Can Luxury Transport Companies Afford the Rising Cost of Energy to Run Their Vehicles?
The question on everyone's lips right now is: can luxury transport companies afford the rising cost of energy to run their vehicles? The answer is a resounding No. But it's not yet too late to make the switch to a greener form of transport. EVs are not mainstream yet and won't be until their prices become more competitive with traditional fuels.
EVs will join the mainstream market until prices are mainstream
The first step in achieving the goal of EV adoption is to make the technology affordable. As a result, most new cars on the market today will not be EVs. However, Ford is moving ahead with the development of EV versions of its most popular vehicles. By 2023, Ford is expected to sell more than 600,000 vehicles. While Ford is unlikely to catch up to Tesla's market value by that date, its EV business will eventually rival Tesla's.
Building a mainstream EV market will require more than cheap batteries and charging infrastructure. A diverse selection of EV models in a wide range of body styles is critical to attracting mainstream buyers. Additionally, there needs to be widespread access to fast charging stations. While Tesla is one of the only manufacturers with a wide distribution of charging infrastructure, the company faces challenges manufacturing vehicles at scale.
Prices for EVs will have to be affordable for middle-class car buyers. Currently, the F-150 Lightning and Hummer EV are both priced too high for the average consumer. In order to move EVs out of the luxury category, car companies will need to offer multiple electric vehicles priced below £30,000.
While a small number of EVs are currently on the market, many automakers are getting in on the action, too. For instance, GM is launching a new EV called the Equinox that should cost £30k. This new model will also be eligible for a £7,500 federal EV tax credit. This could help GM lock in buyers as the EVs climb the GM product line.
EVs will need mainstream prices to join the mainstream market
The cost of EVs has been a big barrier to adoption, but they are beginning to come down in price. Most EVs are currently priced above the cost of an ICE car, making them out of reach for many consumers. While the cost of EVs is considerably higher than that of ICE vehicles, they may be cheaper to maintain over time, as EV drivetrains have fewer moving parts. Government subsidies and electricity prices are other factors that could make an EV more affordable for the average consumer.
To become a viable option for middle class consumers, EVs must reach mainstream prices. The Tesla Model Y is priced well above the typical middle-class car buyer's budget. Even a Hummer EV costs more than £30,000. Car companies will need to offer multiple EVs at prices under £30,000 to break through the price barrier and bring EVs into the mainstream market.
If EVs can achieve cost parity with conventional vehicles, the adoption rate would likely increase dramatically. However, it would still take decades to transition a fleet of cars to electric. Another major barrier is the cost of battery material. Until the cost of batteries is lower than the cost of gasoline, EVs will remain out of the mainstream market.
Charging infrastructure is another major challenge for EVs. Currently, the charging infrastructure isn't adequate to support the increased numbers of EVs. This means that people will have to wait overnight or while they are doing errands.