BloombergNEF‘s Colin McKerracher took to the stage at the BloombergNEF Summit in San Francisco last week where he made a case for electric vehicles reaching the “end of the beginning.” The case for electric vehicles moving into the mainstream or out of the early adopter stage of growth has been fueled by the increase in energy density in lithium-ion batteries and the corresponding drop in cost that comes along with it.
Battery energy density is the amount of energy that can be stored in the same amount of weight. Think about it as the amount of range that can be extracted from the same 500 kilogram (1102 pound) pack. As energy density increases, more energy can be extracted from a battery pack of the same weight. “Battery energy densities keep getting better,” Colin McKerracher, Head of Advanced Transport at BloombergNEF, said. “They’ve almost tripled at the cell level since 2010.”
These improvements are staggering and have paved the way for an electrified future. As energy densities improve, longer range electric vehicles make their way to the market without the need for physically larger, heavier packs. This trend can be seen in the Tesla Model S, which came to market with a ~250 mile (402 km) range per charge. The most recent Model S with its Long Range Plus battery pack can achieve 390 miles (628 km) of range per charge. It can also be seen with the longer range the Nissan LEAF has gained continuously since 2011, going from 73 miles (117 km) of range back then to 215 miles (346 km) in 2020 (nearly a tripling, incidentally).
Improving energy density enables other meaningful wins across the board with electric vehicles. As density improves, the same 100 kWh pack gets lighter. Lighter battery packs translate to lower freight and handling expenses throughout the supply chain, further lowering the cost of the battery. McKerracher commented about battery pricing as well, noting that the price of lithium-ion batteries has continued to fall in recent years. The trend is expected to continue in 2020, with BloombergNEF estimating a price drop from $156/kWh in 2019 to $135/kWh in 2020.
EV charging networks are growing in support of the small but growing fleet of electric vehicles. BloombergNEF estimates there to be almost 1,000,000 EV charging points installed around the world (that’s one million), and this with only a 2–5% adoption rate of electric vehicles in developed markets. Further, that ignores the many, many more simple electricity outlets that can be used to charge an electric car (just like you can use to charge your computer or phone).
When it comes to EV sales, the industry is being forced to stand on its own for the first time in some countries, states, cities, and air districts as they begin to phase out EV incentives in developed markets. In the US, Tesla and GM have already exceeded the 200,000 vehicle threshold that marks the phaseout of the federal EV tax credit, and you can no longer get any tax credit at all if you buy a Tesla here. (Buyers of EVs from other brands can still get a $7,500 tax credit per vehicle, in a system that — oddly — punishes the industry leaders.) After a massive surge and early support of plug-in vehicles in support of clean air initiatives, China is similarly stepping down direct purchase subsidies. EV sales in China have taken a hit as new pricing pressure has hit automakers.
In the US, the EV market is largely unexciting, with the sole exception of Tesla. Specifically, the Tesla Model 3 propelled Tesla into the mainstream consciousness and mass-market sales rankings. Sales of Tesla’s vehicles have remained steady in the US ever since Tesla successfully boosted production of its first affordable electric vehicle in Q3 2018.
Fear of “Tesla killers” from mainstream automakers died off as the Model 3 held its own against the likes of the Audi e-tron and Jaguar I-PACE. Electric vehicles might look, smell, and have windows like combustion vehicles, but building them is a different game altogether. Tesla raised the bar on performance, range, cost, charging, and technology in a way that puts automakers on the defensive. It is not a simple matter of throwing development money at a new vehicle or powertrain program. You have to rethink the automobile to compete.
As EV purchase incentives drop off, increasing pressure on legacy automakers is also coming from cities and states that are pushing for firm bans on combustion vehicles operating in city centers in the coming 10–20 years. These indirect regulations not only put pressure on automakers to bring viable plug-in vehicles to market — they drive changes in consumer behavior as people look to the future resale value and utility of vehicles being purchased today. In fact, as we reported last night, the Tesla Model 3 holds its value better than any other automobile in the USA — by far. That will only increase as more cities get serious about promoting electric vehicles and disincentivizing polluting vehicles.
“City policies are becoming an important driver and are reshaping the global auto market,” McKerracher said.
The global trends are clearly toward electric vehicles, but zooming in reveals a more nuanced story. China is ramping up longer-term targets for plug-in vehicle purchases, with many cities already boasting more electric vehicle sales than many European countries. The US continues to be a laggard, with a regressive government that seems intent on stepping on the emissions accelerator instead, rolling back regulation like it’s going out of style.
It is still early days for electric vehicles, but the drastic ramp up in production and the corresponding sales figures are also supporting impressive R&D into the underpinning battery technology. This, in turn, is driving costs down even further, catalyzing the spike in sales. The future is looking bright as the end of the beginning of electric vehicles also marks the beginning of the end of humanity’s reliance on fossil fuels.