The Expert Podcast

There's a great deal of mixed messaging coming out in news about electric vehicles. EVs are being pushed as the primary mode of personal transportation in the near future. Some manufacturers have gone to all new EV research and development for their next generation of vehicles. So let's take a look at what are the pros and cons that might indicate the future and what you might do about it as a consumer, what actions to take today to prepare for a world of EVs or maybe not.
To start with, Toyota, one of the primary first movers and pioneers of electric vehicles and hybrid vehicles with the Prius, warns of tremendous challenges in big promises for EVs and it says if we are to make dramatic progress in electrification it will require overcoming tremendous challenges including refueling infrastructure, battery availability, consumer acceptance and affordability, and also reliability of the electric grid. These are pretty significant things. The most important I think is consumer acceptance. Do people even want these?
Some consumers really do want an electric vehicle. Some of the reasons for it have to do with practical budgetary expectations that it's going to be cheaper to operate an electric vehicle than a gas internal combustion vehicle, whether that's true or not unknown, but that's the reason. Some have to do with they're willing to pay more even if they know it'll cost more to try to help the environment, but that's a consumer acceptance issue. Even if that's solved, reliability of the electric grid is a big deal.
A lot of electric municipal utility companies are already struggling because they're pulling away from certain types of electric power generation. All the big new plants in California are shut down. A lot of coal plants are being shut down. So converting over the source energy for electric power grids to things like solar or wind or other types, it's going to be tough to match that up with the current demand. Adding in a new demand for electric grids for vehicle charging, who knows what the math is on that?
Refueling infrastructure - well now you drive down the street and there's a gas station every minute or two that you drive. EV charging stations don't exist in that volume and it took 50 years for gas stations to become as ubiquitous and densely populated as they are now. How long is it going to take for EV charging to have the same number of locations that are needed if all electric vehicles are going to be into the marketplace by 2025 or 30 depending upon where you're looking, and that's not much of a stretch.
Washington State is planning on laws that will ban most non-electric vehicles by 2030. The bill says that all vehicles model year 2030 or newer must be electric. Not only will they be banned from being sold in the state, the bill according to what's been reported even banned registration of these vehicles. So if you purchase a vehicle from another state you can't register it in the state of Washington. So if you're driving a gas vehicle and you live in Oregon and you decide you want to move to Washington State, too bad, can't bring your car.
Also within refueling infrastructure is the time it takes to refuel. Anything more than a minute or two puts a big change in vehicle usage. People driving long trips can pull off the highway, gas up in a minute or two and be on their way. A 20 or 30 minute recharging event can change transportation dramatically.
The last part of this is battery availability and you might think well there's plenty of batteries, they're building cars. Well let's take a look and see what that really means. According to Ford, battery cost will jump 40 percent within two years. Well that's a pretty significant piece of news. It just came out April 14th. What is the reason for this? Well while the battery costs were previously expected to plunge in the coming years due to an increase in scale, now they're saying they're going to rise because of the raw materials - cobalt, graphite, rising commodity costs are hitting the sector hard. Lithium battery packs cost between 147 and 143 per kilowatt hour. Now they're saying it's going to be up over 200 because prices of sulfide electrolyte could double.
So this is not a mature market. This is a market that's still being worked out. In addition to that, they're talking about changing the entire architecture of batteries. The industry is seen to be shifting from 400 volt to faster charging 800 volt, which is good - you can charge your car faster. The question is that type of technology takes more raw materials and if the raw material is going to go up in price, that's going to change the battery cost.
You know it was expected that electric vehicle prices would come down over time just like in the last 10 years we've seen prices of cell phones go down, computers go down, and this technological vehicle type was also expected to go down accordingly. The more that news comes out and the realities of the market seem like they're working themselves into the pricing, it does seem like the prices might go up and affordability of vehicles was one of the other challenges mentioned by Toyota right here - consumer acceptance and affordability where electric vehicles are already more money than gas vehicles. As a higher volume was produced it was assumed and presumed that the prices would come down. May not be the case.
Another factor that will change the pricing is the federal tax credits. There's currently at the federal level a $7,500 tax credit for buyers of new electric vehicles. This is intended to jump start the market for manufacturers. However, it gets phased out if a manufacturer sells a certain number of vehicles, I believe it's 200,000. A couple of types of vehicles have already been excluded from the tax credit - the Chevy Volt and also some of the Tesla models, and Toyota being a high volume will have their tax credits phased out for their customers very, very soon. The world's top selling automaker sold 10.5 million vehicles, it's going to have their tax credit phased out. There are still new electric vehicles that have tax credits, but that changes the pricing quite a bit.
