What will kill the electric car this time? Cheap gas? No, electric cars themselves!
Over the years electric cars have come and gone on the American highways. Some of the very earliest automobiles were electric cars such as the Baker Electric, which Jay Leno owns an example of. A lot of people said that John D Rockefeller killed the electric car the first time around by making available low-cost gasoline to power internal combustion engines.
But what killed the electric car in those early days was the available driving range and low purchase cost of the Model T Ford. Electric cars of those days couldn't compete because of their primitive lead-acid batteries which provided only a few miles of range. Lead-acid batteries also made electric cars expensive to buy and maintain.
Lead-acid batteries remained the biggest obstacle to the adoption of electric vehicles for an awfully long while. Over the years, hobbyists and experimenters tried to build electric cars using lead-acid batteries with limited success. The resultant vehicles were slow and had very limited range and were very expensive. And the batteries only lasted a few years and had to be replaced at great cost. Practical electric cars simply didn't exist until very recently.
In response to California's electric car mandate of the 1990's, companies such as General Motors developed electric vehicles such as the EV-1. People accused General Motors of killing that car as well, but it had a very limited range, was very expensive, and GM lost money on every example they made. The technology just wasn't there to make electric cars work, as recently as the 1990's.
But battery technology improved. Lithium-ion batteries have the energy density to make a practical electric car, albeit one that maybe doesn't have quite the range of an internal combustion engine vehicle or can be recharged (refueled) as quickly. The problem with lithium-ion batteries is that they are very expensive, and if not manufactured properly, have a tendency to catch fire.
Elon Musk was very successful early on with his electric cars in that he didn't pitch them as the Every Man's vehicle but rather as an accessory or toy for the very rich. The original Tesla Roadster was a very expensive vehicle and not practical for daily use as it could only seat two people. The Tesla Model S was at least a more practical car, but priced only so that only the very wealthy could afford one. And the very wealthy, no doubt, had a second vehicle, probably an SUV, for other tasks that an electric car would not perform.
So long as these remained expensive playthings for the rich, he had a viable business model, as the cars cost an awful lot to make, and the average person could not afford one, even with the tax incentives. Musk then promised to make an affordable electric vehicle that the average person could buy. And other automakers followed suit. Part of this surge toward electric vehicles was the possibility of more mandates for electric vehicles from various government entities, and part of it was a desire to have a "me too!" product available.
Sales of these more plebeian electric cars such as the Nissan Leaf and Chevrolet Bolt, however, have been very thin. They cost more than that a comparable internal combustion engine vehicle and most people can't afford the difference. Moreover they need a vehicle they can drive to Disneyworld from Detroit, Michigan, without stopping for hours to recharge.
Today, it seems everyone is jumping on the EV bandwagon. Volkswagen is claiming to move to an all-electric business model. Various European governments and China are claiming they plan to outlaw the internal combustion engine, as is the state of California, in the next 20 years. Whether electric vehicles will be ready by that time is anyone's guess. One thing is for sure, the cost has to come way down, the range has to go way up, and the recharge rates have to increase - and we will need a lot more than a few demonstration recharge stations. Every parking space and every parking meter will have to have a plug in it, and a way of charging customers for charging their vehicles. It is not enough for rich folks to have chargers in their garages - apartment dwellers will need chargers as well, and city dwellers, who park on the street, will need access - anywhere - to a charging station.
Maybe in twenty or thirty years all of this could actually happen. But what will happen in the next five years is of more consequence to Elon Musk. His vehicles will have to move beyond being mere playthings of the very rich. Compounding his problems is his acquisition of SolarCity which makes solar roof tiles, which combined with a lithium-ion battery pack, could power a house without the need for electrical utilities, or having to sell electricity back into the grid.
The problem is, solar panels, like electric cars, so far have been the toys of the very wealthy. I have one friend who put solar panels on his house. He's the kind of guy who owns three Mercedes and experiments with biofuels in his backyard. They are hardly poor by any means. And of course, they relied upon leasing solar panels in order to amortize the cost. And the leasing company relied on being able to sell power back to Georgia Power at retail rates. How this works out (particularly now that the house has been sold to a new owner) remains to be seen. Does the homeowner have to take it on the chin for higher lease rates? At 10 cents a kW-hour buy-back, my friend was getting negative electric bills. Under wholesale rate buy-backs, the new owner of the house may find he is paying more, not less, for electricity than his non-solar neighbors, as the cost of the panel lease far exceeds the electricity he sells back to the utility.
