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A Glimpse Into the Future of Technologically Mature Electric Cars

Schalk Cloete's picture
Research Scientist Independent

My work on the Energy Collective is focused on the great 21st century sustainability challenge: quadrupling the size of the global economy, while reducing CO2 emissions to zero. I seek to...

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  • Nov 7, 2016


  • The introduction of affordable 200+ mile electric cars under existing incentive programs offers a valuable glimpse into the future.
  • In the US, incentives will cover the entire battery pack cost of the Chevy Bolt.
  • In Norway, very large incentives will yield effective battery costs of negative $314/kWh – a massive bargain.
  • Current market shares of affordable electric cars are 0.2% in the US and 13% in Norway.
  • Near-term performance of subsidized electric cars in these countries should be indicative of long-term unsubsidized performance.  

Electric car forecasts

The range of views on the future of electric cars is wider than any other clean energy discussion topic. On the one hand, we have the oil companies like Exxon Mobil (below), projecting that “other” light duty vehicles (BEVs, PHEVs and fuel cells) will represent about 4% of the light duty vehicle fleet by 2040 (and displace less than 1% of oil demand).


On the other end of the spectrum, we have analysts like Tony Seba who thinks that the internal combustion engine will be totally obsolete (globally) by 2025. This projection appears to be based on the questionable assumptions that the service delivered by electric cars is just as superior to the service of conventional cars as digital media is over film, and that electric car costs will decline proportionately to battery costs (below), enabling you to buy an electric car for $5000 in 2030.


The truth almost certainly lies somewhere between these two extremes. BNEF recently came out with a more reasonable forecast. Unfortunately, I cannot get hold of the full report, but the most important result is shown below. Pure battery electric vehicles (excluding PHEVs) are projected to reach 30% of new car sales by 2040, based on falling battery pack costs of $100/kWh by 2030 and lower thereafter. This should result in a little under 20% of global vehicles being fully electric by 2040 – at least 5 times the Exxon Mobil forecast. Market penetration by 2025 is about 3% (33 times less than Tony Seba’s forecast).


Personally, I think the BNEF forecast seems quite reasonable, but may be a bit on the optimistic side. Firstly, they assume oil prices rising back to $70/barrel which I view as unlikely, partly because alternative technologies like electric drive takes away conventional oil’s monopoly and we still have lots of cheap oil. Secondly, and more importantly, I think that alternative technologies such as telecommuting, small electric vehicles and doorstep delivery services will grab a large chunk of city driving demand over the next few decades, while highway driving will continue to increase. Given that the electric car is most at home in the city and the internal combustion engine is most at home on the highway, this trend will be negative for electric car demand. More detail on this in a recent 3-part article: car-free lifestyles, autonomous vehicles, fleet composition.

This article proposes a new approach to estimate the performance of future technologically mature electric cars in the US (largest electric car fleet) and Norway (largest per-capita electric car fleet – by far). In this approach, I sum up current electric car incentives and express the result per kWh of battery capacity. The rationale behind this approach is that most parts of an electric car are technologically mature (limited future cost reductions), but the battery pack will still see large future cost reductions. Improvements in areas other than the battery pack are likely to be matched by improving competition from conventional and hybrid cars. We can therefore get a good idea of the market performance of future unsubsidized electric cars by observing the near-term market share in countries where expensive batteries are fully subsidized.

The case of the US

The US has been deploying electric cars based on a strong subsidy program for the last five years. Results of this push are shown below (1, 2) where the lines represent 12 month moving averages. Total battery electric vehicle (BEV) sales currently stand at around 0.5% with a slight uptrend due to the Model X opening up a new market segment. Affordable electric cars, on the other hand, are at only about 0.2% of total sales and seem to be on a steady downward trend.


The introduction of the Chevy Bolt at the end of this year will breathe some life back into that sagging red line. Exactly how much of an impact it makes will tell us a lot about the longer term prospects of electric cars in the US. As shown below, current subsidy programs in the US bring the effective battery cost of the Chevy Bolt down to only $18/kWh. The subsidized cost of the 2017 Bolt will therefore be similar to that of the unsubsized Bolt of the future, implying that its near-term sales performance offers a glimpse into the future of electric cars with technologically mature battery packs.


