In 2011, President Barack Obama announced a goal of getting 1 million electric vehicles (EVs) on the road by 2015. Now it looks like that goal will be met by the end of this year. Beyond that, two manufacturers are anticipated to have each sold more than 200,000 vehicles by that date, triggering a phase-out of federal tax credits for their buyers. So, with EVs becoming a common presence on our roads, how do we get to, and past, the 2 million mark? Experts say it’s a combination of lower-cost batteries and a more robust charging network, and that rapid progress is being made today on both of these fronts.
EV sales momentum started building significantly in 2016, jumping 36 percent to more than 158,000 that year. And, 2017 saw an additional 25 percent hike with that year’s sales reaching almost 200,000. This year has continued that growth with more than 190,000 EVs already driven off dealer lots as of the end of August. August also marked Tesla’s 200,000th vehicle sold, triggering a phase-out of the federal $7,500 tax credit for purchasers. GM is expected to hit 200,000 sales by the end of the year.
Tesla’s much-anticipated buildup in production capacity for its new flagship Model 3 has played a big role in this year’s sales total with 55,000 of the vehicles sold between January and August and monthly sales volume hitting almost 18,000 in August.
Interestingly, none of those Model 3s have been the $35,000 base model that company founder Elon Musk hailed as a breakthrough marriage of technology and affordability several years ago. That model isn’t anticipated until first quarter of 2019. Instead, buyers have been stepping up for a $49,000 upgraded version that has a larger battery pack, which offers greater range between charges along with a bigger profit for Tesla’s bottom line.
Better range, less anxiety
That larger battery pack gets buyers of the upgraded Model 3 a range of 310 miles, which is significantly higher than other EVs now on the market. However, range has improved across the board. Many vehicles now offer close to the 220 miles the base Model 3 is expected to deliver. This is just one of the ways today’s EVs have advanced over models sold just a few years ago. In 2015, for example, the Nissan Leaf—then the nation’s top-selling EV—offered an 80-mile range. The 2019 model now on showroom floors is up to 150 miles, and one of the Leaf’s closest competitors, the Chevy Bolt, is said to have a 238-mile range.
“The vast majority of EVs you see in announcements are in that 200-mile range. I can’t think of any that will be under that range in two years,” said Heather Flanagan, electric vehicle infrastructure manager for ABB, a major charging-equipment supplier.
This growth in range has been supported by rapidly dropping battery costs, now under $200/kilowatt-hour (kWh), down from $1,000/kWh in 2010.
“What’s being developed and announced for 2019 and the 2020s is going to have both higher density and lower cost,” Flanagan said.
Even with increasing ranges, the United States still lacks in the commercial charging infrastructure needed to support the significantly larger number of EVs anticipated to hit the road in the next few years. Bloomberg New Energy Finance anticipates EVs will make up 11 percent of all passenger car sales, or roughly 2 million vehicles, by 2025. A big effort is now underway, funded by an unusual source, to help address this EV supply equipment shortfall.
In the first of four investment cycles, the $2 billion Electrify America initiative is planning to have 2,000 EV chargers at 484 stations across the United States operational or under construction by June 2019. The program is being funded by Volkswagen as part of a settlement in a case that found the company programmed its diesel vehicles to misrepresent actual emissions during annual emissions tests. Observers see the potential for the program to have a major impact on commercial charging availability.
“When you look at the Electrify America map for the first cycle, it’s a really impressive deployment,” Flanagan said. “When you think of three more of those cycles, it has a huge potential to really shift the issue of range anxiety to true range enablement.”
Among the equipment being installed will be several of the highest-powered chargers yet brought to market: 350-kilowatt (kW) units from ABB. Vehicles capable of accepting the equipment’s full capacity will gain up to 120 miles of range in just an 8-minute charge. While no vehicles currently on the market can take advantage of such high-speed charging, EVs set to launch over the next several years will. In the meantime, those stations—like all EV charging equipment—automatically step down their power flow to meet the capabilities of the vehicle it is serving.
The Electrify America effort hopes to fill a critical gap in commercial charging availability. While most EV users will continue to do most of their charging at home, a robust network of supply equipment in work and retail settings, and along interstate highways, is needed to support the coming EV fleet. Edison Electric Institute (EEI), the trade group representing investor-owned utilities, projects that 5 million charge ports will be needed by 2025 to support the 7 million EVs it expects on the road by the end of that year.
“Electrify America will be the largest investor in charging infrastructure through 2027 and will fill some of the gaps along highways,” said John Gartner, a director in the energy practice of the market research firm Navigant. “Utilities are playing an increasingly important role in community charging. Other private investment is taking a wait-and-see approach to determine how much other charging needs to be added beyond these two efforts.”
Private investment has been standing on the sidelines because, at least so far, it has been challenged to make a profit—or just break even. At today’s standard 50-kW charging scale, profits can be quickly eaten away due to demand charges on a charging-station owner’s monthly electricity bill. When only a few vehicles a month are using a particular station, that station’s usage pattern becomes very spiky. Demand charges based on those spikes can wipe out any chance for profitability.
“One of the reasons there isn’t a huge private market is because the business model is so challenging. We’ve seen the private market hasn’t developed a way to make money,” said Kellen Schefter, EEI’s sustainable technology manager. “In the near term, a lot of these stations have really low utilization.”
Some would like to see electric utilities get more involved in building out the charging infrastructure. However, there are big questions regarding just how far into this market they should be able to reach. Should they be able to own commercial charging equipment, for example, or even dedicated charging facilities, and how much of the cost of any added supply infrastructure should they be able to pass on to ratepayers? And what about special rates that eliminate demand penalties for high-speed charging stations? These are important discussions, requiring utility participation, that could impact broader EV adoption.
“We’ve seen a lot more of [EEI’s] members getting involved,” Schefter said. “We’re going to need all hands on deck to support the infrastructure need.”
Cost reductions still needed
Another short-term roadblock to EV sales forecasts for some manufacturers could be the rollback of the $7,500 federal tax credit as more manufacturers hit the incentive’s 200,000-vehicle limit. Once a manufacturer hits that sales threshold, the full $7,500 credit remains available to buyers through the end of the next quarter. After that point, the credit drops to $3,750 for the following six months and then to $1,875 for the next six months before expiring completely.
Tesla hit its threshold this summer, so credits for its vehicles will start dropping in January 2019. GM, which had sold almost 187,000 vehicles by the end of July, is expected to hit its limit by the end of this year, so its credits could start dropping April 2019. Nissan is next in line, with sales of 122,635 by the end of July, but it likely has a couple years before it hits the wall.
“Obviously, it hurts,” Schefter said. “We think it will, in the near term, decrease sales for the individual automakers.”
It could be seen as unfair that the two companies now facing a competitive-pricing disadvantage are also two of the three companies that have led EV development from the start.
“It’s a shame, because Tesla, GM and Nissan were really at the forefront,” Flanagan said. “And, I think it’s a shame they may be penalized for their early investment in innovation, going forward.”
Longer term, all EV manufacturers are under pressure to bring down their vehicle costs if sales are to reach the levels projected for the mid-2020s. Batteries are a big part of the premium automakers now charge for EVs, versus similar models with traditional gasoline-fueled internal combustion engines. So far, battery price trajectories appear to be heading downward in a way that gives EV proponents hope.
“If those costs continue to go down, you reach cost parity in 2022–2025, and, at that point, an EV would be no different than an internal-combustion engine,” Schefter said, emphasizing the role sales volume plays in making the EV business profitable for manufacturers. “I think scale is really important. I think that is the big driver in the profitability question.”