As others have noted, apartment dwellers and more plebeian Americans can ill-afford solar panels at this point, much less have a place to put them. It is one of these technologies that, at this point, is a plaything of the very rich, but not ready for mainstream America.
Again, in 20 or 30 years maybe this will work out, but what happens in the next two to three years? It is not that I'm against solar power or electric vehicles - far from it! I'm a big proponent of both, as I'm an automotive and electrical engineer. I would like to see a world where we power vehicles by the sun. And I think this may happen - in the long-term. In the short-term, Mr. Musk has to pay back his creditors.
In the short-term, companies have to make profits, and it doesn't look like anyone is making profits from these technologies at the present time - without heavy government subsidies. If those subsidies are taken away, such as in the solar panel field, the entire business could evaporate.
And the current Administration is more than a little hostile to renewable energy and electric vehicles. The Trump Administration is poised to impose a 200% to 300% duty on imported solar panels, which could effectively kill off the entire solar industry, as 90% of all solar panels sold the United States are indeed, imported. At triple the present cost, solar panels are no longer a cost-effective proposition.
State after state has enacted new utility regulations which no longer require the utility companies to buy back electrical power at retail rates. Again, this makes solar uneconomical for the average American, much less even the wealthy American. While it may seem we are very close to a solar Shangri-la, we are actually a long way away, as without these government and utility subsidies, the entire thing collapses under its own weight. Throw in a Administration hostile to solar, the entire thing disappears.
The same problem exists for electric cars. Without electric car tax subsidies, which likely will disappear, electric cars will be less and less affordable. Without an infrastructure of charging stations, electric cars will be impractical. The technological press is getting ahead of itself and promising electric cars for everyman within a few years.
Reports are coming out that Elon Musk is struggling to produce his new "affordable" model 3. He claims to have 500,000 orders for the vehicle, although later he admits the number is far less. However today only a few hundred of the models have been produced, mostly by hand. Mr. Musk is running into a problem that others have faced before him, when trying to enter the automobile business. It's easy to make a few custom prototypes, it's very difficult to mass-produce cars, as General Motors can attest to.
So, even assuming demand for these cars is steady, Mr. Musk is going to have a hard time meeting that demand and maybe hemorrhaging money in the short term. Moreover, as more and more people get into this space, it will become more and more difficult to make profits. And it seems that everybody wants to make an electric car these days, including the British guy with his stupid vacuum cleaner.
To me, this is a sign the electric car bubble is ready to burst. It takes more than skill in making vacuum cleaners to make automobiles as Mr Dyson will no doubt find out very quickly. That dilettantes like him think they can just press a button and start competing with the world's automakers is a sure sign the bubble is upon us. World automotive assembly capacity already far exceeds demand. The last thing the world needs is another car factory built from the ground-up. Existing car makers will clean the clocks of Mr. Musk and Mr. Dyson, if there is indeed a market for these cars in the short-term.
Now throw in an economic recession, which is sure to occur in the next few years, particularly now that we have a very unstable government in the United States. Sure, the press is reporting that everything is going gangbusters with the economy and the stock market is going through the roof - and that consumer confidence is very high. The same was true in 2006. Things are always greatest before the fall. Once people realize that the vaunted "economic reforms" of the current administration aren't going to happen - and even if they did, reducing regulations and taxes isn't necessarily going to make the economy take off - the present euphoria about the economy will dry up.
The good news is, like the "dot com" crash of the 1990's, the wreckage will provide a lot of low-cost infrastructure and technology for subsequent companies to get off the ground - infrastructure that would not have been affordable prior to the crash. Thus, I believe, we can expect another crash in the electric car business, due to the current wild optimism over the business, but the end result being that the new technology and availability of parts and infrastructure will seed the next generation can be built from the ashes of the first.
And who knows, maybe in twenty or thirty years Mr. Musk's dream will come true - although he will not be at the helm of the company running that dream.