The subsidy assumptions in the graph above are as follows: $7500 for the federal tax credit, $2000 for state incentives, $2000 for ZEV credit savings and $2400 for fuel taxes. The ZEV credits are the most uncertain. From various internet sources, I estimate that Tesla makes about $4000/car from ZEV credits (other carmakers can avoid this cost by selling more electric cars). It seems reasonable to assume that carmakers pass half of this saving on to buyers of their electric cars. Large carmakers may also be willing to sell electric cars at reduced margins to adhere to regulations and build their public images.

The net present value of avoided fuel taxes are calculated by summing the dollar value of the gasoline tax for a the average inefficient 25 MPG car travelling 15000 miles per year over a 10 year ownership period with a 5% discount rate. This is done because future electric car drivers will also have to pay for things like road maintenance.

It should also be noted that other incentives like free parking, subsidized charging stations and access to HOV lanes also have a significant monetary value. These are neglected in the current calculations because they are difficult to assess accurately in the US due to large variations between states and insufficient data. It therefore seems reasonable to say that the Bolt’s battery pack cost will be entirely covered by incentives when US sales start over the next few months.

The case of Norway

As outlined in an earlier article, Noway is the unquestionable leader in electric car deployment due to truly enormous incentives. The Norwegian electric car success story is illustrated below. It is clear that affordable electric cars command an impressive market share of about 13% (more than 50x better than the case of the US above). However, the trend is pointing downwards again, implying that the Chevy Bolt (or the Opel Ampera-e as it will be known in Norway) is needed to make a strong impact.


The great performance of electric cars in Norway is understandable when viewing the effect of incentives shown below. Anyone buying the Ampera-e in Norway will receive benefits valued at $564/kWh of battery capacity over a 10 year ownership period ($33850 in total net present value). This brings the effective cost of the Ampera-e battery pack to negative $314/kWh – not a bad deal at all!


Electric cars in Norway are exempt from 25% VAT as well as the large up-front additional tax levied as a function of vehicle weight and power. The entry level Ampera-e will cost about $40000 in Norway, but future costs of $30000 were used to calculate the $7500 VAT benefit. Similarly, it was assumed that the Ampera-e battery pack weight is cut by a factor of two when calculating the weight tax of $7400 using this calculator. If current costs and car weights were used, the incentive would increase by $6500 ($108/kWh of battery capacity). The power tax amounts to $3350 using the same calculator as above.

In addition, electric cars in Norway are exempt from tolls (of which there are many), parking fees and most of the yearly vehicle ownership tax. A survey of articles on electric car savings in Norway revealed that people generally save about 7000 Norwegian kroner (NOK) in tolls, 2500 NOK in parking fees and 2690 NOK from the yearly tax. This amounts to a yearly saving of $1500.

In addition, electric cars are allowed to drive in bus lanes. This is a big deal for commuters who can easily save 15 minutes per day through this mechanism. When assigning a value of $10/hour of time saved, this amounts to another $500/year saving.

These incentives will not last forever. Complaints are now increasing about electric cars filling all the midtown parking spots, impeding buses during rush hour and generally increasing traffic in Norwegian cities. For this reason, I calculated the value of these incentives over 10 years with a 20% discount rate (shown below). The total net present value then amounted to just over $10000.


Finally, we have savings from fuel taxes. Norway has the highest gasoline taxes in the world including a 4.22 NOK/litre road tax, a 1.04 NOK/litre CO2 tax and an additional 25% VAT on top of these taxes (extra 1.32 NOK/litre) for a total of $3/gal. This was calculated from numbers in this link assuming a 50/50 split between gasoline and diesel. To get the net present value, this tax was summed over 10 years with a discount rate of 5% (figure above), an average efficiency of 35 MPG and 13000 km per year of driving, giving a total net present value of $5600. Electric cars also get access to free public charging, but this benefit will be ignored because it will be smaller than the fuel tax benefit and harder to assess accurately.

