The cost of EV adoption is high, Volkswagen doubles down on offering a cheaper EV than Tesla, and General Motors talks the totally real possibilities of flying cars. All of that and more in The Morning Shift for Monday, Nov. 12, 2018.
1st Gear: $6 Trillion Is an Awful Lot
Nearly every automaker’s dumping gobs of cash into developing new lines of electric vehicles, despite the fact that EVs currently represent only a fraction of total auto sales. This presents a number of challenges. The cost of an EV with a decent amount of range, for one thing, is higher than a regular gas-powered car, even with federal tax subsidies available.
And besides efforts from Tesla and now Volkswagen, there’s a limited amount of infrastructure to support the kind of fast charging needed to convince skeptical car buyers who get hung up on range anxiety. Most people drive 30-40 miles on average per day, but without fast charging infrastructure in place, they’re limited on how far they can travel in a timely fashion. (Even now, Tesla’s Superchargers can take at least 40 minutes to replenish a car with a sufficient amount of juice.)
That’s what makes infrastructure perhaps the biggest impediment to the growth of the EV the market, especially if an estimate from Goldman Sachs is accurate.
The cost of full adoption is astronomical. An estimated $6 trillion is theoretically needed to build the infrastructure that electric cars need such as charging stations and power networks, according to Goldman Sachs Group Inc.
That’s about 7.5 percent to 8 percent of the world’s gross domestic product. Add to that the amount companies spend on making the cars and batteries, and the number could be even higher.
Granted, that’s not a figure that’s needed in one fell swoop. But the estimate underscores the reality of the situation, and shows that Tesla’s play to build out the Supercharger network early on just might pay off in the end.
2nd Gear: VW EV Will Cost ‘Much Lower Than Tesla’
The scuttlebutt about Volkswagen’s big EV play is that, from the get-go, it’s planning to undercut the price-point of the Tesla Model 3 and General Motors Bolt EV by a whole lot. One report last week suggested they’ll come in under $23,000, though it’s unclear whether or not the specs will match the capability of the Model 3 and the Bolt.
Nevertheless, VW CEO Herbert Diess doubled down in an interview with Automotive News, and said to expect the German automaker’s electric cars to be aggressively priced to the competition.
From Automotive News:
VW’s strategy relies on its flexible MEB platform, which sets only a few parameters for designers working on individual vehicles but allows massive economies of scale to hold down production costs. As an example, Diess said the cost basis for the next-generation electric VW Golf will be reduced 40 percent, despite improving the compact car’s technology and interior room.
“A 40 percent cost reduction, but a much better car; twice the range, bigger interior, but outside, still a compact car,” Diess said, adding that the automaker’s scale should allow it to sell EVs at roughly the same cost premium above a gasoline engine as its diesel offerings once commanded.
He goes on to say that VW will offer an EV that’s more affordable than Tesla, and can succeed in doing so thanks to its massive economies of scale:
“Sales are picking up. It’s not all over the place, but West Coast, if you go to a parking lot, you see already a decent mix of electric cars there. Most of them are probably Teslas, but what’s happening now is that the cars become so much better,” he said. “We will be aggressive on the pricing. We will be much lower than Tesla, but we have all the huge economies of scale and the car is specifically designed now” for battery power instead of being converted from a combustion powertrain.
Next year’s sure going to be interesting.
3rd Gear: Car Policy a Focus Post-Election
Good grief, six whole days have already passed since the midterm elections. And with all the madness it brought still emanating through the air, there’s a growing sense that some significant car policy issues will become a focal point among lawmakers in D.C.
That includes self-driving car legislation and the potential for 25 percent tariffs on all cars imported into the U.S., something President Donald Trump proposed earlier this year. Ah, there’s also the perennial issue of infrastructure, something Trump’s been kicking around forever, and as Automotive News puts it, it’s definitely infrastructure week again, aw yeah wooooooooooo!!!!
Some have suggested Democrats and the White House could find common ground on an infrastructure bill or curbing drug prices, but that spirit would quickly evaporate if investigations into Trump and his administration intensify.
There might be some consternation about Trump’s proposal to revamp the North American Free Trade Agreement, as well, reports Automotive News. There’s Trump’s plan to intervene in California’s ability to set its own standards for electric vehicles. And experts who spoke to the news outlet believe Trump’s team will “soon move ahead with threats to impose high tariffs on imported autos and auto parts, especially to gain leverage in trade talks with the European Union, Japan and Britain.”
Looks like 2019's going to be another year of cars and politics getting entangled.
4th Gear: Subaru Suba-Screwed?
Subaru’s had a rough go at it lately, thanks in no part to quality issues reported that, as Automotive News Puts it, “dented the brand’s reputation and torpedoed profits.” Until now, those issues have been centralized in Japan.
But as Automotive News puts it, rising recall costs have pushed Subaru into a “rare” quarterly loss, impacting its market share in the U.S. Ahe automaker’s global President Tomomi Nakamura is getting pretty annoyed about it, according to the news outlet:
“I have already heard from our U.S. dealers that they are worried about brand image,” Nakamura said last week during the company’s quarterly financial briefing.
“It is true quality-related issues have been on the increase,” Nakamura said, blaming them on Subaru’s breakneck growth. “There is a sense of complacency in various areas of our company.”
The newest setback will saddle U.S. dealers with time-consuming repair work. But just as those retailers want more product, Subaru is forced to slow production to better ensure quality on its factory floors.
Subaru lowered its global sales forecast, but it’s still hoping things will turn around once the quality issues have been addressed. We’ll see.
5th Gear: And Now for Some Very Real News
General Motors has rapidly accelerated efforts to build out a self-driving car division in a short period of time, and the automaker has one of the most aggressive timelines in place to launch a commercial driverless car service. It’s all part of GM’s effort to rebrand itself as something more than a car company, with a breathless vision of drastically reducing emissions and crashes to nil.
So I suppose it’s to be expected that GM would dip its toes into some of the more comically ambitious, super-mobility focused ideas like flying cars. But it’s still funny to see GM tout the idea of flying taxis as a legitimate possibility for its future product line.
From the Detroit Free Press:
GM has had conversations with “air taxi” companies about using the carmaker’s autonomous and electric vehicle technology to create flying cars, Mike Abelson, GM’s vice president of global strategy, said Thursday at the FT Future of the Car Summit USA in Detroit.
“There will be some sort of air transport that will get integrated with this AV/EV technology,” said Abelson.
The Freep hilariously pegs the idea as not “that farfetched,” as a metro Detroit engineer has already built a prototype—one he has yet to test. And, sure, other automakers are toying with the idea, but the logistics and regulatory approvals needed to make flying taxis happen are almost surely insurmountable.
Abelson conceded it’s a complex issue, but suggested it’s only “some years away” before widespread production and sales begin. Sure, man.
Reverse: 409 Damn MPH
Neutral: Are EVs Really Facing A $6 Trillion Problem?
Or is it up to whether or not the car buying public’s preferences change?