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A Glimpse into the Future of Electric Cars, 2018 Edition

image credit: Steve Jurvetson [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Highlights

  • Both the US and Norway showed strong gains in electric car market share during 2018, led by the Model 3 in the US and the new Leaf in Norway.
  • Overall incentives increased mildly in both countries, yielding an effective battery cost for a 60 kWh battery pack of a little under zero in the US and negative $336/kWh in Norway.
  • 2019 will see mild incentive cuts in both countries, providing interesting data about the link between electric car market share and effective battery costs.

Introduction

This is the third annual installment of the series on real-world electric car adoption. As outlined in the first article, the premise is to calculate the effective battery cost after incentives and see how the battery electric vehicle (BEV) market share changes as this value evolves over time.

Data is presented for two important BEV markets with clear and open data: the US and Norway.

Data from the US

After initial production challenges, the Tesla Model 3 took the US market by storm in the second half of 2018. Even though sales certainly got a big dual boost from two and a half years of pent-up demand and the rush before the federal tax credit is halved, demand for this model is very impressive, especially given the high price of the trims currently being sold. As shown below, the US 12-month moving average now stands at a little under 1.5% of BEV market share.

BEV sales figures from InsideEVs.

Aside from the Model 3, there has been little change. Affordable BEVs still languish around 0.3% market share. It also remains unclear when the promised $35000 Model 3 will arrive, with Elon Musk's leaked email that it currently costs $38000 to make not inspiring a lot of confidence. The Model 3 will need a gross margin of about 20% to make a net profit, implying that the base model cannot be sold sustainably for less than $45000 at the moment.

On the incentive front, not much has changed. Given the production delays, Tesla hit the 200000 unit mark later than planned, so we have to wait a little longer to see how demand responds to a $3750 decrease in incentives. Compared to last year, I only made one change to the calculations: increasing the average state incentive from $2000 to $2500 based on California's introduction of an extra $2000 rebate for lower income households.

This brings the estimated effective battery cost down to negative $23/kWh. In practice, this incentive might be a little larger because the value of HOV lane access and free charging is not included.

Effective cost (real cost minus incentives) for a 60 kWh battery pack.

It is therefore clear that current US incentives bring the price of cars like the Chevy Bolt, Model 3 and Hyundai Kona below the lowest point they can ever achieve in an open market by giving customers the battery pack for free.

Data from Norway

Norway has also seen an impressive boost in BEV market share in 2018. Two main factors can be identified: the new Nissan Leaf sold very well, while tolls and fuel taxes on regular cars increased even more.

Sales data from OFV.

The increase in the number of toll stations and toll prices, especially around the Oslo area, has been substantial. As illustrated by some examples in this Norwegian article, families in the Oslo area now pay about $2000 per year in tolls. However, BEVs will also have to pay about a third of this cost from March this year.

Effective cost (real cost minus incentives) for a 60 kWh battery pack.

Overall, total Norwegian BEV incentives bring the cost of a 60 kWh battery to negative $336/kWh. Buying a BEV in Norway therefore remains a complete no-brainer for anyone who can adopt a BEV lifestyle.

Two new data points

The impressive increases in BEV market share in both economies paint a little rosier picture for BEVs than in the previous two years. Given the very large incentives and the good selection of available models, one would expect a significantly higher market share than suggested by the data points plotted below.

BEV market share for the US and Norway over the 2016-2018 period plotted as a function of the effective battery cost (actual cost of a 60 kWh battery minus incentives).

2019 promises to be a much more interesting year. Several new models will be introduced such as the Audi e-tron, Kia Niro and 60 kWh Leaf. In the US, these attractive new vehicles will have access to the full federal tax credit for at least another year.

The tax credit for Tesla shrinks from $7500 to $3750 in the first semester and to $1750 in the second semester. General Motors will also see their tax credit halved in the second semester. When Tesla's federal tax credit falls to zero in 2020, effective battery costs will amount to about $100/kWh, which could conceivably be reached by technological learning. Tesla's US performance over the next two years will therefore be very informative.

In Norway, the increase in tolls for BEVs in the Oslo area could have a small impact, but this increase remains small relative to the very large tolls paid by regular cars. The US will therefore be the more interesting market to watch in 2019.

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