Battery-Powered Vehicles Value Proposition

Battery-Powered Vehicles Value Proposition

Battery-powered vehicles (BEVs) should only replace internal combustion engine (ICE) vehicles if their value proposition is demonstrably better. See, Future of Battery-Powered Vehicles

And what is the value proposition that warrants a transition to BEVs? Here are its core components:

  • BEVs will be less expensive to operate and own 
  • They will use energy more efficiently
  • They are quieter
  • They have no emissions, which is good for urban areas.

The first element of the value proposition is essential, as it is what will drive consumers to make the buying decision.

But this element has yet to be proven.

There is every indication that it will be achieved, which is why it’s reasonable to predict that the cost of ownership will eventually favor BEVs.

The attached cost curve shows that the cost of batteries may be able to eventually get down to where they need to be, which is around $100 per kWh. Getting to $100 per kWh could take a dozen years or more.

Battery Cost Curve from Union of Concerned Scientists. The true cost goal will be lower than indicated since ICE vehicles are also being improved.

The cost of the battery used in the Chevy Bolt is reported to be $205 per kWh, twice the cost needed to have BEVs replace ICE vehicles. The cost of the battery for the Tesla Model 3 is reportedly slightly lower, but still, twice the cost that’s needed. 

A replacement battery for the Bolt is quoted at over $15,000.

While many of the forecasts for battery costs come from those promoting BEVs, such as the Union of Concerned Scientists, there is no question that battery costs have come down dramatically over the past ten years, and that, using a learning curve approach, costs should continue to come down so that they are eventually below $100 per kWh.  

In addition, the cost of routine service and repairs over the life of the vehicle should also favor BEVs.

But the underlying reason why the value proposition favors BEVs is that BEVs use energy more efficiently. See The Future of Battery-Powered Vehicles

It’s equally important to recognize that the transition to BEVs should not be rushed.

Currently, there is a politically motivated drive to accelerate the adoption of BEVs by using subsidies. The hype concerning climate change is behind this effort to use subsidies.

Subsidies can be counterproductive because using taxpayer dollars to promote BEVs will antagonize many people.

There are also at least three major problems with BEVs, possibly four, that must be overcome, and encouraging people to buy today’s BEV with its shortcomings could deter consumers from becoming repeat buyers and pit them against those proposing the use of subsidies.

  • First, there is the length of time required to charge the batteries. Currently, it can take up to an hour to get a full charge from the fastest charging stations. This affects people who are traveling between cities or who are on vacation. It also affects people who live in apartments who don’t have personal charging stations. Rather than filling up the tank of their gasoline car in five minutes, they may have to wait for as long as an hour to charge the batteries of their BEV.
  • Second, the range issue requires a larger battery than currently being offered. Consumers are accustomed to their vehicle having a range of around 400 miles before having to buy fuel. They have already shown that a BEV must have a range of at least two hundred miles. It’s possible people will become comfortable with a range of 300 miles, which would also have the advantage of reducing the size of the battery and indirectly improving the value proposition by lowering the first cost of the vehicle. But it will take time for this to happen.
  • Third, is the cost of building charging stations.

This is a huge investment that someone must pay for. In total, the investment could amount to $7.5 billion … Or more. This assumes the average cost is $50,000 and that only 150,000 stations are needed. (This envisions multiple charging stations at the same location, the same as there are multiple pumps at gasoline stations.) But costs for installing charging stations have been as high as $250,000 if a new feeder and substation is required.

How this investment will be paid for is undecided. Some utilities say the rate should be increased which would mean that everyone would pay for building charging stations, not just those who use them. Using taxpayer subsidies to build charging stations would be the same. Another alternative is for the user to pay two or three times the average residential rate when charging the batteries of their BEVs.

  • There is actually a fourth problem that few are talking about: National security.

Currently, batteries are mostly being produced in Japan and China. Only assembly and packaging are being done in the United States. This problem should be resolved before we tie our transportation system and economy to foreign sources. We’ve solved our oil and natural gas sourcing problems. Let’s do the same for batteries.

Allowing the free market to develop answers to these issues over time, including the time needed to lower the cost of batteries and to build the charging network, is better than having the government mandate the adoption of BEVs and using taxpayer subsidies in the process.

A free market approach will also result in the best answers to all the issues because competition forces the best, lowest cost solutions.

. . .

6 Replies to “Battery-Powered Vehicles Value Proposition”

  1. Whether they will be cheaper to operate will depend in part on the price of electricity. That may depend on how the US generates its future power. Denmark and Germany rank among the highest renewable power users in European nations. And their electricity costs three times that in the US.

    • No question, the cost of electricity will go up if the use of wind and solar increases. On the other hand, if BEVs become a large part of the fleet of vehicles, the cost of gasoline may go down, or at least not increase.
      How these dynamics play out is an unknown, however, I suspect that operating costs of BEVs will be less than for ICEs. But the cost of batteries must be cut in half for BEVs to be competitive.

  2. Don’t forget the cost of gasoline includes a lot of taxes covering the cost of roading and the like. At the moment, electric cars do not pay these taxes. But, if they ever become common, electric cars will also need to pay these taxes – presumably as a surcharge on electricity. They should also pay for the charging stations – imagine the uproar if the government decided to subsidise oil companies and decreed that the taxpayer should pay for service stations!

    • Thanks. Great comments. I agree users should pay for the investment to build the charging stations.
      Your analogy of taxpayers paying oil companies for service stations is great.
      Money for road maintenance in the US and probably elsewhere comes from taxes on the sale of gasoline.
      I also agree BEV owners should pay a similar amount by a surcharge on electricity or other easy to measure means.

  3. Here is the link to the plot from the concerned scientists. As always I am skeptical about claims the the costs for the battery will be reduced especially since I heard this tune about alternative liquid fuels (biofuels) that never materialized. I trust that investors are not engaged on the ever promise of reduced production and material costs since it has not worked well for the alternative fuel investors. Working in this effort for several years, I saw the private investor interest dry up.

    https://www.ucsusa.org/clean-vehicles/electric-vehicles/electric-cars-battery-life-materials-cost#.W_OPgzhKjIU

    Note at the end of the article there is a shameless request for donations.
    Also the plot seems to be vague on actual costs with the blue dots being labeled ” historical/past estimated”

    Donn. Thanks for the well written article, there are numerous obstacles as you point out, but a viable reasonable cost battery still remains elusive despite a century of research. And as you have previously reported the resale value of a used electric car is horrible because $15,000 for a replacement battery means that the car is headed for the junk yard after 7-8 years at best.

    • I read the Union of Concerned Scientists article some time ago. You are correct in that the lower cost may never materialize, after years of trying to improve Li-Ion batteries.
      There is so much research going on at this time that I suspect costs will come down. Whether they can be cut in half from today’s $200 per kWh remains to be seen. Without cutting costs in half the value proposition for BEVs disappears.

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