Electric cars will become significantly cheaper in a short time
2 days ago
Electric vehicles have the potential to become substantially cheaper in a short time.
While the topic of electric vehicles is increasingly captivating the public with its environmental friendliness and elegance, pragmatists are attracted by the possibility of driving on autopilot.
The funds are ready to invest in almost all more or less promising electric vehicle companies.
However, most of the available models are still embarrassingly expensive.
This may change soon.
You can often hear the opinion that in the next couple of years the course of the game in the personal transport market will turn over and the electric car industry will be able to compete almost on equal terms with the good old internal combustion engines.
However, for this, electric vehicles need to become cheaper in order to become more massive.
And here Wright’s law comes to the rescue, according to which, with an increase in the volume of a particular production by half, the price of the product falls by a fixed amount.
Why is this important for electric vehicles?
The thing is that the market for electric vehicles today, of course, is not comparable in size to the market for traditional, time-tested gasoline and diesel cars.
And according to ARK Invest estimates, approximate price parity between electric cars and gasoline cars can be achieved as early as 2023-2024.
According to Wright’s law, it would take about 29 years for the traditional car market to double in size.
Accordingly, they will not really become cheaper over time. But electric cars will soon catch up in price, which cannot be said about the scale.
So by continuing to grow, they will be able to reduce the cost of their models over time.
But as we know, the devil is in the details, and in the case of electric vehicles, in their batteries.
Batteries are one of the most important elements of an electric vehicle. Today they account for 50% of the total cost of a car.
Unfortunately, they are the cause of most of the problems for electric cars: whether it is not enough energy for long trips or unexpected fires.
While engineers wait for the development of chemical technology to get their hands on larger batteries, there were those who began to notice how these batteries are getting cheaper.
For example, a group of analysts from BNEF calculated (using the same Wright’s law) that with a double increase in the production of battery packs, the price of them decreases by about 18%.
Of course, real figures do not always correspond to analysts’ predictions (alas), but in reality everything is confirmed.
Example: 2010 to 2015 the average cost of battery packs dropped from $1,194 per kWh to $384.
That is, by almost two-thirds, despite the fact that the amount of battery energy has increased by 7 times.
From 2015 to 2020, the amount of battery energy has increased by 2.7 times, and the cost has decreased to $137 per kWh.
Based on this model, BNEF analysts predict that battery prices will fall to $58 per kWh by 2030.
Moreover, the transition to new materials in the manufacture of batteries should be completed by this date. This, in turn, should increase energy storage density and reduce raw material costs by a fifth.
What conclusions do we draw?
We see how the eco-car industry will be able to scale economies in the future and hopefully become more “popular".
In addition, companies will be able to purchase batteries at lower prices every year, reducing the share of batteries in the total cost of an electric vehicle.
Not so long ago, we did a big review of car manufacturers, including electric cars.
Among the top ideas was Volkswagen (VOW GY), whose shares have risen 60% since then.
Who else, besides the strong growth of VW shares, is interesting in this market?
The following companies would be singled out: BMW, Daimler and Stellantis.
In the long term, they may well shoot after Volkswagen.