A new study from Boston Consulting Group shows that OEMs are in an interesting squeeze, needing to lower prices and improve performance in order to attract the next tier of EV buyers while also needing to make the vehicles profitable. According to this same study, only one car actually meets the median demand of carbuyers and it’s not a Tesla.
You like that little tease? Here’s something that doesn’t need a tease at all: low-interest rates have changed the behavior of car buyers and we’re probably not going back anytime soon.
I think I’m gonna wrap up this Morning Dump with a little Tesla union news and a Hyundai-Kia recall.
The Next EV Buyers Want Fast-Charging, 350 Miles Of Range, And Sub-$50k Cost
Boston Consulting Group is yet another one of these big consulting companies known for parachuting in, like, overpaid and under-experienced Wharton MBAs to tell companies what to do. Anecdotally, BCG isn’t as bad as, say, McKinsey, but always take anything a consulting company says with a grain of salt.
That throat-clearing out of the way, I think this recently published analysis/survey from BCG is pretty good and there’s a lot I want to dive into because it asks the important question: What do the next tranche of EV buyers need from an EV in order to be persuaded to actually buy one?
This is a fun graphic, even if it takes a second to grok. BCG identified the “next-wave” adopters of EV buyers and asked them what they want out of their next EV. As the subhead here points out, the big things are cost (duh), range (duh), and fast-charging (a little less duh).
The actual price people seem willing to accept is a little higher than I’d have guessed but represents that people strongly considering EVs seem to have a higher income profile than those who are less inclined to have an EV next. The range requirement is about where I’d expect it to be and is a real bummer because most people don’t really need 350 miles of range. The fast-charging is a nice-to-have, though if you can charge at home (as most next-wave people in this study can) it shouldn’t be as big of an issue.
Put all of this together and the Model 3 Long Range is super close to being what people want, but it’s actually the Hyundai Ioniq 6 SE Long Range that fits the bill. More next-generation EVs should meet many of these requirements, which is a good sign for adoption, which BCG puts at about 40% by 2030, which isn’t quite to the 50-60% that some automakers might need to reach 2032 EPA regs.
This graphic above, based on the BCG survey, shows the price-performance frontier, and while there’s a nice median at about $50k, note that there are a lot of people who seem to want a lower-priced vehicle and will be able to stomach slightly lower performance.
So, back to the headline (credit where it’s due, Automotive News had a similar one first), how are automakers going to do this if they keep losing money? From the analysis:
We estimate that most OEMs currently lose around $6,000 on each EV they effectively sell for $50,000, after accounting for customer tax credits. We also estimate that OEMs will only be able to close half of this cost gap by making the right technology choices; economies of scale as automakers ramp up production will help, too, but they won’t make up the difference. Then there is the impact of looming Chinese imports to consider; market prices will likely contract further, exacerbating the profitability challenge. At some point, it will become untenable for OEMs to lose money on every vehicle they sell.
Closing the cost-profitability gap will require help from elsewhere, whether through more aggressive efficiency programs, additional public support, or both. Policymakers could consider linking financial incentives to total range and range efficiency to incentivize OEMs to invest in the areas that matter most to customers. The charging ecosystem will also have to find a way to smartly invest in making a network of 350-kilowatt chargers more readily available and reliable, recognizing that the demand for these chargers may eventually dissipate over the long term as vehicle range increases.
All of that is reasonable and it also underlines an interesting point that doesn’t get talked about as much. EV adoption, at some level, requires more fast chargers. The more fast chargers, in theory, the more EVs we buy. The more EVs we buy, the more investment, the more investment the more range might increase, the more range increases… the less people need these fast chargers.
While granting that a lot of the analysis makes sense to me, I do think that Ford and Tesla’s plans to make a $25k EV that probably offers under 300 miles of range is what’ll get the next-next group of buyers.
How Interest Rates Are Impacting Car Buyers
Under-discussed reason why car prices have risen so much:
A decade of low interest rates that permanently shifted car buyer behavior.
Jessica Caldwell, Head of Insights at @edmunds, breaks down the issue:#EdmundsPartner pic.twitter.com/4bSLFpiBD3
— Car Dealership Guy (@GuyDealership) March 20, 2024
Forgive the Twitter embed video (you can also see it here), but I saw this post this morning from Car Dealership Guy and it’s important. Also, Jessica Caldwell from Edmunds, who is making the points, has historically been one of the best analysts in the automotive industry.
What’s she saying here? If you don’t want to watch the little video, which appears to be some sort of paid partnership with CDG, here’s a quick transcript of the important part:
“Consumer preferences have changed over the last decade because we’ve gotten used to lower interest rates, which got people into bigger cars because people always want–they want more amenities, they want more features, they want bigger in size.”
I’ve set it once before, but it bears repeating now: Buyers mostly care about monthly payments. That’s it. If a consumer was paying $600 a month for a Ford Explorer and, in a low-interest rate environment that same consumer could get an Expedition for the same monthly payment (maybe over a longer term) then they likely took that deal.
Now, with interest rates going up, the inverse is happening:
“They want the same thing and all of a sudden their dealer is telling them it’s $200-$300 more and they’re like “I have that vehicle, it’s the same exact one, why is it $300 more?”
Interest rates can have a profound impact on the market, unsurprisingly, and the egg can’t really be unscrambled at that point. It’s not easy to convince someone to go from the Expedition back down to the Explorer, or from the CR-V back down to the Civic. Which means…
So I think prices are going up, but the thing that can normalize things is more incentives…. but are we ever going back to an average industry cost of $30,000? No, that’s not going to happen.”
