It would be nonsense to envisage a time when pure electric cars cost the same as traditional ones but life continues as normal. Around 2025, the up-front price of pure electric (PE) cars will drop below that of internal combustion engine (ICE) ones, and the fundamentals of the upcoming transition are now clear. Short-range electric cars will continue to sell badly because of range and financial anxiety; their resale value after three years can drop by 80%. The point where resale value may be only 40% down on purchase price is 200 miles (320 km).
Many barriers to EV sales are now falling, as models with longer ranges become available and the need for vast numbers of public chargers reduces. Indeed, new solar cars can even be operated from daylight plus a regular domestic plug.
So, the 2025 tipping point is closer than it might seem – and the automotive industry may not have fully grasped the seismic effect it will have on sales of yesterday’s powertrains, including full hybrids (HEV) and plug-ins (PHEV). These do not have the cost reduction potential and will increasingly incur hassle from gasoline station numbers declining, restrictions on ICE vehicles and decline in resale price.
One exception may be 48V mild hybrids, because they will get pure-electric modes at a fraction of the cost of HEV. Significantly, Continental has just announced such a 48V powertrain.
By contrast, although pure electric cars cost much more today and their insurance is higher as a function of price and scarcity of trained repairers, that will be gone by 2025. Electric cars are set to have ten times better reliability and the insurance may even go lower than that for conventional vehicles.
It took only ten years for major cities to flip from horses to cars. New cars could well be 100% pure electric in 2035, with tougher emissions laws underwriting this switch.
However, there is one cloud on the horizon: lithium-ion (Li-ion) batteries. Although they may have dropped to only 20% of car cost by 2025, supply is an issue. We estimate that a demand of around 2,000 GWh just for Li-ion batteries in cars will exist in 2028 if car manufacturers can make enough pure electric cars at their projected costs.
That exceeds the committed capacity of such batteries for all uses, let alone cars at about half of the overall Li-ion demand. Gigafactory commitments increase all the time, but it is far from certain that they will rise sufficiently to meet demand, and there are unlikely to be other batteries or supercapacitors available within the coming decade that can meet more than a minority of the emerging needs.
We believe that the restrictions on Li-ion battery output go way beyond factory capacity. There may well be temporary shortages of the required cobalt, and even lithium.
Furthermore, ongoing fires cause output delays and mistrust. We have found that the latter are more prevalent where companies push the limits of performance and where battery makers cut corners by changing all parts without thorough testing and prudent scale-up in the race for higher energy density.
In 2018, China recorded at least 40 fire-related incidents involving electric vehicles. Nio recently had one of its ES8 SUVs burn – the third time the model has been involved in an incident in about two months. The Chinese Government is requiring a recall of 4,800, a quarter of all sold.Tesla also recently had two car fires in China. Meanwhile, in the US, Audi is recalling its first all-electric vehicle sold in the country because of the risk of battery fire.
A greener, safer future
Customers and authorities know that fires are much less frequent with EVs versus conventional cars, but they rightly demand even fewer incidents. From 2025, the availability of non-flammable Li-ion batteries will be a huge step forward, but they will take time to be fully accepted. (For more see detail, see the IDTechEx report, ‘Lithium-ion Batteries for Electric Vehicles 2020-2030’.)
In view of all this, will price parity with electric cars around 2025 lead to every new car being pure electric by 2030, or will it be a non-event due to battery problems? We predict something in-between. But make no mistake: this will still be enough to pull down some famous names caught with stranded assets in the ICE, HEV and PHEV space.
There is scope for multi-billion dollar businesses in pure electric cars to be created very rapidly from 2025. A rush of affordable PEVs with no charging problems will even embolden legislators to bring forward dates when polluting vehicles are banned from cities, thus saving hundreds of thousands of lives yearly. Yes, we’re approaching a tipping point.
Peter Harrop is leading technology analyst and chairman at IDTechEx