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US gasoline prices surging above $4.00/gal on average are making
EVs—already coming off a record market share of 6% in the
fourth quarter of 2021—even more financially attractive to
drive, say vehicle trade groups.
Charging an EV costs one-fifth to one-half of
refueling a comparable gasoline internal combustion engine (ICE),
on a per-mile basis, in the US, said the Zero Emission
Transportation Association (ZETA) in a report released in early
March.
Comparing models of popular SUVs, pickups, and sedans, ZETA said
that the EVs are significantly less costly to drive in each
category. The prices below are based on a retail gasoline price of
$4.32/gal (as of 10 March) and a $0.14/KWh for power (December
2021).
Source: Zero Emission Transportation Association
"This month's Consumer Price Index shows once again that gas
prices are surging, which has been exacerbated by Putin's invasion
of Ukraine. American families are losing money at the pump to a
commodity that is increasingly unpredictable and unaffordable in an
already-expensive pandemic year," said Joe Britton, executive
director of ZETA. "Our analysis shows that American consumers don't
have to choose between driving their car or saving money. Electric
vehicles are affordable now."
However, ICE engines still offer substantial advantages on
driving range.
Source: Zero Emission Transportation Association
How will consumers react?
Volatile gasoline prices do make EVs more attractive to
consumers, commented Mike Fiske, research and analysis director at
S&P Global Mobility. "The larger question is whether consumers
view this spike in cost as being temporary or not," he said in an
email to Net-Zero Business Daily by S&P Global
Commodity Insights.
"If they believe fuel costs won't be falling again, that may
play a larger role. In additional to EVs, full hybrids and plug-in
hybrids will also get increased interest during this time," Fiske
said.
While high gasoline prices might draw consumers' attention, car
dealers still have an educational mission ahead of them, as they
talk to consumers about the full cost of vehicle ownership, Fiske
added. "The differences in wear items [breaks, tires, oil, etc.]
may not be as immediately salient when comparing an ICE to an EV,"
he said. "This is one of the reasons that dealership training is
going to be an important factor moving forward as sales penetration
attempts to move into the mainstream. Dealers will need the ability
to articulate benefits and overcome buyers' concerns."
Even prior to the latest gasoline price surge, apparently that
message had been getting through to American car buyers.
The Alliance for Automotive Innovation's (AAI) latest quarterly
report, released on 21 March, pegged EV sales at 187,490
vehicles in the fourth quarter of 2021, up 11% from the
quarter-ago level and up 69% from the year-ago level. This came at
a time when US vehicle sales overall declined by 9% quarterly, said
AAI.
"EVs represented 6% of overall light-duty vehicle sales in Q4,
the highest for any quarter to date," said AAI President and CEO
John Bozzella in a press statement. "The report highlights the
continued progress in consumer acceptance of EVs."
Leading the way for 2021 sales were California with 303,151 new
vehicle registrations, Florida (81,707), Texas (72,736), and New
York (69,434). On a percentage basis of new car registrations,
California again topped the list at 13%, followed by the District
of Columbia (10.9%), Washington (7.7%), Hawaii (7.7%), and Oregon
(7.6%).
Supply chains and infrastructure
Looking months or years down the road, two factors appear to be
critical to expanding EV acceptance: initial sticker price of a
vehicle, and infrastructure to charge the cars.
The International Council on Clean Transportation has predicted
that the purchase price of a new EV could reach cost parity with ICE vehicles
in 2024-2025 for shorter-range driving and 2026-2028 for longer
ranges.
When cost parity is combined with lower costs of fueling and
maintenance, auto research and testing group Consumer Reports has estimated
the lifetime cost of ownership for EVs can be $6,000-$10,000 less
than a comparable ICE vehicle.
But this changes if the EV cost curve doesn't continue to trend
downward. Right now, supply chain challenges are affecting all
original equipment manufacturers (OEMs), particularly on computer
chips that are critical to every vehicle, regardless of power
source. But EVs face a second set of supply chain issues because
prices for batteries and battery components are soaring.
"In recent weeks, Tesla has raised prices on their vehicles, as
have other OEMs," Fiske said. "Due to production constraints where
demand will outpace supply for 2022 and 2023, there is not much
incentive for manufacturers to make vehicles more affordable if
they know they will be able to sell it either way."
EV costs this year will be pressured by prices for key minerals
such as nickel, which has surged to unprecedented levels. Nickel
prices briefly closed above $48,000/metric ton (mt) in early March,
before trading was suspended on global exchanges. It was about
$37,000/mt at close in Europe on 21 March, compared to $16,420 a
year ago.
Charging infrastructure
On a positive note for EVs, the charging infrastructure
continues to make significant strides. AAI said the US ended 2021
with 44,500 publicly available EV charging locations and 110,158
charging ports—the latter being a 16% increase for the
year.
"As the data continues to show, EVs are at an inflection point,"
Bozella said. "In order to make the transition smoothly and
successfully, we need to ensure charging infrastructure is widely
available and convenient to use."
He noted that the National Electric Vehicle Infrastructure
Guidance, administered by the US Department of Energy, is now
managing $5 billion in federal funds that will be disbursed over
the next five years for states to establish a nationwide EV
charging corridor. This is in addition to $2.5 billion in
competitive grant funding for clean vehicle charging and refueling
infrastructure that was authorized through the 2021 infrastructure bill.
Now ZETA and AAI are working to increase the federal EV tax
credit from the current $2,500 to $7,500 per vehicle (based on the
vehicle's battery traction capacity and weight). Congress has
proposed raising that to $12,500 per vehicle, but that is part of
the Build Back Better plan that has been stalled in the US Senate
since January.
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