Musk Vs. Auto Giants

Dear Rich Lifer,

Electric vehicles (EVs) are zooming ahead of gas-powered cars. Last week, research from Wards Intelligence revealed that EV sales grew faster than gasoline-powered car sales. 

EVs now make up only a small percentage of the automobile industry, but their sales have been skyrocketing, with double the amount sold in 2021 compared with last year.

Meanwhile, total vehicle sales overall only increased by 29%.

According to consulting firm AlixPartners LLP, auto companies are spending $330 billion combined over the next five years to bring more EVs to showrooms. 

Now the biggest question is: will consumers buy EVs?

Today, we explore the future of EVs and explain one of the biggest factors that is key to the future of the EV industry. 

Traditional Automakers Join EV Craze

For years, Tesla has dominated the electric vehicle sector of the automobile industry. According to estimates from research firm Motor Intelligence, Tesla’s U.S. sales increased 78% through June this year.

Tesla’s new Model Y crossover SUV helped drive most of the increase in sales, as it quickly became the company’s best-selling model. Tesla reported its second-quarter earnings Monday, announcing $1.45 per share from $12 billion in sales.  Analysts had expected the company to report roughly 94 cents in per-share earnings from $11.5 billion in sales. 

In the third quarter of 2020, Tesla reported over $800 million in operating profits. This year, Wall Street expected profits to hit $835 million due to strong delivery sales — Tesla delivered a record-breaking 200,000 vehicles in the second quarter of the year.

Tesla blew these expectations out of the water as well, announcing a new quarterly record of $1.3 billion in operating profits. 

Shares of the company rose 2% after the news was announced. 

The good news for Tesla might serve as an optimistic sign to other traditional automakers that are also branching out into the world of EVs, including Ford Motor Co’s Mustang Mach-E SUV and Volkswagen AG’s ID.4. 

Carlos Tavares, chief executive of global automaker Stellantis, which owns Jeep, Ram and other auto brands, also outlined an investment plan for more electric cars and battery plants. 

Mercedes-Benz recently announced that it will only sell electric vehicles by 2030 if the market demand persists. 

This expansion by these and other established companies helped drive sales of EVs up to over 3% of the total U.S. market in May and June, the highest ever recorded, per industry data.

Auto executives have recently stated that they believe consumer interest will continue to rise and help continue the move over to EV over gas-powered vehicles.

But do recent numbers support this claim? Let’s explore…

Are Consumers On Board? 

According to a consumer survey released in June by UBS, 37% of U.S. respondents said they were likely to consider an electric vehicle — an increase from the 22% who responded positively a year earlier.

Overall, consumers are less daunted by the potential drawbacks of electric vehicles than in the past. 

When they released their findings, UBS wrote, “Their key concerns and pushbacks about EVs (high price, limited range and access to charging) are easing.” 

California dealership head Mike Sullivan told the Wall Street Journal that he’s been witnessing an increase of Tesla owners coming in to test drive new models of EVs from traditional automakers and less expensive options, such as VW’s ID.4. 

And although he sees interest increasing, he recognizes there is a long way to go, commenting, “If there are 100 steps to this, we’re really on step two or three.” 

But regardless of how many steps forward are left, one element needed to bridge the gap between the supply of EVs and the demand of consumers is more charging stations.

Charging Stations Hold the Key to EVs Future 

The current dilemma with electric vehicle charging stations is as follows: EV advocates worry that without more charging stations, consumers won’t be willing to buy EVs, but companies are avoiding building more charging stations because they are worried there aren’t enough EVs on the road to use the stations.

Right now, 42% of EV users are located in California, meaning the rest of the country is lagging significantly behind in EV usage. 

However, some groups are working to build more stations across the country. One such group is the Electric Highway Coalition, which includes the Tennessee Valley Authority, Duke Energy Corp., and American Electric Power Co and has recently announced it will add Consolidated Edison Inc. of New York, Exelon Corp. and Avangrid Inc. 

The effort to expand the coalition will help increase production of EV charging stations across the rest of the U.S. Fast-charging stations will be especially helpful, as most EVs can only travel a few hundred miles before needing to plug-in. 

However, the cost of building these stations presents a daunting bill for many companies. Cathy Zoi, chief executive of the charging provider EVgo Inc. explained that the construction and the charging units for each parking stall cost about $110,000; therefore, “When we’re talking about building a station, we’re talking about a half a million to a million dollars in capital.” 

Although sales of electric cars are increasing, they still make up only 3% of total automobile sales in the U.S. Phil Dion, chief customer officer at AEP, noted, “The volume is not there to justify the cost.” 

Anne Smart, vice president of public policy at the charging provider ChargePoint Holdings Inc., explained that another challenge for groups like the Electric Highway Coalition will be dealing with state regulators who will have to approve the electricity-rate changes to finance build-outs. 

There may also be issues regarding potential monopolies amongst utility providers because some companies will want to deliver new electric infrastructure to charging sites while others might want to own stations themselves. 

On top of that, there’s the desire to make charging stations as similar to the experience of a gas station as possible. This means they would provide drivers with a spot to “get a cup of coffee, catch up on your emails, charge your vehicle and move on,” says Jeffrey Lyash, chief executive of the Tennessee Valley Authority.

Scott Barrios, a senior account manager at Entergy Corp., also pointed out that charging stations, especially fast-charge ones, will burden power grids. In fact, one fast-charging station needs the same amount of energy it would take to run all of the lights and the heating and cooling system of a grocery store. 

It’s clear there are multiple challenges ahead in providing an environment for EVs to become the norm on the roads.

Atlas Public Policy, a Washington, D.C. research firm that tracks the EV market, reported that almost $90 billion in investment would be required this decade to move the U.S. to 100% electric-passenger vehicles and light trucks by 2035. 

There is a huge opportunity for investment in this industry, and even if there are many steps still to take, as Mr. Sullivan noted, it’s clear the road is being paved for EVs to lead the way. 

To a Richer Life,

The Rich Life Roadmap Team 

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