Which Market Forces Are Shifting EVs Into ‘Drive’?
Originally published on Fresh Energy.
By Jukka Kukkonen
The market for electric vehicles (EVs) has been developing rapidly over the past several years. As the market matures, it has the potential to make a dramatic impact not only on the auto industry but electric utilities, consumers, and the entire electric grid. To make sense of it all, we took a look at which market forces are shifting EVs into DRIVE, which are keeping the market in NEUTRAL, and which are moving things in REVERSE.
Shift into DRIVE
Enthusiast customers, owners, and supporters – One of the most consistent drivers of the electric vehicle (EV) market has been its enthusiastic base of customers and supporters. A recent survey of 10,000 EV drivers found that more than 90 percent have shifted to driving electric for good. Plug-in vehicle owners are the best ambassadors for the technology, because they are talking from experience. No one can make as compelling and convincing a case for new technology as those who use it every day.
California and other ZEV states – California and other Zero Emission Vehicle (ZEV) states have kept powering the transition by requiring that car manufacturers make emission free vehicles a certain percentage of their sales. Without this pressure we would have seen significantly fewer resources invested into EVs, resources that have been crucial for the advancement and innovations in technologies that are making the EVs competitive with the internal combustion engine powered vehicles. Without these ZEV mandates the traditional auto manufacturers would have not invested in the electric drivetrain because internal combustion engine manufacturing has increasingly become their core competency and profit center. This shift is forcing manufacturers to rethink their future strategies and it likely wouldn’t have happened without the pressure that ZEV mandates put on them.
Tesla Motors – No company has done more to show just how great an electric vehicle can be than Tesla. Their Model S literally broke the mold for how cars are designed and built. Model X is following the same path and together they have introduced a number of innovations that very few of us could have anticipated even 5 years ago: Touch screen controls, over the air updates, 4 wheel drive technology that is more efficient than 2WD drive and the autonomous driving features. Tesla is showing us how digital age technology will change the way we drive. The funny thing about it is that you can’t quite understand the impact of all of these innovations until you own an EV and drive it every day.
Nissan, Chevrolet, and BMW – Of the traditional manufacturers these three have put the most resources into EV development. Nissan and Chevrolet started the competition with Leaf and Volt in 2011 and kept tweaking these models over the years. BMW on the other hand ran two limited field trials (Mini E and BMW Active E) before launching their cutting edge i3 model in 2014. These companies are not only bringing great cars to market, they’re using innovative strategies to give themselves a one up on the competition. Nissan has been promoting the No Charge to Charge program and the 2016 Leaf saw a considerable increase in range through slightly bigger battery size. BMW is the first company to produce a car using carbon fiber, reducing the weight and making the i3 the most efficient EV in the market. Chevrolet brought the second generation 2016 Volt to the market at the end of last year, but unfortunately went a bit to the dark side by offering it only in ZEV states (making it a compliance car). Fortunately it looks like Chevy is coming back to light early with their 2017 model and offering it in all states this spring. Hopefully they don’t return to the dark side with the launch of the new Bolt at the end of this year.
Government policies and programs – Meaningful support by the federal government has helped level the playing field for new technology so that the price difference between an EV and a non-EV is now less than a couple thousand dollars in most cases. Two drivers in particular have been the federal tax credit for purchasing an electric vehicles ($7,500) and tax credits for charging infrastructure (30 percent). For states that have implemented their own electric vehicle incentives and programs, EVs can actually be cheaper than a comparable gas vehicle – and that’s not even taking into account the significant savings in paying for fuel and maintenance over time.
Utility programs – The electric drivetrain is changing things because it is 4 times more efficient than a traditional ICE drivetrain and at the same time shifts the energy use from oil to electricity. This is a very welcome development for utility companies who have seen a pretty flat line for their electricity growth thanks to energy conservation programs and increasingly efficient appliances and buildings. Utilities have started to figure out ways they can work with consumers when they shift to driving electric not just because this shift creates demand for electricity, but because of how this new demand can impact a utility’s system. By enrolling EV owners in an off-peak charging program, for instance, utilities can take advantage of cheap wind on the market overnight. Utilities can also provide renewable energy-based zero emission charging solutions to their customers like Great River Energy does through their Revolt program.
