
How automakers can drive electrified vehicle sales and profitability - basitmakine
http://www.mckinsey.com/industries/automotive-and-assembly/our-insights/electrifying-insights-how-automakers-can-drive-electrified-vehicle-sales-and-profitability
======
zackmorris
I had no idea lithium ion batteries had become so inexpensive. Here is the top
search for "kwh battery" on eBay right now:

[http://www.ebay.com/itm/Li-ion-Lithium-24vdc-100ah-2-4kwh-
NE...](http://www.ebay.com/itm/Li-ion-Lithium-24vdc-100ah-2-4kwh-
NEW-2015-VOLT-Battery-Off-Grid-Solar-Battery-/182436435488)

So with shipping, $869.96 for 2.4 kwh, or about $362/kwh. A $3 gallon of
gasoline has 33 kwh, but only 8 kwh of usable energy due to the inefficiency
of internal combustion engines, so $0.375/kwh.

So batteries are somewhere around 1000 times more expensive than gasoline,
but, if they can be recharged more than 1000 times they may actually be
cheaper. 1 kwh of electricity costs about 10-20 cents usually (call it $200
per 1000 charges). That's a total of $1069.96 for 1000 cycles, maybe $1269.96
for 2000 cycles, etc, something on that order anyway.

So $1 per cycle per kwh is pretty close to a breakeven against gasoline, and
batteries are only going to get less expensive.

~~~
PostOnce
At some point, the tax structure for cars has to be changed to account for
electric vehicles wearing the roads and not yet paying to maintain them? I'm
not sure, but I think that's what fuel tax pays for? So, the cost will go up
at some point in that sense.

Then, on the other hand, $3/gal is a US-only phenomenon among countries that
can really afford electric cars, everywhere else it is ~2x that? Europe,
japan/korea/australia? I could be wrong here too but I think that's how it is.
So there electric may already be quite a bit cheaper, depending on generation
cost.

~~~
prostoalex
States already rely on a variety of revenue sources, such as vehicle
registration fees and tolls, in addition to gasoline taxes.

Ultimately I don't see how one could institute a fair system without
converting all roads to toll roads (perhaps with variable pricing to manage
demand).

Gasoline taxes are a reasonable proxy for "usage", so heavy users contribute
more.

Registration fees treat everyone of the same make and model the same, be it a
livery vehicle with six-digit annual mileage or a proverbial old-lady whose
car is being driven around town twice a week. And one can't exactly levy a tax
on kWh.

~~~
fulafel
Fixed fees are much worse than gasoline taxes, because they lower the marginal
cost of driving, making the already fixed-cost biased cost structure even
worse.

(This is bad because it makes driving more very cheap for people who already
have cars, the exact opposite what's good for extracting maximal utility out
of minimal fuel use)

------
spenrose
"These new scenarios do not reflect hippie idealism, they just take seriously
a) the cost curves demonstrated by PV, EVs, and batteries so far, and b) what
countries said they would do in Paris. ... If these forecasts play out, fossil
fuels could lose 10 percent market share to PV and EVs within a decade. A 10
percent loss in market share was enough to send the US coal industry
spiraling, enough to cause Europe’s utilities to hemorrhage money. It could
seriously disrupt life for the oil majors."

[http://www.vox.com/science-and-
health/2017/2/2/14467748/elec...](http://www.vox.com/science-and-
health/2017/2/2/14467748/electric-vehicles-oil-market)

~~~
prostoalex
> It could seriously disrupt life for the oil majors.

Things weren't exactly groovy for them the last few years with sub-$40 oil.

~~~
adrianN
They still have billions in profits each year.

------
woodandsteel
A nice thing about this trend is that it means if you buy an EV today and
replace the battery in, say, five years, the new battery will probably cost
much less and also have much greater range. So you will have a car that gets
better as it gets older, at least in some important ways.

