The Year of the Electric Car is scheduled for 2022 – and that’s no pipe dream, folks. It’s a hard number coming straight from a recent study by Bloomberg New Energy Finance. The main argument against EVs has always been cost to manufacture, particularly with a problem in battery size and power – a cost that then gets passed down to the customer.
For its part, the government has been providing federal tax incentives up to $7,500 to encourage consumers to purchase EVs, with the dual hopes that smart consumers will see it as an investment while these subsidies will be viewed as offsetting the cost.
Despite this carrot reward, the stick is the same issue that consumers face when adopting solar panels into their personal homes as a viable source of energy: the upfront and initial costs are all on them – and it’s a sizeable number. In exchange, the energy output received doesn’t nearly match their monetary investment.
In short, it doesn’t seem like a quid pro quo.
The state of the union doesn’t really convey the sense that we’ll be ready to gear up by 2022: today, EVs make up less than 1% of new car sales. However, Bloomberg predictions see a tipping point occurring in 2022. This is the point at which the unsubsidized total cost of BEVs (or battery electric vehicles) will fall below that of regular internal combustion vehicles.
At this point, consumers will be less reluctant to adopt – which means that there will be a steady rise that sees EVs conquering 25% of total market share by 2040. That’s 41 million in global sales.
Of course, this report assumes that consumers’ reluctance to adopt lies mainly in the cost, not necessarily in thinking. But perception – of both brand and the true power of electric versus internal combustion – is also a big factor.
For its part, innovators like Tesla and Nissan have set out to rethink the battery issue from three distinct angles:
- reduction in battery manufacturing cost
- increase in battery power
- reduction in battery size
Tesla’s focus on the battery pack has caused the company to return to the drawing board, and is largely responsible today for developing a pack that has dropped in cost per kWh from $1,000 to $350.
The “battery question” is now a determined variable in the equation of EVs so the rest depends on car manufacturers: aggressive pricing could further drop the average cost to $200/kWh by 2022, and $120/kWh by 2030. They’ll have to depend on incremental improvements to the rest of the car as well as making the process of battery manufacturing more efficient and speedy.
Barriers to Adoption
There may still be a couple of barriers to adoption, besides simply cost:
- Consumers who purchase luxury cars and cars for racing capabilities will still view internal combustion engines as more powerful than BEVs
- The car sharing economy is growing, which means fewer people are even aspiring to car ownership
- All this innovation and focus on battery packs does not negate the fact that many regions will require infrastructure first: that is to say, there will have to be a network of charging stations to support this growth initiative and projection
- While the free market competition initiated by Tesla and now adopted by other companies has really worked, when it comes to a focus on the “battery question”, a lot still rests on the support of governments. This is not just in the form of incentives but lobbying efforts that are going into killing manufacturing subsidies.
Brand Storytelling for EVs
Here’s the bottom line – and it’s hopeful: while climate change and nation-state accords come under the microscope, consumers are becoming increasingly empathetic and aware of the need for an alternative mode of fuel. They’re more likely than ever to make the jump and these public debates are certainly priming them to adopt BEVs by Bloomberg’s projected date of 2022 and 2030.
But they’ll still need a reason effort still rests on brand messaging and positioning. Car brands have their work cut out for them when it comes to articulating how they intend to keep excellence of manufacturing and their original values intact while shifting gears, so to speak, to a new form of power. Will consumers still remain loyal or will it be a free-for-all? Let’s arrive at 2022 and see.