In The Motley Fool’s series Motley Fool Live, Industry Focus, host Nick Sciple and Fool’s senior auto specialist, John Rosevear analyzed why EV sales are booming in Europe.
The article pointed out that in the US sales are a bit slow, but that they are growing fast in China. In Europe, they absolutely took off in 2020.
Sciple asked the key question, “What’s been driving this market?” and wanted to know what has been the push that brought the large European automakers to the market? Rosevear’s reply noted that the lesson of Tesla for the auto industry is that EVs can sell if they are great. He also pointed out that it was a mix of regulatory “carrot-and-stick,” and that EVs are more affordable and better than they have made their own case. He summarized Ford’s stance that company basically said, “We don’t want to come out with little cheap EVs to check a regulatory box. We want to make products that people really desire.”
Back to Tesla’s lesson for the auto industry, Rosevear said, “We’ve been talking about this process for a few years now for investors and saying, ‘Yes, they’re coming,’ and, ‘Yes, they’re coming,’ with respect to the big automakers getting into EVs as they build out the supply chain and build the infrastructure, and so forth, and now it’s starting to happen.”
Sciple compared Tesla with the rebel forces of Star Wars in the sense that Tesla has moved around slowly but has turned the industry around. “We’ll see how they compete. It’s this question of whether they’re just going to maintain share or whether Tesla blows them up and continues the kind of rebel force taking over the auto market. That’s a trend we’ll continue to watch,” he said.
Rosevear also pointed out that in China, which is the world’s largest new-vehicle market, the government has enough room to be aggressive with its “carrot-and-stick approach to adoption.”
Battery Technology Plays A Key Role
One thing that wasn’t mentioned was battery technology. The reason why EVs are becoming more affordable is due to advancements in this field. Bloomberg noted that batteries for EVs are speeding toward a tipping point and cited a new survey that showed how battery prices are quickly approaching cost competitiveness. For the first time, battery pack prices were cited below $100/kWh in 2020, and this is with the market average at $137/kWh.
The study, published in December 2020 by BloombergNEF, noted that lithium-ion battery pack prices have fallen 89% from their price in 2010–numbers above $1,100 per kWh. The battery packs that are priced less than $100/kWh were for batteries in e-buses in China. These were the lowest reported prices but the volume-weighted average price for e-buses in China was just a bit higher at $105/kWh.
The Crossover Point Is Closer
Logan Goldie-Scot, who is the head of clean power at BNEF and one of the authors of the study, noted that the crossover point was no longer a decade away. “We’re not talking about that crossover point being a decade away anymore,” he said. “For many vehicle segments, it’s in the next three or four years.” Even if prices for nickel, cobalt, lithium, and other raw materials used in batteries return to the highs seen in 2018, $100/kWh packs would be delayed by only a couple of years, the survey found.
The crossover point is the time when EVs are cheaper to buy than ICE cars. Elon Musk and Sandy Munro also talked about this point in Munro’s recent interview with Elon. Munro mentioned that before the crossover point for EVs over ICE was 2010 and noted that he thought this after tearing apart the Model 3. “50% of the vehicles sold — well, more than 50% — are going to be pure EV or they’re going to be hybrid,” Munro said.
Elon Musk agreed with Munro’s take and said, “I think it probably, I think it’s probably — ten years — probably majority EV.”