~~~
mtgx
Unless, of course, the car manufacturers get the bright idea to make EV
batteries "irreplaceable", too - you know, for "better efficiency" or to make
the cars "leaner" or whatever their excuse would be.

~~~
Dylan16807
When a battery "can't" be replaced on a consumer device, that generally just
means you need a soldering iron or to pry it open. Many car repairs are
already vastly more difficult than that, so those barriers would be
negligible. It's hard to think of an equivalent.

------
anw
An interesting thing:

> Around half of consumers in the US and Germany say they comprehend how
> electrified vehicles and related technology work versus almost 100% of
> consumers for ICE vehicles

I wonder if the almost 100% who say they comprehend how ICE vehicles work
actually do understand it–even in a limited regard. It's easy to feel you
understand something if you are familiar with it for the majority of your
life.

~~~
mikestew
As an ex-professional auto mechanic who has on multiple occasions explained to
customers the problems their vehicle is having, I can say with confidence that
the number of ICE owners who have the faintest clue as to how their vehicle
works is nowhere near 100%. At best, gas goes in and goes "boom" at some
point. Most owners of ICEs know about as much about how an ICE works as I know
about how a nuclear reactor works (which amounts to "something something
fission, heats water, and spins a turbine with steam).

And if _that 's_ the bar, then customers sure as hell know how an electric
motor works.

------
mbloom1915
solve the problem of making EVs useful for city livers and then we can start
to talk about real adoption - suburbia has luxury of charging EVs overnight
when affordable but people living in apartments/condos/etc and parking on the
street every night do not have accessible EV charging infrastructure

~~~
blendo
The biggest problem for city drivers (I'm in San Francisco) is we only need a
car that goes about 45 mph, but we can only buy vehicles (electric or ICE)
that are designed for 70-80 mph. They tend to weigh over 3,000 lbs, and a
Tesla weighs near 5,000 lbs.

The best we can do right now are "Neighborhood Electric Vehicles", limited in
the US to a top speed of only 25mph. Scoot rents one, a Twizy:
[http://blog.caranddriver.com/in-a-twizy-nissan-renting-
elect...](http://blog.caranddriver.com/in-a-twizy-nissan-renting-electric-
renault-twizy-in-san-francisco/). They're fun to drive, but VERY rough and
crude.

Perhaps we need a class of lightweight vehicles with a top speed just barely
insufficient for freeway use? For pedestrian and bike safety, I'd think we
need to keep vehicle mass and velocity as low as practical.

~~~
fernly
Oddly enough that is exactly what the linked report says, scroll to exhibit 11
and after: "Findings for the other seven consumer segments indicate near-term
unmet demand for more basic mobility solutions (e.g., lower-range, smaller
vehicles, less driving utility)."

------
Animats
_Given current system costs and pricing ability within certain segments,
companies that offer EVs face the near-term prospect of losing money with each
sale. Under a range of scenarios for future battery cost reductions, cars in
the C /D segment in the US might not reach true price parity with ICE vehicles
(without incentives) until between 2025 and 2030, when battery pack costs fall
below $100/kWh..._

So the real business is 7 to 13 years away.

~~~
cowardlydragon
And they are ceding all of it to Tesla.

------
ergo14
So... how long these batteries last? What about enviromental effect related to
their recycling? That information is interesting.

~~~
mark242
They last. I have a 2-year-old electric Ford Focus and have noticed nearly
zero battery degradation; the range has been consistent since day 1. Recycling
the batteries is undoubtably less of an impact than even the recycling of
engine oil from an ICE car over the same timespan.

~~~
dfrey
Citing 2 years of life as evidence of longevity is a depressing sign of our
disposable culture.

~~~
chipperyman573
In this case, I see it as a good sign. Our battery technology has made so many
significant advances that you wouldn't have been able to say the same 10-20
years ago. It's not that we're "ok" with degrading batteries, it's just that
we're _really really_ bad at stopping it.

------
Scoundreller
What happens to the economics when governments start charging some type of
road tax on non-gas vehicles to replace gas taxes for road maintenance?

~~~
kirrent
I visited New Zealand recently and was told that the reason Diesel was so much
cheaper than unleaded was because it didn't have the road tax built into it so
agricultural vehicles wouldn't have to pay for road they weren't using. As a
result Diesel cars had to keep a logbook and pay a tax based on their mileage.
Didn't ever get to see it in action.

~~~
sitharus
There's not much to see, it's just a window sticker like the registration. It
has the highest allowed odometer reading. For cars this is just checked
against your dash odometer, for heavy vehicles (over 2.5 tonne iirc) it's
checked against a tamper proof hub mounted odometer.

