Opinion: EV supply will be limited until ICE cars die out
Question: When does a car with an internal combustion engine become worthless?
Answers: When the cost of buying or leasing an electric vehicle along with the cost of maintenance and mileage becomes cheaper than using a free gas car.
This has been the case with frequent drivers for years, but with higher fuel prices we are now at the point where the cost comparison is getting sharper. It’s now also noticeable for consumers who don’t drive a longer range.
In a story this week, Bloomberg Highlighted the plight of an Uber driver who had the option of keeping her extremely common ICE vehicle, the Toyota Camry, or renting a Tesla Model 3:
Barnes chose to rent a standard Tesla Model 3 for a month through Hertz, which contracts with Uber Technologies Inc. and offers drivers a $344 weekly rate that includes insurance, basic maintenance and unlimited miles. Even after accounting for the cost of charging the car, Barnes was paying roughly $450 a week for “the car of her dreams,” less than the nearly $600 required to fill up her Camry.
Apparently, Uber drivers are at the high end of the mileage spectrum. But there is much more to consider here. First of all, renting a vehicle from Hertz isn’t typically on most economists’ list for low-cost vehicle management. There is at least one additional middleman involved, although Uber helps subsidize those costs. $450/week extrapolated to nearly $2,000/month.
But let’s also acknowledge that the Uber vehicle in question, a Tesla Model 3, is not a cheap EV even in its standard $47,000 configuration. A 2023 Chevy Bolt EV ($26,500) or Nissan Leaf (under $20,000, after full government EV incentives) with similar range costs nearly half as much. That changes the math dramatically, since the purchase price of an electric vehicle is the outsized cost in an ROI equation compared to a gasoline car. ICE vehicles typically cost about twice as much per mile to drive and service, and that was before gas prices rose dramatically.
With gas prices at $5 and not bouncing, at least for the summer, more and more people are flocking to electric vehicles. But after many years of automakers making excuses that there is no demand for electric vehicles, now no automaker can produce electric vehicles to meet demand.
We cannot make enough electric vehicles and prices will reflect that
in the electrWe used ‘s Electric Vehicle Best Price Guide to highlight the best deals we could find at dealerships across the country. We have often saved our readers thousands and sometimes tens of thousands of dollars. Because the supply chain tightening is related to fuel price increases, we now cover cars that you can actually find on lots that are sold at or near sticker price.
Tesla, which doesn’t use a dealer model, has been raising prices for most of the last year, taking the Model 3, which once had a starting price of $35,000, to $47,000. Model Ys have continued to increase. It doesn’t seem to matter — Teslas will have to wait many months, even if two new factories come online.
But I have to imagine that once the supply chain comes back online and more competition emerges, Tesla could lower its vehicle prices again. Even if not, cheaper electric vehicles are coming.
Real, cheap electric vehicles are coming soon
Chevy just slashed the price of its 2023 Bolts by $6,000 and has a $30,000 equinox ahead of it. Ford CEO Jim Farley has spoken out about the need for affordable electric vehicles worth around $25,000, setting the base price for the Ford F-150 Lightning at $40,000. Hyundai and Kia both sell vehicles for $34,000 before the $7,500 tax credit. Volkswagen has touted its ID.Life vehicle for just $24,000, and every cheap Chinese manufacturer is raving about the idea of entering the US market.
Sure, traders will raise prices due to scarcity, but it won’t stay that way forever. Eventually, electric vehicle production will begin to meet demand. Or will it?
Who would buy a $26,000 gas Chevy Equinox when a slightly more expensive electric one was available and cost less than half as much per mile to own? If the refined Build Back Better Bill is passed, electric vehicles will become even cheaper. Economics will keep EVs more expensive than petrol cars, maybe until petrol cars are gone?
What keeps combustion engines running?
The biggest hurdle that remains to be overcome for electric vehicles is the infrastructure, regardless of whether it is needed explicitly or implicitly. City and apartment dwellers don’t always have access to full charges overnight, so the five-minute gas fill is still justified. But if running a few hundred feet of 240V power lines is all it takes to save a few hundred dollars a month on gas, I think HOAs will do it (and some states have “right to charge” laws in place to help renters charge options). The same goes for street parking. The citizens will demand it.
But even we suburbanites need reassurance that we can make the 500-mile drive to Grandma’s house or the quintessential American road trip across the country. Tesla owners can now do that with little or no effort.
It’s still possible for other EV manufacturers, but it sometimes takes a little more effort to find charging stations and hope they’re online and charging at optimal speeds. This just keeps getting better, with the US government even dropping $5 billion for a nationwide charging network by installing chargers every 50 miles on the nation’s freeways.
Back to basics
Also, let’s not forget that EVs are simply a better experience all around. Smoother, quieter, and greener vehicles make happier drivers, and in the case of the Uber driver we mentioned earlier, happier customers:
Your new ride is also well received by the passengers. “They’re a lot more generous,” Barnes said. “I’m usually lucky enough to get $1 to $3 in tips, but now it’s $10 or $15, sometimes in a row.” Overall, she made over $2,600 during her 25-day lease, more than double the 800 to $1,000 she normally made driving the “Beast,” according to screenshots of the earnings she provided to Bloomberg.
The EV luck can be seen directly financially. Doubling or tripling the tips is another big benefit to the bottom line.
And while this article has primarily focused on the direct consumer cost of gas versus electricity, there are also the huge social costs of pollution. Fossil fuels are more expensive than you think, and even oil companies have started (pretend?) to support carbon pricing to make fossil fuel costs more in line with reality. Society must switch to electrified transport before most industry is ready. But that’s going to take a decade, even if we put every single battery we can into EVs, and this will hurt the EV inventory for years to come. The solution to this is for manufacturers to ramp up production of electric vehicles and halt production of gas cars sooner than they think possible.
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