Including the CO2 tax as an electric vehicle incentive might sound strange given that almost all of Norway’s electricity production is clean hydropower. However, Norway already charges an upfront CO2 tax on new cars. The average new car sold in Norway has CO2 emissions of about 125 g/km (low NEDC estimate) resulting in a tax of about $3300 based on the aforementioned calculator, amounting to an already high CO2 tax of about $130/ton over a 200000 km lifetime.

More importantly though, replacing a gasoline car with an electric car in Norway definitely does not avoid all the CO2 emissions associated with the gasoline car. Given that hydropower is very cheap, it is generally produced at maximum capacity with any excesses being exported. This implies that more local consumption will reduce exports, enforcing more fossil fuel consumption abroad. In addition, Norwegian electricity providers have sold clean power consumption rights equivalent to fully 75% of total Norwegian consumption to other European countries. On paper therefore, half of Norwegian power consumption stems from fossil fuels and 25% from nuclear power. Only 15% of Norwegian consumers have entered a more expensive electricity contract which guarantees 100% renewable electricity.


Many people will be watching the sales performance of the new Chevy Bolt and other affordable 200+ mile electric cars over the next couple of years. According to this analysis, these upcoming sales statistics can give a very interesting glimpse into the future of technologically mature electric cars. Performance in the US can be seen as the base case where future technologically mature electric cars compete with gasoline cars on a level playing field. Norway will provide an optimistic case where a very strong political will to remove gasoline cars from the road is maintained for decades to come (rather ironically subsidized by oil exports).

I’ll be collecting data from the US and Norway as sales numbers and effective battery costs (incentives included) evolve over time in order to establish a trend of electric car sales performance vs. effective battery costs. Let’s see what happens…

Original Post

John Miller's picture
John Miller on Nov 8, 2016

Schalk, very well written and balanced article as usual. Since Norway has a power generation mix of about 42% FF, 36% Hydro, 22% Nuke, and <1% Renewables, a rapid growth in EV’s will generally have a greater unit LDV conversion carbon emission impact then the U.S., currently. Although the U.S. power mix (2015) is about 67% FF, 6% Hydro, 20% Nuke, and 7% Renewables, this situation will likely improve towards Norway’s EV impact levels by 2030 due to the EPA’s CPP.

As far as the cost of EV’s per 200-mile battery travel range, most of the recent studies tend to overlook a major performance factor: ambient temperatures. In colder climates, the capacity of charging EV’s is reduced significantly; depending on how much a battery has been drained (discharged) prior to recharging and how cold it actually is during charging operation.

In hotter climates, the impact on charging capacity is not the major issue, it’s the EV’s battery lifespan. Even though battery costs are projected to decline significantly in the future, the replacement battery cost is still huge compared to ICE oil changes and tune-ups over the average vehicle life. Once EV’s start making up a much more significant percentage of future LDV fleets, these performance and cost factors will likely become much more transparent, and, could significantly impact future EV sales levels. And, yes there are technological solutions to these EV battery performance issues (battery heaters, coolers, etc.), but this will add significantly to the overall EV purchase and operating costs.

Jarmo Mikkonen's picture
Jarmo Mikkonen on Nov 8, 2016

Norway will provide an optimistic case where a very strong political will to remove gasoline cars from the road is maintained for decades to come (rather ironically subsidized by oil exports).

2 million barrels a day oil equivalent…that’s how much Norway pumps oil and gas per day. The emission savings produced by electric car are insignificant by comparison. In fact, the total emissions of Norway pale when compared to those produced by the oil they drill.

A bigger irony than electric car subsidies is that Norway pledged to become carbon neutral by 2030, by buying emission offsets with their oil money. What about oil production?

A Norwegian decision in January to up its fossil fuel production in some of the region’s riskiest and most environmentally fragile areas raised eyebrows in the wake of the Paris agreement.

“This is a totally separate issue, as the climate neutrality goalposts are all about offsets by 2030,” Helgesen said. “After 2030, it is going to get tougher, and beyond that, even tougher.”