------
marze
The details can be debated, but the trend is real and has tremendous real
world implications.

Clean air, enables 100% solar, 2.4 sec zero to sixty, and so on.

~~~
Neliquat
Clean in the city, most of that power is still from coal, just further from
your tailpipe. You are just moving numbers around.

~~~
johngalt
But those numbers being moved around are not equivalent. A centralized power
plant is vastly more efficient and clean than thousands of little gasoline
engines. This is true even for coal.

Not to mention it allows us to make policy decisions about where our energy
comes from at the source without changing anything at the consumer side. If we
find out that <energy source> is unhealthy, unsustainable, running out etc...
We can change one power plant rather than millions of autos. If OPEC turns the
taps off, we aren't all suddenly paying twice as much to drive to work.

------
kristianp
Interesting that Honda has gone down the Fuel cell route, with EV coming soon
for the clarity. Fuel cells are not going to win in this market due to the
Tesla effect.

[http://automobiles.honda.com/clarity](http://automobiles.honda.com/clarity)

~~~
prostoalex
Toyota is also selling a fuelcell Mirai in limited markets.

~~~
Animats
Yes, you can buy a Toyota Mirai in California. Toyota is selling about 100 a
month. This includes three years of hydrogen, and they even have some filling
stations.

~~~
astrange
Hydrogen isn't a clean fuel, since the cheapest way to make it right now is
from natural gas.

~~~
adrianN
The battery in a Tesla is also not clean fuel because the cheapest way to
charge it is from coal fired power plants.

~~~
astrange
True for most of the US but the Mirai is only sold in California which doesn't
use more than 6% coal.[1]

Fuel cells seem like they'd be good for vehicles that can't have charging
downtime. But then again hydrogen seems obnoxiously difficult to store what
with all the escaping and the catching fire, so maybe we can stick to ICE and
synfuels?

[1]
[http://www.energy.ca.gov/renewables/tracking_progress/docume...](http://www.energy.ca.gov/renewables/tracking_progress/documents/current_expected_energy_from_coal.pdf)

------
jwatte
"by 2020 there will be $ 190 per kWh and $ 20 per kWh less than $ 100 per
kWh."

Wat?

Anyway, we already know this. I'm hoping for third party battery packs by the
time I need a fresh set for my 2011 Leaf. (Still years away)

------
Shivetya
I am quickly coming up to my next car purchase and I am debating the one last
hurrah of another convertible or to swap over to an EV. I am still not
convinced of the value of the current generation of EVs (200+ mile range only)
and don't consider any of the sub 200 viable automobiles.

This might be the first time I consider a lease. I have seen what happens to
current and previous generation EVs and unless you just plan to keep it you
will get soaked. I also would like to see more movement on availability of
charging outside of home.

~~~
ENGNR
Leases are definitely looking more attractive. You could also consider that
the battery is an expendable component that you'll be able to upgrade
separately to the chassis once the tech improves anyway.

Personally I think software upgradability is the most important criteria,
which means either Tesla or lease and let someone else deal with rapid
obsolescence.

~~~
benjaminjackman
Except that if I recall correctly Tesla has also stated that they expect to
upgrading the hardware yearly as well (e.g. sensors). So an apt analogy may be
an iPhone. iOS still get updates (which is great) but eventually you are going
to need to get a new phone (/car).

------
kumarski
Let's talk about performance capabilities.

Primarily galvanic battery chemistry gains?

These have not been on the rise and would need to be for batteries to ever
take any meaningful marketshare from Coal.

~~~
F_J_H
Give it time...

------
glibgil
Or, you know, automakers can see their wealth destroyed like every other
industry that is made more efficient through technology

~~~
Gibbon1
The automakers have a short term problem. Which is their profit margins are
aligned with being an older stodgy industry. However they now need to make
large investments in new technology driven by a real risk of going out of
business if they don't. The last time we saw something like this was the big
push to add emissions controls and improved crash safety back in the 1970's.

~~~
cowardlydragon
How hard is it to spin off / startup a separate EV company?

