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The first thing I want to say is that while this is an interesting thought experiment, I’m not saying it will or even should. I like documenting these calculations “deep in the envelope” so that I have something to refer to for all the electric vehicle naysayers who say ridiculous things like “it took us 100 years to get to 1% electric cars. in the United States, we will only have a few percent by 2040. The 3 big objections that I will cover in this article are:
- Demand: no matter what the automakers do, people only buy electric cars when they are heavily subsidized, so other than a few green people, electric cars will not become mainstream.
- Existing car manufacturers: America’s “big 3s” (I wonder how long before Tesla joins the club and people call it the “big 4s”) – GM, Ford and Stellantis – have disappointing goals.
- Battery power supply: it doesn’t matter if people want electric cars – if we can’t increase the production of batteries, we can’t make them.
Demand
I’m not going to spend a lot of time on this one as it will be obvious to anyone with an open mind that the lower prices and the widening of choice of electric vehicles are creating all the demand necessary for electric vehicles to convert all sales. general public, even without warrants or purchase inducements.
Electric vehicles must become available in all market segments at a lower purchase price than gasoline or diesel cars.
Today we have luxury midsize sedans, large sedans and crossovers that are pretty well covered. However, we do not have competing luxury sedans, crossovers, SUVs or pickup trucks available from multiple manufacturers at equivalent or lower prices than their gasoline competitors. I think the standard Model 3 and Model Y lineup will drop to $ 35,000 to handle the mid-size sedan and crossover market, but that’s still just one non-traditional brand. In my opinion, the $ 25,000 Tesla, XPeng P5 and BYD Dolphin will clean up the $ 15,000 to $ 25,000 small sedan, hatchback and crossover segment. The Cybertruck and the Tesla van will be released in less than 5 years. Given the success of these vehicles, many other battery-powered electric vehicles will emerge in the next 5 years.
Once the purchase price is equal to or less than that of a gasoline car, the cost of ownership becomes manner lower due to lower fuel, maintenance and depreciation costs for electric vehicles.
Existing car manufacturers
Last month, when America’s Big 3 automakers released a joint statement on their “aggressive push” into electric vehicles, the devil was definitely in the details. Many have found it disappointing in the following 4 ways:
- It was just an aspiration, not a commitment or even a plan. If I crafted a statement that would be defensible if I wildly missed a target, aspiration is the word I would use. No one would mistake this for a commitment.
- It’s for 2030, not 2025. Almost all of the leaders of these companies will have retired long before that. I’m not saying that companies won’t work towards these extremely modest ‘aspirations’ (they’d be foolish not to), but executives will be long gone before companies are judged on their actions against this statement. .
- He doesn’t even say they’ll be electric cars. He says they’ll include fuel cells (hydrogen, which is stupid) and plug-in hybrids with tiny batteries that no one bother to plug in.
- He claims that these companies with unionized membership “will strengthen continued US leadership in clean transportation technologies.” Who are they kidding? It can be argued that the United States is a leader in clean transportation or if China is the leader, but the only way to argue that the United States is a leader is to base this argument on Tesla’s huge advantage. in electric car technology, not on Ford. , GM or Stellantis have done it.
The solution is quite simple: These companies can sell any electrified cars they can make by 2026, but their gasoline cars will not be salable at a profit. The government will bail out workers for sure, but I hope it does not stop them from building these smog machines. These manufacturers will try to increase their battery electric cars to compete, but they are moving very slowly and will not have the battery to really do it.
New brands in the United States – like BYD, XPeng, and Nio – and brands that have been around for some time – like Tesla and VW – will massively increase production of electric vehicles to meet demand. Where will they find the batteries? I have some ideas on this below.
Battery powered
There are 4 solutions that will address the serious shortages of electric vehicle batteries that I see coming.
- Most cars will switch from lithium nickel batteries to iron phosphate batteries. This should cut battery costs by around 30%, but I don’t even think that’s a big deal because the costs drop a lot even without those 30% savings. The reason for using these batteries is that it takes a few years to expand the nickel mining and refining capacity and we want more batteries now. The price of nickel is likely to remain significantly higher than that of iron, especially in the coming years.
- There is one more important material to consider in lithium iron phosphate batteries, and that is lithium. There is a lot of lithium in the world, but the capacity to extract and refine is not increasing fast enough. Table salt is very easy to produce from seawater. The above video from The Electric Viking brings up many other positive points for the battery. It’s not even cheaper, but it will be if we do enough.
- Tesla has shown that it can build a large factory from scratch in a year. Other companies will learn how to do this, and there is no shortage of capital interested in investing in batteries. I expect the battery supply to double every 18 months or increase about 8 times over the next 5 years. That’s considerably faster than the 15% growth rate projected by this market research company. In my opinion, this article which examines the announced plans by companies to build 115 mega battery factories shows the kind of growth that I find more likely in this white-hot area.
- I know it won’t be popular, but for companies that still can’t get the batteries they need to build competitive vehicles, they could either put in a small 25kWh battery and it could be a city car, or they can install a 15 kWh battery for a 60 mile range that meets 90% of their needs and a range extender gasoline engine for occasional long trips. Another idea would be a small trailer with a 50 kWh battery that you could tow behind a car with a 15 kWh battery on long trips. This battery could be rented and shared by many people.
Conclusion
The US electric vehicle market share in the first half of 2021 was 2.5%. Growing rapidly, it could easily reach 3% on average for the whole of 2021. Tesla is expected to dramatically increase production as its Austin plant ramps up, Hyundai appears to have several high-volume cars coming to the United States. United, Ford will continue to expand production of its Mustang Mach -E and F-150 Lightning, VW will announce and deliver several new models, and Nissan will launch its alluring Ariya. With all of this, it shouldn’t be difficult for electricity sales to double in 2022 to 6%. By 2023, many models introduced in 2022 will increase further and many new electric models will be released, including the game-changing $ 25,000 Tesla. It would not be a stretch for electricity sales to double again to 12%.
By 2024, some Chinese automakers will likely start exporting low-cost models for around $ 15,000 a car, the $ 25,000 Tesla will continue to climb, and everyone will be producing all possible electric cars to try not to lose too many shares. It is easy to imagine that the share of electric vehicles could further double to 24%. If Chinese $ 15,000 cars are allowed to compete in the United States, they could take a lot of market share from the Hyundai Elantra, Honda Civic and Toyota Corolla that now dominate the small car market.
If electric cars grow by 20% in 2025 and 2026, they could reach around 64% market share by 2026 and the remaining 36% would be mostly plug-in hybrids. Assuming owners of plug-in hybrids tune in to support 80% of their miles, they would leave only 7.2% of the kilometers driven on gasoline (20% of 36% of new car sales). But since these are hybrids, their fuel consumption should be about 30% less than that of a regular gasoline vehicle, so calculate about 5% of the fossil fuel consumption that we use for vehicles. sold in 2021 (for new cars only – as it will take at least a few years to retire cars sold in the past).
Disclosure: I am a Tesla shareholder [TSLA], WORLD [BYDDY], Nio [NIO], and Xpeng [XPEV]. But I am not offering any investment advice of any kind here.
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