battery cost in just 2 years time. No use putting any stock in general cost reduction predictions if the experts are pretty clueless of where cost actually is at any given time and different approaches to building packs might be facing wildly different cost perspectives.
(1) What Tesla *charges* for their battery-size increments is not necessarily their true *cost* per kWh.
(2) Tesla has always claimed the lowest cost/kWh by using thousands of commodity cells, yet no other automaker has followed that approach. Why is that?
1) Agreed; Tesla is pushing the bigger packs (smaller ones aren't even available yet)so clearly the bigger packs is where they make their money. So what they charge is way *higher* than what it actually costs them. I fail to see the logic in the suggestion that Tesla encourages larger packs to increase their losses.
2)Other automakers like Daimler and Toyota have actually followed that approach letting specialist Tesla do the packs for them. Since the new gen Pansonic lithium nickel chemistry has properties that are very suitable for automotive applications these cells seem the right choice. Using the generic 18650 format rather than some big cell approach seems to be the clever way to get the right chemistry for the right price.
- where would other automakers get the right cells? Panasonic is invested in Tesla; they might not be inclined or have the production capacity in place to sell to other automakers.
- other automakers lack the expertise of turning thousands of 18650's into a pack and may be reluctant to risk their reputation on getting it wrong and wind up burning down somebody's garage.
(2) The packs Tesla has done for Daimler (A-Class E-Cell, Smart ForTwo Electric Drive) and Toyota (RAV4 EV) are *very* limited production runs. They are nowhere near volume vehicles. It's an easy way for other makers not to have to engineer low-volume compliance cars.
Another Tesla/Daimler deal, announced in Feb, will (Tesla says) exceed in value all its previous powertrain deals combined. We'll see what car that's for soon, and whether it too is for (larger numbers of) compliance cars or for an actual high-volume vehicle.
But again: Why does NO other OEM use the Tesla battery approach?
Now let me ask you the same: what do you reckon could be the reason for the fact that "only" three carmakers, including two giants like Daimler and Toyota use the Tesla system?
Yours may be 2 reasons, but I'm inclined to suspect another: The complexity, cost, testing & part count required to wire thousands of commodity cells together in each pack may not scale past tens of thousands of packs a year.
No idea how much automation Tesla uses for module assembly, but cranking out 100s of thousands of those packs a year is likely a pricey affair compared to 10x fewer parts using large-format Li-ion cells.
As for the carmakers, Toyota uses Tesla for one compliance car (exactly 2,600, yawn) versus up to 20K Prius Plug-Ins this year alone, more in future. Daimler may now be up to 10,000. Hardly relevant volumes.
About economics of scale speculations: Tesla is prepared to do 100K+ of them per year if demand is there. It is counter intuitive that Tesla's high part count approach should work out cheaper than a big cell approach, but nobody else in the industry seems to be anywhere near where Tesla is now in terms of cost.
Please consider your bicycle as the daily commuter vehicle, with the EV as a second car (for when you need to haul things, kids, etc.), and the guzzler (ICE) as a tertiary fallback. Why? Because we need to make the transition away from the fossil-fueled lifestyle (very, very quickly!) to prevent further climate change. NOAA reports that our planet has crossed a sad milestone - 400 parts per million atmospheric CO2.
http://researchmatters.noaa.gov/news/Pages/arcticCO2.aspx
This adds urgency to our great cause.
Thanks!
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