July 19th, 2011 
Category: 
I came across an interesting article recently where Carlos Ghosn, CEO of Renault-Nissan Alliance, forecasts the number of EV vehicles sold in 2020 to comprise 10%. It turns out that this is the most optimistic prediction there is out there right now on EV take rates. That means 90% of global car sales in 2020 will still have combustion engines (hybrids included).
One would think that the take rate would be higher than that and sooner than 2020 but this should not be surprising at all. Green driving needs a reality check because of 1 important ingredient: The Battery.
Nissan Battery Pack
There is a lot of research being done all over the world looking to develop the next generation of lithium batteries. Batteries are critical for the success of electric powered vehicles; the future of this game changing technology depends on them. Why? Because current batteries are lacking the following attributes:
Long-lasting: It would be nice to get more than 100 miles per charge. A limited range will hit drivers with distance anxiety. Do I have enough juice to get to my destination? How will I recharge if I run out of power midway? The Nissan Leaf for example has an EPA-certified range of 73 miles.
Quick Charging: Unless you are a hard core tree hugger, I doubt consumers will be lining up to buy EVs that require 8 hours for a full charge. People are used to filling their car in less than 5 minutes, there’s a huge behavioral change that is required which will be hard for our fast pace lifestyle. According to Nissan, It takes about ~30 minutes to 80% at a 480 volt quick-charge station. Starting from a depleted battery, ~7 hours at 220/240V (depending on amperage), about 20 hours at 110/120V. You want that 480V quick charge installed? That will be another $2,000.
Affordable: Nissan’s cost to manufacture its battery was last reported at $9,000 per unit. Battery prices will certainly go down due to volume manufacturing but it won’t be by next year. Luckily, both Nissan and GM are offering 8 years of 100k miles warranty on the battery which has an estimated life of about 8 years, It will be interesting to see how the first generation models behave as they usually go through all the early teething problems The car is still very expensive compared to a conventional gas powered vehicle and you won’t be recovering your investment in gas savings anytime soon. This means that at least initially, EVs will remain a niche market. Would you buy a second hand car with 2 years left on the warranty? I doubt I would want to fork out $9000 for a replacement battery for an 8 year old car….
Safe: What is the optimal energy density that can be held safely? How far can we push the limit before risk increases?
Reality Check
What would it take in order to achieve a higher take rate?
I think consumers will definitely embrace electric vehicles if they can travel as far as their gas-powered car on a single charge. Don’t get discouraged, battery technology will be evolving and getting better with time but let’s not kid ourselves by believing all the weak points will be solved within a short period of time. After all, advances might involve trade-offs where improving range increases the cost and the size of the battery.
I haven’t even discussed how “green” these cars actually are but that will be for another post.
Final Thoughts
That 10% figure might be a tad optimistic for 2020 if we take hybrid cars as an example: How long have hybrids been around? The first Toyota Prius became widely available in 1997, 14 years ago. What is the current percentage of global car sales in 2010? 2.2% from 44.7 million cars sold.
Carlos Ghosn has all the reasons in the world to optimistic; he’s investing $5.4 billion in EVs. The technology will get there but it will take time to mature. Even if the 10% take rate is hit by 2020 or before, this will have no impact on world oil consumption. Unless a substantial breakthrough in green technology or a significant increase in oil prices takes place, oil will be the dominant transportation fuel for years to come and I intend to profit from it.
Did you really believe EVs were going to impact global oil consumption in this decade?
My DIY stock portfolio is overweight in Canadian oil producers for a reason. I believe Oil consumption is on the path of growth for the next decade and I intend to take every advantage possible of it:
What I’ll say is that the current technology isn’t sufficient to replace oil, but I like the momentum that EV have gained recently (which was missing in 1997) and it is only a matter of time before we have a breakthrough.
I do not know enough about the industry to predict dates, but I won’t be surprised if the above prediction turns out true.
MC, I agree with you that it is only a matter of time before EV technology matures. It will take time, that’s the thing.
Excellent article, Mich! Facts are facts. I like the way you pose the issue of range, recharge time, and the impatient nature of today’s consumer.
