The Economics of EVs and B'game

Dan Neil is the automotive columnist for the Wall Street Journal and one of the funniest writers around.  He also has one of the best jobs on the planet as one after another car manufacturer delivers cool test cars to his house and lets him "drive them like he stole them" for a week.  He makes a compelling case that the two main knocks on electric vehicles (EVs)--their cost and range-- will diminish rapidly over time.  He writes

When commercial batteries attain specific energy levels on the order of 500 watt-hours/kg, and when pack-level costs level off around $50/kWh—within a decade—mass-market EVs will be capable of 700+ miles between charges and cost less to build than gas-powered equivalents. With that kind of energy onboard you could make cars fly—and houses and restaurants. Gas-electric technology will become as irrelevant as quadraphonic sound.

Sounds good, but what about the dealers?  A WSJ article notes

As auto executives and investors buzz about the coming of age of the electric car, many dealers say they are struggling to square that enthusiasm with the reality today on new-car sales lots, where last year battery-powered vehicles made up fewer than 2% of U.S. auto sales.  Most consumers who come to showrooms aren’t shopping for electric cars, and with gasoline prices relatively low, even hybrid models can be a tough sell, dealers and industry analysts say.

Tesla Inc.’s influence on the electric-car market has created a new standard for car shoppers, offering an online transaction and a simplified lineup with no price negotiation. Other electric-vehicle startups, like Rivian Automotive and Lucid Motors, say they’ll likewise sell directly to consumers and bypass traditional dealerships.  Some car companies are now following their lead, initially stocking dealership lots with few if any electric models and allowing customers to order more directly from the manufacturer.

Adding to the dealer uncertainty

Electric vehicles typically have fewer mechanical parts and don’t require the same type of service that gas engine cars need, such as oil changes. That work right now is a big profit center for dealerships.

Why do I care here at the Voice?  Auto Row has been a signature feature of Burlingame since, well, there have been dealerships.  My 1939 directory lists 27 Auto Agencies - New and Used including Nash, LaSalle, Packard, De Soto, Hudson and Terraplane dealers.  Autos and Transportation is our number one sales tax revenue source at $1.2M in 2Q19.  That dropped to $800K in 2Q20 as Covid took effect.  It's one thing to dedicate eight off-Broadway parking spaces to EVs that seldom show up for a charge.  It's another thing to see a major revenue source get whacked.  We have a Tesla showroom in town, but I'm not sure if they "make the sale" in B'game or on-line.  This is a very long term trend, but one that bears watching just like the hoped-for recovery in hotel occupancy and ToT. 

Comments

[Joe]

It looks like it will be a bumpy ride to the $50/kWh price point:

Lithium prices are surging, sparking concerns about limited supplies of the battery metal that is crucial to the electric-vehicle boom.

Chinese prices for lithium, considered a bellwether because of the market’s higher liquidity and active spot market, have soared since the start of the year. Lithium carbonate, a compound of the silvery metal used in the batteries that power most of China’s electric-car fleet, has jumped 68% since the start of the year to $11,250 a metric ton, according to Benchmark Mineral Intelligence.

The supply-and-demand balance for lithium fell into deficit in 2020 for the first time in years, according to commodity analysts at CRU. For 2021, the firm is forecasting lithium demand of about 450,000 metric tons, exceeding supply by roughly 10,000 metric tons.

“You will find there is a ‘sold out’ sign on every operating mine at the moment,” Mr. Archer said. “There will be some bad moments in the coming years where there will be a shortage of lithium production.”

[JP]

They are gonna be a rich man's car for some time with or without at tax credits and thinking that the charging stations in the Broadway parking lot will get renters to buy one is fantasy.

[Paloma Ave]

We need to realize that climate activist need to find meaning and purpose in their lives.

I don't buy it, but then what do I know?

[Person]

Agree with sounding the bell here for our auto dealerships and the incoming changes. I'm not sure what the city can do here or is doing here to adapt. Feels like all dealerships are building the airplane/playbook as the are flying it, aside from Tesla. So perhaps not immediately obvious. Is this an incrimental change our systemic? Only time will tell, but safe to say worthwhile to watch this one closely.

[New Blood]

1. Many car manufacturers have pledged to do away with combustion engines in the next 10 to 15 years.
2. New buyers (yes, old people die along with their consumer habits) are no longer interested in purchasing vehicles in person.
3. While the autorow generates tax revenue needed for city services, it would be better suited for dense housing where families could live and thrive. More neighbors = more shopping, more children, better life for everyone.
4.Broadway chargers have high utilization rates.

