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UBS: Electric vehicles to reach cost parity with petrol cars by 2018

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CleanTechnica

Analysts for UBS have torn apart a perfectly good Chevy Bolt to see how it is put together. What they found led them to make this rather startling announcement:  the “total cost of consumer ownership [of electric cars] can reach parity with combustion engines from 2018.”

Notice that doesn’t mean an electric car and a conventional car will cost the same to buy new. It means they will cost the same to own, figuring in maintenance, cost of fuel, insurance, and all the other factors that are part of the total cost of ownership.

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The UBS study goes on to say, “This will create an inflection point for demand. We raise our 2025 forecast for EV sales by 50% to 14.2 million — 14% of global car sales.”

14% by 2025 is eerily similar to the 15% the state of California is aiming for by the same date. The study language is somewhat imprecise, as the term “EV” is commonly understood by many to include plug-in hybrid vehicles as well as battery electric models, but the inference is that UBS is referring only to fully electric cars in its findings.

After deconstructing the Chevy Bolt, which it called “the world’s first mass-market EV, with a range of more than 200 miles,” UBS called the electric car the “most disruptive car category since the Model T Ford.” It says it expects Europe to lead the rest of the world in adoption of electrics.

The UBS team found that the powertrain for the Bolt was $4,600 cheaper to produce than originally thought, “with much cost reduction potential left.”

It also found that the electronics built into the car cost about $4,000 more than those in a conventional car, not including the cost of the battery. But they say GM is losing money on every Bolt they sell. “We estimate that GM loses $7,400 in earnings before interest and tax on every Bolt sold today, mainly due to a lack of scale.”

The same analysts say they expect Tesla to lose $2,800 on entry-level versions of its soon to be introduced Model 3 but think customers will opt for extra cost options that will raise the average selling price to $41,000 — $6,000 more than the base price. Tesla will be able to break even at that price, they believe.

Overall, automakers will start earning a profit of about 5% on electric cars by 2023 as the switch over from conventional cars to electrics gathers momentum. “Once total cost of ownership parity is reached, mass-brand EVs should also turn profitable,” UBS said. 5% happens to be the average profit margin on conventional cars, although some premium manufacturers like BMW are accustomed to profit margins as high as 8%.

Its findings led UBS to issue a warning for companies that make replacement parts, since electric car drivetrains are more reliable than those that feature internal combustion engines. That makes perfectly good sense, considering a gasoline engine has over 1,000 moving parts. An electric motor has 3.

Add in the increasingly complex automatic transmissions in use today and there are a lot of things that require fixing as a conventional car ages. “Our detailed analysis of moving and wearing parts has shown that the highly lucrative spare parts business should shrink by 60% in the end-game of a 100% EV world, which is decades away,” UBS said.

Source: CleanTechnica. Reproduced with permission.  

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  • George Darroch

    Here’s the thing: Tesla wants to sell its electric cars. All the available evidence suggests that GM doesn’t.

    In a constrained consumer spending environment, TCOO will have to drop significantly to beat the upfront cost advantage for most consumers.

    • john

      Perhaps figure into your TCOO the lesser devaluation of an EV over an ICE.

      • Michael Dufty

        Aren’t they currently devaluing faster? I bought a 5 year old i MiEV for about a quarter of the list price. With an ICE you’d expect more like half. Currently it is mostly because the original price is too much for the market, but I think I would be more worried about 5 years battery degradation than 5 yrs ICE engine degradation.

        • john

          The MiEV i do not think is exactly a main stream EV so yes your figures would hold up, however i think for a Tesla the devaluation would be less.

