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Table of contents Contents executive summary . .1 introduction: beVs and electrification . .2 What’s preventing eVs from being profitable? . .3 Proposed strategies for beV success . .9 beV profitability? it’s going to take time . .11 Exclusive insight from: • Jonathan Storey, director, Automotive Reports • Manuel Sattig, i Project manager, BMW • Tomoko Blech, representative, CHAdeMO Association Europe • Calvey Taylor-Haw, managing director, Elektromotive • Dr Andreas Schamel, director of global Powertrain, research and Power engineering, Ford • Gloria Esposito, head of Projects, Low Carbon Vehicle Partnership • Cosmin Laslau, mobile energy analyst, Lux Research • Luke Tonachel, senior Vehicles analyst, energy & transportation Program, Natural Resources Defences Council • Olivier Paturet, general manager, Zero emission strategy, Nissan Europe • Selda Gunsel, Vice President of global Commercial technology, Shell • Greg Archer, Programme manager – Clean Vehicles, Transport & Environment Can battery EVs ever be profitable? automotiveworld.com 3 Executive summary Executive summary • battery electric vehicles (beVs) have failed to achieve sales anywhere near busier when gm’s bolt goes into production, followed by a reported eV the levels required to meet some of the ambitious targets set by oems and version of the opel Karl and tesla’s model 3 global leaders at the start of the decade; renault-nissan's Carlos ghosn promised 1.5 million eVs by 2020; angela merkel called for 1 million eVs on • government incentives are a proven route to encouraging faster beV the roads in germany by 2020; and barack obama called for 1 million eVs adoption and market growth on us roads by 2015 • infrastructure improvements are essential to encourage beV sales, including • one of the biggest financial hurdles that car manufacturers have to overcome a greater number of recharging stations, more consistent plug standards and in terms of making a profit with beVs is the cost of the battery itself; however, wireless charging technology in public spaces batteries are becoming more affordable, with some experts claiming a current cost reduction rate of 25% per year • the dramatic fall in global oil prices in the second half of 2014 - and the associated fall in consumer fuel prices - is likely to have a major impact on • luxury cars are currently the most lucrative market for beVs as oems can the business case for and interest in beVs; the true impact will be reflected factor the high cost of production into the vehicle’s premium consumer price in the 2015 calendar year sales figures for beVs tag • in addition to falling fuel prices, and continuous improvements in internal • oems are also pursuing mainstream success with a number of C-segment combustion engine (iCe) technology, fuel cell technology presents a genuine beVs; the Ford Focus electric, Kia soul eV, Volkswagen e-golf and the bmW threat to beVs; there is a renewed general interest in fuel cell vehicle technology, i3 compete with the well-established nissan leaf. and the segment will get spurred on by the launch of fuel cell vehicles by honda, hyundai and toyota Can battery EVs ever be profitable? automotiveworld.com 1 Introduction: BEVs and electrification Introduction: BEVs and electrification electrification is widely seen as an inevitable part of future mobility. Whether two key factors holding the market back are range and infrastructure. this entails part-electrification, like mild hybrids or cars with range-extending technology, or full electrification, will depend on a number of factors, including electric cars are much more expensive to produce than those using iCes – oem corporate strategy, regulation, government incentives and fuel prices. electric components, notably batteries, usually raise production costs to around double the cost of equivalent car with an iCe. this cost is inevitably passed on regardless of the potential that internal combustion engines (iCes) have to to the consumer, or simply absorbed into the overall strategy of the oem. in improve efficiency, a degree of electrification is expected to be essential to meet many cases, oems have accepted these losses in the knowledge that they are increasingly stringent fuel economy standards around the world. but with a huge ultimately better off selling costly electric cars than being lumped with the hefty array of options for applying electrification to passenger cars, the automotive fines incurred due to a lack of compliance with fleet-wide emissions targets. industry will not decide on one dominant electric technology in the foreseeable future. instead, the market will become an arena for several different types of thus, making a profit with an expensive-to-produce beV continues to be electrified powertrain. targeted by development teams. it is therefore crucial to examine the problems that car manufacturers must address when trying to market a profitable beV Pure electric options are among the most commonly discussed, perhaps due to and assesses whether passenger cars using these powertrains will ever their complete independence from the vast infrastructure built around iCes. become profitable. using exclusive insight from leading executives from oems, however, there are many limitations that have so far prevented battery electric suppliers, consultants and trade associations engaged with the electric vehicle vehicles (beVs) from taking a meaningful share of the market. market, this report addresses the question of whether beVs can ever be profitable. Can battery EVs ever be profitable? automotiveworld.com 2 What’s preventing EVs from being profitable? What’s preventing EVs from being profitable? Cost barriers aside from the problems with range and refuelling infrastructures for eVs, the high cost of producing beVs poses a major challenge for oems. Cosmin laslau, mobile energy analyst at lux research, explains that one of the biggest financial hurdles that car manufacturers have to overcome is the cost of the battery itself. the general metric for measuring battery cost is us dollar per kilowatt hour (us$/kWh). “as an oem you probably want a battery that can deliver 50 kilowatt hours inside your car,” says laslau. “right now, it costs around us$400/kWh for most oems. that means you need a us$20,000 battery pack just to give you a decent driving range. most cars cost about us$20,000, so you're effectively doubling the price of your car.” Tesla Gigafactory rendering and projected figures however, laslau does anticipate battery cost decreasing: “it will change over time due to greater volumes and, in part, due to dedicated scale up and price reduction rate. “they are coming down by about 25% per annum at the localisation efforts like the tesla gigafactory,” he says. “a battery production moment,” he says. “that's going to ramp down because they’ll reach a point facility of that scale, a magnitude larger than ever seen before, will help reduce where they can't make them any cheaper, but it's a huge game changer.” costs. The OEMs get plugged in “We're still never going to get to a place where oems really want the battery to be, but we'll get to a place where it's cheap enough to compete with some lower so far with beVs, the tried-and-tested route has been via the luxury car market, priced vehicles. a great example of that is the bmW i3, against which tesla is where consumers with more to spend can afford to invest in an expensive car, going to compete directly with its upcoming model 3. both will be around the therefore covering the high costs that would otherwise have to be absorbed by us$35,000 - us$40,000 price point. that's still not cheap, but it is better than the car manufacturer. however, a number of oems are also aiming to produce what tesla has had so far.” electric cars in other segments.