[Paloma Ave]

1. New Blood is WRONG.

2. We do NOT need dense housing.

3. If you want to live in a dense housing area, move to Oakland or San Francisco.

4. Burlingame is great 'JUST THE WAY IT IS'.

[Barking Dog]

New Blood - you forgot to use the words equality and equity, which in today's world has the same definition.

[BillyGBob]

Sorry to disappoint you Paloma (not really), but auto row is already zoned to allow multi-family residential and offices above the ground floor. With a conditional use permit, non-auto commercial uses are allowed on the first floor. From a land use and transportation perspective, it's a very attractive site for mixed-use development. As auto retail becomes less-lucrative, I can easily see the land owners looking at TOD (among other things) there.

[Handle Bard]

It always amazes me when someone (lookin' at you, New Blood) makes some statement that is so clearly unsupported by da facts that are right in front of em. Hey New Blood click on the link Joe has put in the original post and then tell me that one-half of one charge per day per EV station is "high utilization". So many people walking around believing what they wish was true and avoiding discovering what is true.

[silverstein]

The devastating effect of mining Lithium article linked below: https://www.wired.co.uk/article/lithium-copper-mining-atacama-desert

[Barking Dog]

2 Northern Nevada companies lithium recycling

American Battery Metals- Incline Village
Currently building a huge facility in Fernley(approx 30miles east Reno).
https://americanbatterytechnology.com/

Comstock Mining- Virgina City
https://www.comstockmining.com/
https://www.thestreet.com/investing/comstock-mining-shares-triple-on-investment-in-ev-battery-recycler

[Joe]

I am reminded of a WSJ/ Holman Jenkins piece from Feb 9 titled:

EVs Are the Lowest Climate Priority

No matter how you slice the data, the car in your driveway is an emissions asterisk.

How much do the cars you and I drive actually contribute to emissions?

Don’t ask the Union of Concerned Scientists, an EV promoter habituated to quickly changing the subject to “transportation” emissions.
Many inventories also ignore the full range of greenhouse emissions, focusing on CO2 to foster a nevertheless-untenable illusion that passenger cars provide leverage over a global climate problem. No matter how you fiddle the data, personal EVs are a single-digit factor and belong low on any sane list of priorities.

If the Environmental Protection Agency is right, the average light vehicle racks up 11,500 miles a year and sits idle 96% of the time. The World Resources Institute says passenger vehicles account for 7.5% of all emissions, but this includes buses, taxis, etc. Rental cars average 31,000 miles. Other fleet vehicles average 23,000 or more. Heavy trucks average 63,000 miles. One finding that appalled fleet operators is that their vehicles spend up to 33% of their time idling, which is not how people treat their personal vehicles.

An electric car that’s sitting in your garage, not displacing a significant amount of gasoline-powered transportation but still sucking power out of a wall socket, can be a net emissions contributor when all is said and done.

----Law of Unintended Consequences----

[silverstein]

Destroying Entire Ecosystems and Permanently Destroys the Earth and is becoming the new “blood diamonds".

https://usa.streetsblog.org/2021/02/09/lithium-mining-and-the-hidden-environmental-costs-of-evs/

https://returntonow.net/2021/02/09/the-spiraling-environmental-costs-of-lithium-batteries-could-rival-fossil-fuel/

[Joe]

Another Econ lesson-- here comes the taxman:

As much as it tries to be the company of the future, Tesla TSLA -3.39% shares a present-day problem with the rest of us—it has to deal with the Internal Revenue Service.

Tax rules were a boon when it was almost the only electric-vehicle game in town. Its well-to-do customers got a $7,500 federal rebate and many states added to that. Now it has sold so many cars that customers no longer qualify for the federal subsidy. That matters more now that it is competing in the increasingly crowded mass-market category.

Buyers will face an even bigger hit if they choose to pay with bitcoin since the IRS will treat this as a sale of the recently appreciated asset. Say a buyer from California pays for its entry-level Model 3 sedan with $33,690 in bitcoin purchased three months ago. At the marginal tax rate of the average Model 3 buyer according to automotive research firm Hedges & Co., she would owe $4,056 at the federal level and $1,572 to California for short-term capital gains. Starting this year, cryptocurrency ownership has to be reported on federal returns under penalty of perjury.

The upshot is that, compared with, say, a rebate-eligible Hyundai Ioniq EV with an almost identical sticker price paid for in legal tender, the Tesla Model 3 buyer using appreciated bitcoin would pay 53% more after taxes.