          • Michael Dufty

            Leaf is about as mainstream an EV as you can get and I seem to recall they topped lists for most depreciation in the USA

  • john

    My thinking is this.
    A friend just spent $50k buying a SUV.
    He is up for fuel usage of 7 liters per 100 km and service at at least $400 a year.
    If he had put his name down for a Model 3 Tesla and yes got it in 2020.
    They would be comparable on upfront cost.
    He would be then up for say 6 kWh per 100 km for power.
    Service cost of well at the maximum $50 per year.
    Over 10 years he may have had to replace brake calipers although with regenerative probably not.
    The wheel bearings may need a repacking with grease for both.
    Yes the wind shield wipers but hardly anything else for an EV.
    From a consumers point of view he would have been better going EV.
    From the manufactures point of view they would prefer his choice not the EV.
    Frankly I feel that the consumer once they have choice will choose the EV and that will force the manufactures to build a product that is in demand.
    As the motor vehicle has been the worst consumer item ever produced unfortunately the manufactures will continue as long as possible to produce hideously expensive wasteful vehicles and paint them up as the next best thing to sliced bread to the plebeian public.

    • David leitch

      I have been considering these issues from my personal point of view for over a year. Even leaving aside the model 3 is not available yet and likely cost closer to A$60 k than $50 k the fact is that it is just one size. In fact its too small for my particular needs. Great around town car, less good when I need a station waggon. Tyres and brake pads will certainly have to be replaced on both cars, probably more often on the Tesla because its heavier.

      The tesla model S does 20 KWh per 100 km. So lets say 15 for the Model 3. If you power it off rooftop pv cost is just the foregone feed in tariff, but if you buy from the grid at say 12 c/KWh off peak its still cheap.

      So in the end the Model 3 will make a great second car in our house, but couldn’t be the sole vehicle. Unfortunately.

      The UBS study on vehicle parts is interesting though, as is the fact that there is lots of cost reduction potential, although that is hardly surprising.

      The future is bright for EVs but will be brighter when there are more model choices as far as I’m concerned. In the conventional car world you can get
      any think from a smart car/ to a suburban in body shapes. At the moment we are on the cusp of the Model T stage for EVs

      • I agree with almost all of what you say. Much of what I read about brake pads of the Teslas etc suggest they will last for longer because the regenerative braking reduces physical braking considerably.

  • Robin_Harrison

    We’re expecting EV price and convenience parity with ICEVs by 2025. Given the massive difference in running and maintenance costs, who do they think will still be buying new ICEVs by then?

    • Rod

      I’m sure many, like me, are thinking their next car will be an EV or hybrid.
      And others may also be putting off their next purchase until EVs are more affordable.
      There is a small but definite negative trend in vehicle sales in Australia.
      Hopefully it is all those soon to be EV owners waiting until the time is right.

      • Robin_Harrison

        EV consciousness is pathetically low in Oz, not helped by a lack of incentives, long distances and a political system owned by the FF industry. However the other part of this energy transition, renewable energy, is going great guns here despite political opposition. That’s already having some effects (or at least been noticed) elsewhere and EV development elsewhere will certainly impact Oz.
        We’re looking at the global exponential growth of RE and EVs. We’re not immune to that global effect here and it’s happening a lot faster than people think. Exponential growth is noted for that.

  • Michael Dufty

    I think the maintenance savings may be overstated. The main difference would be ~$100 of fluids a year. Maybe less brake pads. Not sure of the relevance of numbers of moving parts – how often do you need to replace one of those 1000 parts in an engine? They are designed to last as long as all the others. Plenty of expensive non moving parts to fail in an EV too. I just had a $600 service on my EV, basically change the brake fluid and check a bunch of stuff. I think it was a bit of a rip off, and will go elsewhere for the next service, but still, not saving much money yet.
    I love the EV for the driving experience and environmental side, but not sure it makes economic sense.

    • john

      You were ripped off with out a doubt.
      There is no way it costs $600 to check the net for an update let alone $5 for the fluid.

      • Michael Dufty

        It is not quite as bad as that, it was a physical check of the car components, they claim it is very hard to disassemble the car to get to the bits to look at, I am skeptical though. You could say it is a waste of time checking that, but you could also save a lot on ICE services by not doing all the checks in the manual. Changing fluid and bleeding brakes properly will be a lot more than $5 for any car.

        • George Darroch

          Quite difficult when there’s not a lot of competition in this space, and few people with track records.

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  • Suresh Kumar

    why not replace cars with Electric capsules inside cities? #SDGs #transport #pollution #health https://www.facebook.com/Global-Goal-No13-A-solution-for-City-Pollution-The-Smart-City-147941658897870/