Is now the time to buy an EV?

 In EV Industry

For more than a century internal combustion engine (ICE) vehicles have served transport demand across the world. However, not for too much longer.

The push towards reducing greenhouse gas emissions is causing industry and policymakers to rethink the status quo. Electric vehicles (EVs) have emerged as the next technology to disrupt the transport sector, but, before EVs become widespread, various barriers require attention.

Barriers to EV adoption

Cost is a particular burden for EVs. The main difference between an ICE and EV is the battery pack. The production and assembly of the battery pack make up a large proportion of the EV cost. As a result, OEMs are looking to expand EV production to bring down the cost of the batteries and thus help reduce the upfront cost of EVs.

Another significant barrier is the EV charging infrastructure. The lack of availability is considered a deterring factor in purchasing an EV. Therefore, increasing the visibility of the charging infrastructure is seen as a method to put consumers at ease.

The associated anxiety is the battery range, in other words, the need to charge between journeys. Naturally, consumers will compare the distance their ICE vehicle can travel on a full tank of gasoline with the range of an EV. An ICE vehicle on average can operate around 400 miles, to date, EVs have been unable to complete.

However, evidence suggests that perceived and actual barriers are considerably different. For example, FleetCarma recently studied actual EV driving data, to find that drivers rarely used public charging infrastructure, and overwhelmingly preferred to charge at home.

Therefore, it could be appropriate for policymakers to focus on debunking the perceived, and breaking down the actual barrier, i.e., addressing the concerns of consumers already exposed to EVs. Nonetheless, it is clear that consumer attitudes towards EVs are becoming much more favorable.

The erosion of fear

A recent study by The International Council of Clean Transportation highlights the importance of the first-hand experience of EVs and the positive influence it has on consumer attitudes and behavior. The review implies that creating opportunities to test drive or trial an EV could be a crucial strategy in encouraging EV adoption.

Nonetheless, there is a fear that EVs will not be able to manage daily consumer needs that in turn, manifest negative stereotypes that consumers take with them. However, the most significant barriers to EV adoption are slowly eroding, and here is how;

Upfront Cost – OEMs commitment to ramping up EV production is allowing manufacturers to benefit from economies of scale; mainly with battery production. According to the Union of Concerned Scientists since 2010, battery costs have declined significantly, the brief also notes that once the batteries reach $125-150 per KWh, EVs will be price competitive with ICE vehicles. Latest figures suggest that the industry is around $190 per KWh.

Battery range anxiety –  since first generation EVs, battery range has come on leaps and bounds. For instance, the 2012 Nissan Leaf had a range of 73 miles. Fast forward six years and the 2018 version has double with 151 miles. Also, the current best-selling EV in the US market, the Tesla Model 3 manages a battery range of 220 miles. Looking into the future, Elon Musk has suggested that the new Tesla Roadster will have a 620-mile range capacity.  Nonetheless, 200 miles is more than enough for the average daily commute and consumers are beginning to realize this.

In short, industry advancements are shifting the goal posts, in particular, reductions in the upfront costs and improvements in battery range. In this way, consumers are more than ever inclined to purchase an EV. However, don’t just take my word for it, check the recent sales figures.

Global EV sales

In 2017, Germany and Japan led the way, with sales more than doubling from the previous year. Concerning volume, the United States and China top the list. In China, just under 580,000 EVs were sold, up 72% from the year before. Notably, over two-thirds of EVs sold were battery-electric vehicles (BEVs), suggesting that BEVs will be the preferred choice moving forward.

However, analysts would argue that although EV sales may have more than doubled in some regions, EVs still represent a small percentage of the market. While this is accurate, based on the current trajectory, EVs will soon render a material proportion of the market.

Canada leads the charge

The strong 2018, Q2 sales in Canada could represent a pivotal moment in EV attitudes. The graphic below presents 2018 YTD, compared with 2016 and 2017. Note, plug-in EVs include both hybrid and battery-electric.

Source: Matthew Klippenstein, GreenCarReports.com

 Between 2016 and 2017 EV sales remained relatively flat. However, 2018 saw a break away from this trend. In particular, Q2 (April to June 2018), witnessed a dramatic rise in EV Sales, a 214% increase to be precise.

The question is how and why did this happen? Well, not surprisingly the introduction of the Tesla Model 3 into the Canadian market had a significant impact, spearheading the BEV sales. Notably, the Tesla Model 3 comes with a modest price tag of $35,000, arguably at a level already competitive with its ICE counterpart. Evidence supports this, given that financial incentives ceased in the Ontario province yet sales continue to rise.

Fleet implications

Although pull factors toward EVs differ between individual and commercial purchases, fleet owners are beginning to realize the benefits of switching to EVs. For example, UPS already operates over a thousand EVs in the US and Europe and has committed to expanding the fleet further.

A significant reason for this change in behavior is taking a longer-term view. UPS like other fleet owners have recognized the favorable cost implications of operating an EV fleet overtime, not to mention the ‘green’ reputational benefits.

In short, EVs are no longer considered a technology of the future; they are the here and now. A combination of vehicle improvements such as reducing the upfront cost, improving battery range, and increasing the number of available models are contributing towards more positive EV attitudes. Some will inevitably choose the ‘wait and see’ policy, but why wait? Start benefiting today by making your next vehicle purchase an EV.

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