Advancements in battery (and other) technologies – The rapid improvement in battery technology is taking each new batch of EVs into a new level. Take my personal experience: I just replaced our 2012 Nissan Leaf with a 2016 model. The tested range for our 2012 was 73 miles whereas the 2016 gets 107 miles. That is a 47 percent increase in range in just 4 years. Advancements in battery technology have made lithium ion batteries both cheaper and more energy dense so Nissan could fit more kilowatt hours into the same space. This vehicle also has the best heater that I have ever had in any car thanks to the new heat pump heating technology. Heat arrives now in seconds compared to minutes in internal combustion vehicles.
Shift into NEUTRAL
Charging infrastructure – When electric vehicles were first coming to market there was an expectation that public charging infrastructure would play a big role in how people use their EVs. We have now learned that the vast majority of people just charge their cars at home and, where the option is available, at work, so generally speaking public charging infrastructure does not play a major role in adoption. One exception is for intercity travel, where an expanding DC fast charging network will continue to play an important role. Tesla has led the way by building out its own Supercharger network and others are following.
Dealers – To this point, it’s been tough to get dealers to embrace selling EVs. It may be because salespeople are unfamiliar with the product or because they’re not given an adequate stock of cars to truly provide options for customers on their lot. But some dealers are starting to realize the opportunity. In Minnesota, we are using the strategy of elevating sales people by publicizing those who are most helpful for customers. Another key strategy will materialize this spring when, for the first time, there will be an all-electric room at the Twin Cities Auto Show. This will give auto dealers a chance to showcase their EV options to customers who might otherwise have never considered many of those models. We are “fast charging” this event by staffing the room with MN PEV Owners.
Shift into REVERSE
Inertia – Change is really, really hard for most people. We’ve been driving internal combustion engines for more than 100 years. People grew up seeing their parents and grandparents refueling at gas stations, not repowering them in their own garage. It is sometimes hard to understand how new things can make your life better and that process takes time. Fortunately technology is developing fast and people are starting to understand how these developments can improve their life on so many levels.
Misleading information – New technology will naturally invoke skepticism and be questioned by existing players in the marketplace. The burden of proof is on the new technology. Every small negative point will be magnified and questioned. Traditional technology might have very similar and even worse features, but no one is pointing those out, since we have already learned to live with those and likely don’t even realize that they exist. Fortunately EVs have already proven their capability in a very short time and the trend lines are clear. The burden of proof is starting to shift and EV advantages are becoming the new topic of discussion.
OEMs – As mentioned already in the ZEV states portion, most original equipment manufacturers (OEMs) have been pulled into the world of electric vehicles dragging their feet. Some have dipped their toes, but aren’t really ready to jump in the deep end. Of the 20 EVs that have a true market presence, roughly half are only available in the ZEV states – essentially just fulfilling a minimum requirement. In some cases, even for those that are technically available, the stocking numbers are so low that you can’t really find one. Many new models look really promising but will only truly become an option for consumers if they are delivered widely to the market. OEMs talk the talk, but customers need to see them walk the walk. No Plug, No Deal!
Low gas prices – The electrification of the transportation system essentially means that we are moving from analog to digital. Much in the same way low film prices couldn’t have kept people from moving to digital cameras, low gas prices won’t be able to stop the transition to electric cars. People who experience electric driving are not turning back, no matter how cheap gasoline may be. The general public just needs more information and opportunities to experience driving EVs. Gas will always boom and bust with global markets, but the cost of electricity is much more stable – especially as more and more of the electricity we use comes from fuel free sources like wind and solar.
