[Source: The New York Times] As the world’s automakers place larger bets on electric vehicle technology, many industry analysts are debating a key question: How quickly can plug-in cars become mainstream?
The conventional view holds that electric cars will remain a niche product for many years, plagued by high sticker prices and heavily dependent on government subsidies.
But a growing number of analysts now argue that this pessimism is becoming outdated. A new report from Bloomberg New Energy Finance, a research group, suggests that the price of plug-in cars is falling much faster than expected, spurred by cheaper batteries and aggressive policies promoting zero-emission vehicles in China and Europe.
Between 2025 and 2030, the group predicts, plug-in vehicles will become cost competitive with traditional petroleum-powered cars, even without subsidies and even before taking fuel savings into account. Once that happens, mass adoption should quickly follow.
“Our forecast doesn’t hinge on countries adopting stringent new fuel standards or climate policies,” said Colin McKerracher, the head of advanced transport analysis at Bloomberg New Energy Finance. “It’s an economic analysis, looking at what happens when the upfront cost of electric vehicles reaches parity. That’s when the real shift occurs.”
If that prediction pans out, it will have enormous consequences for the auto industry, oil markets and the world’s efforts to slow global warming.
A Boost From Batteries
Last year, plug-in vehicles made up less than 1 percent of new passenger vehicle sales worldwide, held back by high upfront costs. The Chevrolet Bolt, produced by General Motors, sells for about $37,500 before federal tax breaks. With gasoline prices hovering around $2 per gallon, relatively few consumers seem interested.
But there are signs of a shift. Tesla and Volkswagen each have plans to produce more than a million electric vehicles per year by 2025. On Wednesday, Volvo announced that it would phase out the traditional combustion engine and that all of its new models starting in 2019 would be either hybrids or entirely battery-powered.
Skeptics argue that these moves are mostly marginal. Exxon Mobil, which is studying the threat that electric cars could pose to its business model, still expects that plug-in vehicle sales will grow slowly, to just 10 percent of new sales in the United States by 2040, with little impact on global oil use. The federal Energy Information Administration projects a similarly sluggish uptick.
The Bloomberg forecast is far more aggressive, projecting that plug-in hybrids and all-electric vehicles will make up 54 percent of new light-duty sales globally by 2040, outselling their combustion engine counterparts.
The reason? Batteries. Since 2010, the average cost of lithium-ion battery packs has plunged by two-thirds, to around $300 per kilowatt-hour. The Bloomberg report sees that falling to $73 by 2030, without any significant technological breakthroughs, as companies like Tesla increase battery production in massive factories, optimize the design of battery packs and improve chemistries.
For the next decade, the report notes, electric cars will remain reliant on government incentives and sales mandates in places like Europe, China and California. But as automakers introduce a greater variety of models and lower costs, electric cars will reach a point where they can stand on their own.
Still, this outcome is hardly guaranteed. Governments could scale back their incentives before plug-in vehicles become fully competitive — many states are already beginning to tax electric cars. Battery manufacturers could face material shortages or production problems that hinder their ability to slash costs. And an unforeseen technology failure, such as widespread battery fires, could halt progress.
“But we tried to be fairly conservative in our estimate of where battery prices are going,” Mr. McKerracher said, “and we don’t see barriers to electric vehicles’ becoming cost competitive very soon.”
Source: The New York Times
July 8, 2017