So you just bought a new car ... did you also buy 4,000 gallons of gas?


Before I get to the 4,000 gallons, I want to quickly mention something I thought was entertaining. In my last post I talked about the impact of the word "Electric" and to my surprise, I saw a quote last week from a carmaker saying "... we’re going to position this as a car first and 'electric' second …" - probably pure coincidence ... or maybe my audience is larger than I thought :)

Anyway, the 2 obvious barriers with EVs are 1) range and 2) cost.  Compared to golf carts that get about 10 miles to the tank/charge and SUVs that get about 300-400 miles, these current generation EVs are stuck in the middle at 50-100 miles.

If you're deciding between a traditional economy car that gets 400 miles/tank and costs $20,000 versus an EV that gets 50-100 miles/charge and costs +$30,000, it's a pretty straight-forward decision. But if you had to buy all your gas upfront, meaning 10 yrs worth or ~4,000 gallons (~$10,000) - that decision isn't so simple anymore!

And this is where the carmakers got it backward - they should learn from consumer electronics and go with the strategy of ... " Batteries NOT Included ! "

By separating the cost of the car from the cost of the fuel/battery (~$10,000), law and order is restored and we're back to a $20,000 economy car battle. Unfortunately, fuel expenses are now equal because your monthly gas expense just turned into a monthly lease payment for your battery but at least you don't have to worry about buying a new battery down the road if you decide to keep your EV for a long time. And if you do decide to sell your EV in a few years, your blue book value won't be a joke because now you only "own" the car but not the battery. The good news is that at least one EV carmaker is already headed down this path - you'll find them mentioned in this article "Who's got their electric car act together?"  

Sure there is still a range gap, but this will narrow over time and EVs have 1) improved acceleration versus traditional economy engines, and 2) their maintenance costs should be lower because you no longer have a gas engine or mechanical transmission. So they will fill a need, even though it will be a very small percentage of the passenger car market. Initially, it will be the traditional early adopters, but the next wave might be the generation currently in high school that will graduate from college later this decade. Their first car purchase might very well be an EV, and again, that sounds good to me because there will be a lot of silicon in those cars!

If you've got an opinion on this "electric" topic, I'd love to hear it! Later this month I'll discuss the real reason carmakers are rushing to get EVs on the streets. Until then, take care!

Ken 

  • Even though Nissan is leasing batteries in the rest of the world, they are not planning to do so in the U.S., from what I hear.  Apparently we want to own our own batteries.  

    I think that people are smart enough to know that higher initial costs can be offset by lower fuel costs.  I think sometimes people tend to use this as an excuse to get something they really want anyway, like a diesel for their pickup truck.  Even when the savings aren't really there with careful analysis.  

    I thought about buying the original Prius, for example, but decided not to.  It was based on the Toyota Echo, and Consumer reports got exactly 1 mile per gallon more in their real world tests of the Prius than they did with the Echo.  But enough people paid the extra $10K and waited 6 months for the Prius anyway.  And at that point the Echo was only $10K itself.  So people paid double for 1 real world mile per gallon.  And it was, if I recall correctly, 38 vs. 39 miles per gallon.    Not a real big savings.

    So I'm not so sure about this batteries not included approach.  Nissan will try it in the rest of the world, so we can see what happens.  

  • Ken,

    I'm going to have to agree with you for the most part on this one.  If potential buyers knew when purchasing an EV that they were paying for their energy upfront, it might seem more feasible for some to invest in their energy consumption now (assuming it is cheaper now versus later).  

    The proposition to lease the battery would also pose an interesting situation from a supplier and competitor standpoint.  By leasing the battery, it may potentially open the door for more than one battery manufacturer to supply batteries for each EV (i.e. the Leaf for now, but certainly more will be joining it).  Not only could this drive the cost of the batteries down due to competition, demand, and production, but it might be able to push OEMs to pursue a common form factor so that a single battery might fit in more than one EV.  As previously discussed, Better Place has been the early adopter of this idea as they've purchased numerous Leaf batteries in their effort to integrate into Israel's infrastructure with their battery swapping concept.  For now, they'll be the guinea pigs in their experiment to see if that option is truly practical.  From a charger perspective, this might also push the EV charging market in a very different direction...

    Either way, there will most definitely be a great opportunity to get as much silicon into these cars as possible!

    -Cam

  • To me the biggest concern is still battery life.  The genius of the Prius was the way the engineers decided to operate the battery (a NiMH battery) in a tight range of around 40%-80%.  By not overcharging or overtaxing the battery they greatly extended the life and offered a full 8 year, 100,000 mile warranty to aleviate concerns.

    The Lithium Ion batteries in the full electric cars will be taxed much harder and the real world lifetime is a little less certain.  

    Ian, my experience with the second generation Prius has been excellent.  Consumer Reports analysis over the years show it as one of the top value cars out there.  I did wait a few months for delivery, but didn't overpay.  My lifetime mpg is over 53.   Maintenance costs have been very low.  My data is at www.enerjazz.com/prius  

  • Ian, thanks for your comments. I didn't know Nissan is planning to lease the Leaf batteries with customers outside the US. As you said, it will be interesting to see where they have the most success.

    Cameron, I agree standardization would help drive costs down but I think there are at least 2 forces resisting this and both are coming from the carmakers. The first is their natural interest to protect a differentiating/core component of the vehicle. Today we don't have interchangeable engines or transmissions so I'm not sure battery packs will break that trend. Second is liability. Remember the notebook battery problems that surfaced a few years ago - I believe some were caused by aftermarket replacement packs that didn't meet the OEM specs and safety standards. I don't think the carmakers are going to let a similar thing happen with EV battery packs.

    I would hope, however, that within each carmaker, they standardize on the mini-packs used to create the larger battery packs for each car line so that they can leverage the volume across all their EV and hybrid vehicles and so that battery pack repairs are easier/cheaper to make.

    Paul, I think your battery life concern will probably be the main reason people "almost bought" an EV over the next few years. They might be comfortable with the range and cost, but if you "own" that battery, they will eventually wonder "what will I do when the battery warranty is about to expire?" - their resale value will be in an ugly freefall ... unless, of course, they are leasing the battery pack :)