Schalk Cloete's picture
Schalk Cloete on Nov 8, 2016

I don’t think it is realistic to expect any oil and gas exporter to “keep the carbon in the ground”. Oil and gas are just too valuable and decades of easy profits have conditioned the population to get used to a lifestyle where most people can consume more than they produce.

Norway has handled this situation better than any other oil exporting country. Oil profits generally don’t go into wasteful consumption (e.g. before Norwegians could buy a Tesla for the same price as a Golf R, there were almost no luxury cars on the road). Instead, these profits are invested with an increasing level of environmental responsibility around the world.

Personally, I think intelligent purchases of emissions offsets with oil money will be much better than subsidizing electric cars with oil money. The emission reductions per unit investment should be at least an order of magnitude greater. It would be even better if such a program can be extended outside the EU to developing countries. Rich countries can do a lot more for climate change by investing in cheap clean energy and efficiency projects in developing countries than extremely expensive local programs like electric car subsidies.

To put it in numbers, I’d estimate that the average barrel of oil generates about $150 of economic value (my rough estimate of the oil price at which the global economy will stagnate), while costing about $30 to extract. The resulting $120/barrel social profit equates to $380/ton of CO2. If this profit is invested smartly into carbon reduction initiatives costing $30/ton (of which there are many), each ton of oil CO2 emitted can avoid nearly 13 tons of CO2 – a massive climate change mitigation win.

Nathan Wilson's picture
Nathan Wilson on Nov 8, 2016

Good to see the BEV incentives explained simply. But I don’t think it will be anywhere near this easy to extrapolate from sales of subsidized sales of a couple of BEV models to the market potential of BEVs as a group.

The problem is how to account for the numerous other factors, which in some cases can be dominant:
– Even though most BEV charging for the next few years will be done at home, how much weight will potential buyers put on availability of destination chargers just in case? (i.e. lack of public charging is a bigger issue now than in the future).
– BEV early adopters may be much more tolerant of perceived short-comings (e.g. range, recharging time) than the general public. (i.e. shortcomings could be a bigger issue in the future).
– BEV early adopters may be more tolerant of a limited model choice than the general public.

The other thing to remember is that there is a large range of per model sales volumes that seem to be viable in the market. According to this source, while highly popular models like the Camry and Accord sell around 400,000 units/year in the US, there are many more models with annual sales in the 40,000/year range (Taurus, Maxima, Mini Cooper).

So unless the BEV sales in the next few years are at one extreme or the other, I’m not convinced they’ll enable us to make very accurate predictions of future BEV sales.

Roger Arnold's picture
Roger Arnold on Nov 8, 2016

I think that alternative technologies such as telecommuting, small electric vehicles and doorstep delivery services will grab a large chunk of city driving demand over the next few decades, while highway driving will continue to increase.

Agree about city driving demand, not so sure about highway driving trend. I expect that the transportation sector will be in a state of flux over the next few decades. We’ll almost certainly see a sharp drop in ownership of full-size vehicles once autonomous vehicles sink the cost of rentals and dial-a-ride. Bikes and small personal EVs should become much more popular after worries about being blown off the road or crushed in collisions with larger vehicles begin to fade.

We could also see the advent of a new class of transportation vehicle: “road ferries”, designed to carry bikes, scooters, small EVs, and their riders between express stops within a city. Or between cities. Could cut down a lot on highway driving.

Schalk Cloete's picture
Schalk Cloete on Nov 8, 2016

Good points. I agree that this type of extrapolation will only offer a rough indication. It will certainly be interesting to see whether the steady increase in available models and the buildout of charging infrastructure will strongly influence this trend over the years.

Consumers now have a steadily increasing selection of shorter range electric cars to choose from, but this does not seem to translate into steadily increasing sales. Maybe many people are deferring their purchases in anticipation of the Bolt or even the Model 3. We’ll soon find out.

As you said, the issue of the limited number of early adopters being more willing to adapt to the practical challenges of electric car ownership is also an important point. Broader availability of charging infrastructure can also help, although it should be noted that this will not remain free as it is now. I saw that Tesla plans to start charging for use of its superchargers next year.

The fact that there are reasonable arguments that can be made for more and for less adoption of electric cars in the future gives some more confidence in this methodology. At least the subsidized Bolt should give a good indication of how much it will help sales to add an additional $7500 worth of batteries to an affordable electric car.