EVs face some serious headwinds, not the least of which is the current high cost of batteries and availability of rare earths (they’re not called “rare” for nothing). I think that Carlos Ghosn is talking his book, and that’s OK and expected. But magical thinking will not alter the fact that the electricity needed for EV is downstream from coal, nuclear, or natural gas. And that’s good for investors/speculators like me and thee.
You nailed it right on the head 101 with the “magical thinking” part. The problem with all of the hard core environmentalists is that they are impatient with technology and think that their magic thinking and apply it on wind and solar as well!
We can only hope that green transportation alternatives will become affordable, reliable, and accessible sooner rather than later!!!! Great article.
They will Barb, it’s just a matter of time and one should keep realistic expectations when it comes to EVs.
My next car will be electric and I’m not your typical tree-hugger. I have my eye on a Ford Focus Electric and I will probably pull the trigger next year. Of course, I will keep my gas-guzzling F-150 to tow my toys around and drive long distances.
According to Steven Chu from the DOE, battery packs should drop in price to around $3,500 and increase in range to over 200 miles in the next 5-10 years. If that happens, EVs have every potential for hitting 10% by 2020. Also, developing countries have much simpler needs compared to U.S. commuters, so EVs could become cheaper than ICE vehicles in the future. If gas prices keep going up, this will also help EV adoption.
That’s a nice car there Bret, I’d love to see how it goes in the next 3-5 years and I will be the next customer in line once the technology matures.
I hope EVs hit 10% market share in 2020 and if it does, I won’t be disappointed, trust me. Until then, it’s a show me game.
Necessity is the mother of all inventions….
If we see $8/gal gas in the States then I believe the EV market will sky rocket past 10%…if we stay at $4 – $5 then I doubt we will come close to the 10%
I agree with you Evan and I sure hope oil remains subdued below $100 a barrel in order to avoid slipping back into recession.
I agree with Barb – can only hope “going green” will become mainstream. The fact is, we’re not forced to go there yet, but we should be – as stewarts of this planet for future generations.
I know my wife and I are strongly considering a hybrid car for our next vehicle. Purchase for that planned sometime in early 2013. I’m sure I’ll have tons of posts related to that as we start the considerations and make some decisions.
Good stuff Mich.
I’ll be looking forward to the tons of posts you will share with us on the subject. Green tech will prevail in the end but only when its ready.
I guess our new technology is not yet ready to change oil.EV is a great idea but should also take a lot of considerations, and thank you for pointing it out!
I hope a genius will come out a very brilliant idea on how to we can at least conserve oil big-time.
It will happen Cayla, it’s just a matter of time before the new technology is ready.
Good post. I agree with you that it will take time. Regulations will have to play a part in it too in order to accelerate it.
Often times, I hear the calculation that a hybrid is NOT cost effective from a financial perspective as the hybrid is more expensive. With the current economy, I don’t see buyers opening their wallet much either. Unless of course, as Evan mentions, gas goes way up … Then again, public transportation may win
You are right PIE, regulations is part of 3 variables along side oil prices and technological breakthroughs. I do not believe gas will hit $8 anytime soon but a black swan in Saudi Arabia will prove me wrong in a heat beat!
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This article reminds me of the documentary ‘Who Killed the Electric Car?’. I think that as oil prices continue to grow, it will just accelerate the research being done for more efficient fuel sources. It may not be time for the electric car to surpass the traditional vehicle, but that doesn’t mean things will not change soon.
You are right ROT, a sustained surge in oil prices will make sure EV technology succeeds. Things will change, just not that soon.
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I believe that it is in all our best interest to support EV technology. Tiffany and I owned a Ford EV Ranger for years. Had to sell because of a dearth of batteries. We are on board for a Volt for the business this summer and a Tesla S for personal use. It is a stretch but worth it we believe. March sales for the Volt should prove to be surprise to the upside. I hope Rush et: all are boiled in oil for their stupidity. I write and comment on these issues and energy independence on my humble website. You are invited of course.
Hi George,
There is no doubt about it, EV tech is in our best interest. But we have to be realistic with our expectations, oil isn’t going away any time soon and it is in the interest of the US to secure energy independence ASAP. Not everyone can afford a Volt or a Tesla S particularly in emerging countries where oil demand is growing. Oil will be part of our energy landscape for the next 20 years and beyond.
Will drop by your site for sure,
Cheers,