------
melling
What is the environmental impact of EV car batteries? Making them and
recycling them? When we have a billion EV's and batteries in every home with
solar, will we have a problem?

~~~
jbmorgado
Well that will depend on what are the materials they are being built with when
that happens.

The materials being used presently won't scale to such big numbers as you
purpose, so it will all depend on the alternative materials being used by
then.

~~~
gibybo
They won't? What materials are we limited by?

~~~
astrange
It's unclear if we have enough lithium and cobalt. But nobody's really tried
and Elon doesn't seem worried about it.

------
jbmorgado
Not questioning the accuracy of the predictions, but this article is so full
of typos that it makes it hard to read and get the relevant information.

------
tlrobinson
This looks like blogspam, probably best to link to the actual McKinsey page:
[http://www.mckinsey.com/industries/automotive-and-
assembly/o...](http://www.mckinsey.com/industries/automotive-and-assembly/our-
insights/electrifying-insights-how-automakers-can-drive-electrified-vehicle-
sales-and-profitability)

~~~
sctb
Thanks, we've updated the link from [https://hardavenue.com/tesla-electric-
battery-price-reduced-...](https://hardavenue.com/tesla-electric-battery-
price-reduced-significantly/).

------
mehwoot
_According to the research result, we can see that the same batteries can be
produced at 227 kWh per kWh in 2010... and that by 2020 there will be $ 190
per kWh and $ 20 per kWh less than $ 100 per kWh._

What

~~~
tlrobinson
Definitely sloppy. From the report (PDF:
[http://www.mckinsey.com/~/media/McKinsey/Industries/Automoti...](http://www.mckinsey.com/~/media/McKinsey/Industries/Automotive%20and%20Assembly/Our%20Insights/Electrifying%20insights%20How%20automakers%20can%20drive%20electrified%20vehicle%20sales%20and%20profitability/How%20automakers%20can%20drive%20electrified%20vehicle%20sales%20and%20profitabilityMcK.ashx)
)

 _From 2010 to 2016, battery pack prices fell roughly 80% from ~$1,000 /kWh to
~$227/kWh_

 _Current projections put EV battery pack prices below $190 /kWh by the end of
the decade, and suggest the potential for pack prices to fall below $100/kWh
by 2030_

~~~
cr0sh
Up-vote for the better explanation - but you basically stated what I did as
well (but mine was a guess - a correct educated guess, but still a guess)...

I think your's wins!

~~~
refulgentis
For later viewers who won't understand the down votes, because comments have
relative times after an hour: this is a content-free quibble over who deserves
credit, the grandparent, who linked an original source with a perfectly pulled
quote, or the parent, who "guessed" 4 minutes later.

~~~
caminante
/Off topic

IMHO, the thread's already self-policing (with a downvote mechanism).

Personally, I found your comment confusing. Currently, cr0sh's other comment
has already been pushed down by sibling comments. Suggestion: add links to
specific comments.

~~~
refulgentis
I explicitly said parent and grandparent, and frankly, it's helpful to point
out toxic behavior, it encourages down votes.

~~~
caminante
By the time your comment was made, cr0sh's other comment [0] -- which you
didn't give relative directions to -- had already been pushed down. Thus, I
didn't follow at first.

I don't think you have to direct other people to downvote on HN. Again, the
community's good at self-policing.

[0]
[https://news.ycombinator.com/item?id=13556024](https://news.ycombinator.com/item?id=13556024)

------
jacquesm
[https://news.ycombinator.com/submitted?id=basitmakine](https://news.ycombinator.com/submitted?id=basitmakine)

flagging this as spam.

~~~
linkregister
Help me out; I can't see a common theme except this person really likes a site
called hardavenue.

~~~
tlrobinson
"Really likes", or "owns"/"runs"/"works for"?

~~~
linkregister
Next time just say "this person is spamming a site that he/she owns" instead
of the cryptic statements you made. Clarity is important.

------
Proven
"Consumer demand is starting to shift in favor of electrified vehicles and has
strong disruption potential"

Bull. It's a joke to talk about customer "demand" when a single damn car
hasn't been sold without government subsidies.

Parasites.

~~~
astrange
You don't think the gasoline car system has subsidies?

------
transfire
EVs would be completely viable and cheaper then ICE right now if we had more
functional government. It is not terribly difficult to add inductive charging
to roads from an engineering perspective.