So what do you do as a consumer if you're facing all of these different news sources and different seemingly different points of view about what's going to happen with electric vehicles? How do you use that information into your own personal decision? Well, if you were going to buy an electric vehicle anyways, obviously go ahead and buy one and probably sooner than later as these tax credits are being phased out and as prices might be going up, and on top of that general inflation is going to make vehicles next year cost more than the previous year. Automakers have already announced that lower inventory volume and fewer discounts is already part of their business plan anyway, not even for electric vehicles, for all vehicles. So if you're in the market for a vehicle, now might be a good time to get one anyways even if you have to move up your purchasing decision a short period of time, months or even a year.
In addition, you may find that a used vehicle may not be as appealing. Tesla has announced that they're not going to allow lease buyouts, meaning at the end of their lease Tesla owners used to be able to purchase their vehicle and keep owning it, but Tesla now is going to keep the cars probably because they want to cash in on sky-high used car prices. There are people that have purchased a Tesla brand new and driven it for two or three years and have been able to sell it for more than they paid new. So in effect they got the car for free and they used it for two years and made money. It's unheard of.
So you may find that used vehicle values at the present time are pretty strong. So if you have a used vehicle even if it's not electric, you might be able to sell it or trade it in at a pretty substantial price, get into a new vehicle, lock that in before the prices go up, to take advantage of the pre-battery price increase, take advantage of pricing before additional inflation, and still be able to cash in on available incentives before those are pulled away. As electric vehicles become more naturally in demand, the government may not have to do as much in terms of incentives on the vehicles, so you might find that the incentives naturally go away.
If you are not planning on purchasing an electric vehicle and you just don't like them, don't want one, then it may be good to try to keep your current vehicle. Don't necessarily trade it for another gas vehicle unless your vehicle is going to fall apart. Hang on to what you have. At some point in the future the final answer on what happens with electric vehicles will be worked out. The market and the forces will decide are electric vehicles going to be the future or was it just a flash in the pan, and at that point you can decide and you'll know better what to do with your gas vehicle. Maybe you keep it as a classic car or an artifact. Maybe it becomes valuable for other uses. Maybe you end up with a primary vehicle electric and your gas vehicle is your backup or your second vehicle, but that will work itself out in the future.
One thing you might want to do is look at any home improvements you're working on to see if adding an electric vehicle charger is a good home improvement to make along with other things you're going to already be doing. There are currently many incentives from electric companies, utility companies, and local municipalities to install charging facilities at your residence and you might be able to get some tax credits or some rebates for that. And if you're going to be doing any type of home improvement that involves electrical, it might be cheaper to do it all at once and have that additional circuit in your garage for a fast charger even if you don't have an electric vehicle. It's kind of like having a house with an outlet for a dryer even if you have a gas dryer - having that might be useful in the future. At some point all homes might have them anyway. There's some states that are requiring any new house to have an electric vehicle charging circuit built into the house.
So doing that might not be a huge expense and it might be something where when you sell your house, if you decide to sell it, it adds value to the house, especially if you can get tax credits to offset all or most of the cost right now. This is so important to recognize because Tesla again is making a change to their sales model. They are no longer including a charging cord with new Tesla vehicles. They're assuming that the buyer either has a charging station at their house or they're going to use charging cords at recharge facilities at their work or public charging stations. So adding that circuit and that facility to your house may not be as much as you think and it could be a way to future proof your house from adding it later when it might cost twice as much.
Something you might be able to do for, you know, $1,200 or $1,400 now, maybe with a $500 or $600 tax credit, it cost you under $1,000, where two or three years from now the cost of copper, labor might put the cost at $3,000 with no tax credits. So it's a good investment if you're going to need it anyways. Think about what other investment you can make with $900 that's almost guaranteed to be worth $3,000 in three years. A triple in three years is pretty significant. So look at it like any other investment in stocks or anything else that you do.
Electric vehicles are still in the unknown phase of what the future will hold, although it's a significant subject of news and powerful forces behind the future. There's government agencies, manufacturers, activist groups, and consumers all have their own effect on the market and what's going to happen. Keeping an eye on it is helpful for a consumer because it may make a difference to $5,000 or $10,000 or $20,000 of your personal net worth by making the right decisions now, so you're not caught on the wrong side of history two or three years down the road when all this sorts out and the powers that be decide what's going to happen with electric vehicles.