As some states slowly look to lift restrictions related to COVID-19, we still look to other countries that are ahead of the US in terms of lifting restrictions such as China to see what the future may hold. In a time when social distancing may become a new norm, what does this do to mass transportation and the future of private car sales?
In a recent study completed by Ipsos, before COVID-19 hit China, 34% of respondents used their own private car and 56% used the bus or metro. After the COVID outbreak, 66% planned on using their own private car vs. 24% now planned on using the bus or metro. While there was a slump in sales while the outbreak was occurring, there may be a larger demand for private cars after restrictions are lifted. In the survey by Ipsos, 66% of the people that responded planned on purchasing a car within the next 6 months due to the fear of infection from mass transportation.
In the US, we’re still in the midst of the COVID outbreak but we are starting to see some states lift restrictions. We would expect that there may be a shared view of mass transportation and a major sentiment to drive a personal car. While ICE and EV sales are expected to be 50% of what they were in April 2020 vs. April 2019, according to CNBC, a bounce-back in the near future looks likely.
For EVs specifically, sales were strong prior to COVID. According to InsideEV, they were up 16% compared to the previous year. COVID has thrown a wrench into the car sales industry and it’s yet to be seen how sales will be affected post-COVID. People are enjoying cleaner air and quieter roads, which can be partially attributed to fewer cars on the road. Both of these benefits could be enjoyed more with an increase in EV market share, as noted in our previous article. We see this as a speed bump to the EV industry, but we believe that sales will bounce back as people experience the benefits of EVs.
Car manufacturers have also dedicated billions of dollars to R&D for new EV models and we expect this trend to continue. For example, Volvo recently told Automotive News that they will cut some R&D and design budgets but will keep their EV budget intact. CEO Hakan Samuelsson remarked, “electrification, autonomous driving, and our future technology development are an absolute priority.”
How sales occur may change as well. Right now, car dealerships are offering to deliver cars to your house, or you can make an appointment at a dealership to test drive a car with minimal human interaction. Of the responses in the previous survey, 79% preferred this method after the outbreak. We expect dealerships to continue with this approach in order to ensure the safety and health of customers, but also their employees. Closing the transaction may be a new experience as well. Instead of signing the mounds of paperwork that you typically would at a dealership, you may just sign electronically. The future may be researching online, having a vehicle dropped off at your house, negotiating the price over the phone, and then finalizing the paperwork digitally. Time will tell if this will be the new norm. For now, we will enjoy test driving an EV next weekend with minimal interaction with a salesperson. Stay tuned for more about this adventure next week.
COVID-19 has affected us all to some degree, from orders to shelter in place to maintaining social distance. For the electric vehicle (EV) industry, it has had various impacts including affecting research and development, the supply chain and specifically, the production of its batteries. For years, the United States has fallen behind its competitors in EV battery production, but will COVID-19 act as a catalyst in the move of battery manufacturing from China to the US?
In recent years, moving manufacturing out of China has been on the docket for many companies. A Bank of America survey revealed that “two-thirds of global sectors in North America have either implemented or announced plans to pull at least a portion of their supply chains out of China”, including the automotive industry. For most industries, including the EV battery industry, the factory shutdowns as a result of COVID-19 could serve as an eye-opener to the United States’ reliance on China. A move to the US for EV battery manufacturing would provide more eco-friendly jobs, increase national energy security, reduce foreign dependence, and help the US firmly establish itself as the world leader in the transition to EVs.
Bringing EV battery manufacturing to the US is easier said than done. Most EV batteries are lithium-ion. The majority of this battery production currently takes place in China. Yayoi Sekine of BloombergNEF reported that in 2019, of the 316 gigawatt-hours of lithium cell manufacturing capacity worldwide, China led the way globally with 73% compared to only 12% to the next largest producer, the United States. With this large of a gap, it would take a concerted effort over the coming years to move production primarily to the US, but it can be achieved.
To better understand how a change like this could happen, it’s important to look at where the main elements of lithium-ion batteries come from. You guessed it, lithium is a large component of EV batteries. For years dating back to the early 1990s, the US led the entire world in lithium production, but for the last 25+ years, that hasn’t been the case. With the advent of EVs, mining companies across the US have worked to improve their positions as top producers but have fallen short. There are currently four countries that dominate in lithium production: Australia (51,000 tons), Chile (16,000 tons), China (8,000 tons), and Argentina (6,200). Because of privatization and secrecy, lithium production numbers aren’t public and are just an estimate in the US, but we do know that the US is far behind. It’s not that the US can’t become a leader in lithium production, it just hasn’t done so in recent years.
China also dominates the US when it comes to the other elements within lithium-ion batteries: cobalt, nickel, manganese, and graphite to name a few. For example, China is the only commercial-scale producer of spherical graphite. In order to improve the US’s place in the EV battery manufacturing world, it needs to improve in all facets of element production for batteries.
James Breyer, CEO of startup Hercules EV, commented when asked about the current state of EV battery manufacturing in the US: “US domestic production of batteries and other energy technologies is paramount to the security and sustainability of the electric transportation industry moving forward. While supply chain disruptions of the magnitude seen with COVID-19 are hopefully fewer than once per millennium, it showcases the need for distributed supply chain networks.” To overcome this, he has promised that his company will make a strong effort to partner with manufacturers that have regional supply chain capabilities.
Aside from COVID-19, perhaps the biggest factor in all of this will be the rise of newer battery technology such as solid-state batteries. While the composition of solid-state cells is generally the same as liquid electrolyte cells, the large swaths of new and established companies building newer battery technology might just be the springboard that stateside EV battery manufacturing needs to pull ahead.