Schalk Cloete's picture
Schalk Cloete on Nov 8, 2016

I don’t think highway driving will increase a lot, but I do think that increases in autonomous features, convenient rental services and an increase in models designed especially for highway driving will make longer car journeys more comfortable/affordable and therefore more popular.

I’ve not thought about the “road ferry” concept before. I guess it could be a problem that small vehicles will take more space and take longer to load/unload than just people by themselves. Maybe a better model would be to combine a good public transportation system with publicly available e-bikes?

Helmut Frik's picture
Helmut Frik on Nov 9, 2016

The latter is a bit a trend in germany. There are many more things happening in the market than just battery prices.
E.g. car makers have noticed the problems with heating in winter in the cars, which was not a problem with fossile powered cars due to abundant waste heat from the engine. So the new models come with insulation and a heat pump for heating and cooling, which make the cars more comfortable, and reduce the increase of consumption in cold weather.
Other points are ongoing developments in the motors for use in vehicles – so far electric motors have usually been in stationary use, and ony a few in handheld tools. E.g. Siemens has developed a new electric motor with 260kW at 2600RPM (if I remember right) for aviation use with a weight of just 50kg, and plans to produce similar motors for use in cars. (260kW permanent power, so more available for short time acceleration, so the moter is “too big” for usual cars, so scaled down for a average low to medium cost car it might just have 20kg of weight)
Or developments done to change battery design without improving battery chemestry (so advances in chemestry come on top) by eliminating unneccesary parts by stacking high number of cells in one housing by Fraunhofer (On one side a ongoing development which might fail, on the other hand the target of the develpment is already the complete machinery for a production line, so on labratory level it works), giving a significant reduction in the weight of the battery, reducing the costs of the car around the battery significant (1kg less battery leads to roughly 1kg less weight of the rest of the car due to less steel for the body, smaller brakes, wheels, etc. ) If this project would work as designed, it would maybe not reduce the price per kWh by a single $, but it would make a new version of a Model S with same features 600kg lighter, and while keeping battery size extend range accordingly, or allow to reduce battery sizes and reduce weight of the car a second time. 600kg less would mean the car becomes significant cheaper as well.
There are a lot more things changing as well, which make things harder to predict, but make it likely that future electric cars offer more value per dollar even with the same price of batteries.

Helmut Frik's picture
Helmut Frik on Nov 10, 2016

Well, there are a lot more changes then just the prices of the batteries in the area of barttery electric cars.
E.g. cars get thermal insulation (which was almostunneccesary so far due to the huge waste heat from the ICE) and heat pumps for heating (and cooling) reducing the amount of energy needed in winter and increasing comfort in the car.
Or the different parts in the car get improvements, e.g. Siemens has developed a engine for avionic use with 260kW permanent power @2600RPM (if i remember right) with a weight of just 50kg. Which should be produced too for use in other transport systems, with adopted size – which could result in engines for usual cars with a weight of just 20kg.
And batteries aleo loose weight. E.g. Fraunhofer researches on cell packaging where not only one cell gets packaged ( and the wired and packaged again, but a whole stack of cells where the same material works as anode on on e side and kathode on the other side will be packafged in one piece, removing all wiing, most of packaging and a nearly half of the material for Anode/Kathode. Result of this research should be a working production line for battteries which reach up to 400Wh/kg with existing cell chemistry (so improvements in cell chemistry come on top). Since 1kg reduction in battery weight leads to a loss of another kg in the structure of the car, brakes, wheels, etc. if this project is successfull it might open the way for a Tesla S Version 2.0 which has 600kg less with the same power and capacity, which recduces costs and allows either longer range or smaller batteries, which reduce weight and price of the car again. And there are multiple similar developments on the way in paralel. Which will need to different cars and different prices in the future, independent of the price per kWh.

Jesper Antonsson's picture
Jesper Antonsson on Nov 11, 2016

You must have Norway mixed up with some other country (Finland?). Norway’s power generation mix is almost 100% hydro and no nuclear.

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