Looking Forward
This revolution is about to pick up some speed. We are very close to seeing our first affordable EVs with a 200 miles range (Chevrolet Bolt, Nissan Leaf 2.0 and Tesla Model 3) and this will bring the change to the masses. Many of the first customers for those cars will be existing EV owners who are looking to upgrade from their current model or add a second EV to their household. At the recent MN Plug-in Electric Vehicle Owners Circle meeting I asked attendees about their future vehicle plans and about 70 percent said they would upgrade to a new 200 mile model or add one to their household fleet. Even if we take this result with a little grain of salt and say that only 50 percent of the existing owners nationwide would be ready to jump within a year of when the 200 mile range EV hits the market, that might still mean that there would be about 200,000 buyers in this group alone. Once you start to add in others who are presently sitting on the fence we could easily see demand for a half a million vehicles once these new models are available.
If you think that kind of growth is too dramatic, look to Norway as an example. They implemented several key policies to encourage electric vehicle use and increased sales to 30,000 in 2015 after selling essentially none only a few years earlier. This represented 22 percent of the car sales and it was done without any of the new models discussed above. Imagine what their figures, and ours, will look like when new models hit the market next year.
Jukka Kukkonen is an electric vehicle expert at Fresh Energy, an independent nonprofit that works on market based energy policies in Minnesota, and the founder of PlugInConnect.
Reprinted with permission.
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The ‘Drive’ list seems so much more substantive than the ‘Reverse’ list! I’d have to add one more thing to the ‘Drive’ list though- air pollution and, to a lesser degree, climate change. Perhaps air pollution isn’t too strong a driver in the US, but it’s a matter of life and death in China and India. In the west there are some cities (London for example) that are moving towards ZEV in the city center. And while there might not be many consumers who are willing to pay substantially more not to pollute, on balance I think most people would rather drive clean if they can afford it.
It is a testament to the policies the U.S. EPA enacted from the 1970’s… that we don’t have American cityscapes that look like India or China.
Outstanding article, Jukka. Spot on.
Another REVERSE would be if GM manages to keep Tesla stores at its current number or even less than the current number.
That would require Tesla cars to be unattractive to buyers which is nearly impossible today. GM is afraid…as they should be but Tesla is going to whomp all over them (that’s the technical term) which will be especially gratifying in the face of the resistance GM put up.
Even with these new models we will be supply constrained for years to come. That sounds like a good thing but total sales are still too low. Hopefully more manufacturer’s will aim for the 500,000/year and more sooner then currently planned!
We want a charging network! I wonder if someone could make a Tesla to J1772 or Tesla to CHAdeMO adapter that would include supercharging fees and allow non-Teslas to charge at Superchargers. That would probably be the only adapter people would be willing to spend $2k on 😀
For electric utilities (or unbundled grid managers, if you are lucky enough to benefit from the 21st century solution), mass adoption of EVs is more than just a new revenue stream. Overnight and workplace charging lends itself to demand management, shifting the load to the lowest-cost time bands. The technology for this is not rocket science, but it does need institutional innovation to become a reality. It is definitely on the way.
I missed chapter and verse on the “misleading information”. Is there an organised dirty tricks campaign against EVs, and if so who is running it? Otherwise it’s just an expression of inertia.
You mean the Koch factor.
Koch Brothers are running a dirty tricks campaign; they announced their intent to do so.
In the “reverse” chapter we should note that in cities, half of car owners have no private parking to plug their car at night (e.g. 55% in Belgium). We face a chicken and egg situation here. Who will invest in a public charging infrastructure before the cars are there? Who will buy cars that cannot be charged at night?
I think you’re looking at the last market phase for EVs. The biggest advantage of EVs over gasmobiles is their low operating cost, and the biggest disadvantage is EV’s high initial cost. So city dwellers who don’t drive very much (i.e. not very sensitive to operating cost and not willing to spend a lot initially) should be the folks least incentivised to go electric. It’s the commercial fleets and folks with long commutes who should be the early adopters. And they all have private garages.
How many are commuters that park at an employer most/part of the day? Couldn’t/shouldn’t workplace charging (private) campaigns be the best place to start, rather than public charging?
Hi Jukka. Saw you at AXP. Optamotive.
Thank you Jukka! I’m 100% on board:-)
Superb piece. Lots of spot on insight. Kudos to the enthusiast owners and others keeping the eyes on the road ahead!