According to research, the global EV battery market is expected to grow by $15.7 billion between 2019 and 2023, providing an opportunity for the US to close the gap with China. COVID-19 has opened the world’s eyes to many ways that we can change and improve. Will the location of EV battery manufacturing be one of them? We won’t know the true impact for a while, but this could be the start of big change for the EV industry.
In these unprecedented times, we find ourselves inundated with a significant amount of negative news. At the time of writing this, according to the CDC, there are over 160,000 confirmed cases of COVID-19 and 2,800 deaths in the US, and this amount is only rising. It’s hard to see through the negativity to get through to the positive stories, but there are some bright spots such as businesses and communities prioritizing health and safety, neighbors helping each other out, and some municipalities implementing virtual inspections to make sure that vital construction can continue. Another big positive that we noticed is how new technology like electric and autonomous vehicles (EV and AV respectively) can have a positive impact on the future
In the past, we’ve written about the benefits of EVs and in an odd way, today’s circumstances provide a look into what a future with ubiquitous EVs could hold. For one, we are starting to hear about how pollution levels are down in cities as more people are working from home and factories close down. As we wrote about, pure EVs emit no harmful gases and pollutants and would help to reduce pollution levels when the world returns to normal work life. We have also noticed how much quieter cities have become with fewer vehicles on the road which would be similar to a world with more EVs because of much less noise pollution compared to ICE vehicles.
Autonomous Delivery Vehicle
In times of crisis, we may see our government be more flexible and this may allow the acceleration of innovation. For example, this could be an opportunity for grocers to push further for the development of AV assisted deliveries. A company out of Bejing called Neolix has claimed that the pandemic has caused a boost in sales of its delivery bots. This autonomous grocery delivery could cut down on crowded grocery stores and may prevent the hoarding of necessities like water and toilet paper. Some people would argue that toilet paper isn’t necessary to hoard, but the grocery store shelves around the US might tell you otherwise.
AVs would also help overcome the driver shortage and logistical nightmare we are seeing with freight transportation. AVs transporting medical supplies to hospitals would allow oversight to be remote and would reduce human interaction. At EPG, we’ve even seen how self-driving technology controlling the movement of containers in shipping yards are doing their own part in getting critical supplies delivered faster. We believe AVs can play a vital role in improving people’s lives if implemented in a safe and correct manner.
In the days of 24/7 news, we often need a little dose of positivity. The world will get through this pandemic and although it may be hard to believe, some good things will come from it. We hope that everyone is staying safe and healthy around the world!
As EV popularity grows and revolutionizes the auto industry, we have seen the introduction of new companies that are focused on just EVs and existing manufacturers introducing more EVs to their existing lineup. One practice that seems to be in question is how these EVs are sold to the consumer. Many states have current franchise laws that require vehicles to be sold by an independent dealership or limit the number of non-franchised dealerships that a manufacturer can have in the state.
For example, Georgia limits non-franchised dealerships to five in the state. Some EV manufacturers are starting to challenge these laws and challenge how vehicles are being sold to consumers. In Colorado, legislation is making its way through the House to allow automakers with no existing dealer franchise network to sell EV’s direct to consumers. If the bill makes its way through the house, it will head to the governor’s desk for signature.
EV’s are changing the landscape of the vehicle industry in more ways than one. Could we start to see more and more states change how vehicles reach the consumer?
Where Can You Buy a Tesla Directly?
States With Total Direct Sales Bans
Alabama (also bans service centers)
Connecticut
Nebraska
New Mexico (also bans service centers)
Oklahoma
South Carolina (also bans service centers)
Texas
West Virginia
Wisconsin
States With Limited Sales
Colorado (1 store limit)
Georgia (5 store limit)
Maryland (4 store limit)
Michigan (Lawsuit Settlement)
New Jersey (4 store limit)
New York (5 store limit)
North Carolina (6 store limit)
Ohio (3 store limit)
Pennsylvania (5 store limit)
Virginia (2 store limit)
States for Which Tesla Gained the Right to Mostly Unrestricted Direct Sales
Arizona (2017 court ruling)
Indiana (2017 law change)
Massachusetts (2014 court ruling)
Michigan (2020 legal settlement)
Minnesota (2013 law interpretation)
Missouri (2017 court ruling)
New Hampshire (2013 law change)
Rhode Island (2017)
Utah (2018 law change)
Washington (2014 law)
Wyoming (2017 law change)
BloombergNEF released finds that between 2010 and 2019 battery prices fell 87%, from $1,100 per kWh (kilowatt-hour) to $156 per kWh. According to BloombergNEF’s forecasts, they expect prices to be around $100 per kWh by the year 2023.
“According to our forecasts, by 2030 the battery market will be worth $116 billion annually, and this doesn’t include investment in the supply chain. However, as cell and pack prices are falling, purchasers will get more value for their money than they do today” said James Frith, BNEF’s senior energy storage analyst and author of the report.
Why the drop in prices? This can be attributed to a number of things including more resources being put into battery research and development, increased electric vehicle sales, and larger battery pack orders as shown in figure 1. With the continued development of new battery technology such as solid-state batteries and new anode and cathode material composition and increasing electric vehicle sales the price per kWh should continue to go down for the foreseeable future.
AAA recently released a study named Electric Vehicle Ownership: Cost, Attitudes and Behaviors in which they surveyed electric vehicle (EV) owners. The study revealed that the majority of owners no longer had any skepticism towards owning an EV after purchasing one. This resulted in 96% of the owners saying they would buy or lease an EV again the next time they were looking for a new vehicle. Our favorite findings from the study are below and please check out AAA’s complete fact sheet here.
A few other interesting numbers are:
$330
Savings in annual maintenance versus a gas-powered vehicle
$546 vs $1,255
The cost of electricity versus gas required to drive $15,000 per year
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