Not without some sort of dramatic change, at least.
Most German Tesla Workers Vote Against The Union
The way German labor works is a little different than the way it works here in the United States, which is a lot more binary. In Germany, any company with more than a handful of employees is required to have a works council if the workers ask for it.
Generally, auto plants have works councils represented by IG Metall (the German equivalent of the UAW) candidates. In the latest works council election at the Tesla plant near Berlin, the non-union candidates performed better than the union-affiliated candidates according to Reuters, though this doesn’t mean that the union didn’t show some gains:
The IG Metall union still expects to take 16 of 39 seats, making it the largest group in the new Tesla Gruenheide plant works council, the union said in a separate statement.
The top German trade union had hoped to gain greater influence over pay and working conditions after it accused the U.S. carmaker of inadequate safety provisions. It had put forward 106 candidates in an attempt to get a majority.
No one asked me, but putting forth 106 candidates for 39 seats seems like a bad strategy.
Hyundai-Kia Recall 140,000 EVs Over 12V Battery Failure
In my experience, the weakest part of any electric vehicle is not usually the main battery pack. It’s the 12-volt battery. Just a normal lead-acid 12-volt battery.
Why do these need to exist? The ECU, stereo, et cetera in an electric car (or any car) don’t require the kind of insane high voltage needed to move a car and you wouldn’t want that much voltage going to your stereo (plus all the off-the-shelf parts are 12-volt). Ergo, the most obvious solution is that almost all electric vehicles (Cybertruck aside) still have a regular 12-volt battery. When that stops working, the whole car stops working.
It’s no surprise then that Kia/Hyundai/Genesis is having to recall a bunch of its vehicles to fix an issue with the Integrated Charging Control Unit (ICCU), which has been failing on cars and stopping the 12-volt battery from charging.
From the recall safety report:
The Integrated Charging Control Unit (ICCU) may become damaged over time from transient high voltage and thermal cycling. A damaged ICCU may not be able to charge the 12-volt battery which can discharge gradually while driving with progressive reductions of motive power. If the driver ignores the warnings associated with the discharging battery condition and continues to operate the vehicle in a reduced power mode, the vehicle may eventually experience a complete loss of motive power.
The solution to this problem is to replace the ICCU/ICCU fuse if there’s any sign of damage and update the vehicles to the new software, which is designed to avoid this problem.
What I’m Listening To While Writing This
I was immediately a fan of Tierra Whack when her first album, “Whack World” debuted in 2018. It’s been a while but we now have “World Wide Whack.” It’s great. There’s a super David Byrne art school energy here I love, and I can’t help but be charmed by the accurate VW dash at the end of this video. If you like this video watch her short film from five years ago.
The Big Question
How much EV range do you need and how much EV range do you want if you want an EV?
I’m really curious about that $6K/vehicle number. Both how they got it (because Tesla seems to be able to make a decent profit with some of the lower prices out there) and more importantly whether they mean a marginal loss per vehilce or amortized loss across the entire program. That is, are they actually losing $6K per vehicle or do they have massive R&D and setup costs from standing up a whole new type of drivetrain and vehicle as well as lumping in the costs of overhauling their infotainment systems, amortized across a relatively small number of vehicle sales so far. In the same way that Toyota “lost money” on the first-gen Prius at first but the program turned profitable a few years later just from total sales (and probably wildly profitable after the tech was used for the RAV4 Prime)
A little late but some comments on the consultant generalizing and especially the Wharton MBAs parachuting idea:
A lot of the partners involved at the big 3 consulting firm Detroit offices come from OEMs and end up at them. These are the ones leading the work, and they’re generally very sharp and experienced in automotive. They make a lot of money
The associates are likely working at whatever office they got recruited to and would be the closest thing to the parachuting MBAs…but they don’t have MBAs. They do grunt work and don’t lead much at all aside from producing ideas. They make engineer money
The MBAs/PhDs in Detroit offices constituting the “consultants” often have automotive backgrounds, particularly in engineering. I have met a number of them and they are usually top engineers that got bored after mastering the engineering skills. Moving up in engineering organizations isn’t very financially rewarding but the responsibility is immense. They make good money but far from overpaid.
The point missed here is that big 3 all hire experts in a separate research department, so mentioning consultants here is like teasing GM ignition switch engineers when discussing a GM credit topic. And, the research department is staffed with industry experts, sort of like a Monroe (who the website has no problem complimenting due to the fact that DT likes the one guy…)
I’m really getting tired of hearing the same old regurgitated bullshit claiming automakers need a 12V battery because the normal electronics run on 12V.
Every one of us are messaging on devices that take 110-240V (yes AC) and downvolt then to between 5 and 20V DC (for charging/initial electronics), and yet the cpus/SOCs in all of our laptops/phones/computers run on 0.8-1.5V (more on the lower end of that).
DC to DC conversion has to be done regardless to jump down to a voltage to charge the “12V battery”, there is no fundamental reason why that can’t directly be fed from the HV system (with capacitors etc to buffer if necessary).
Please stop parroting that nonsense.
It’s not even close to nonsense, it’s good engineering practice.
Designing a step down transformer for the HV system that will work flawlessly with the existing HV and LV power busses even in standby mode is a non-trivial design exercise that will add weight, complexity, and cost for very little benefit. 12v battery powered architecture is already everywhere in the automotive world and uses known high-reliability components that can be purchased off the shelf. There is a reason that every life safety critical transportation application from trains to planes and submarines uses a separate LV battery powered bus: it’s statistically proven to be a more reliable source of power than having to step down from a HV source.
It is fundamentally untrue that a 12V battery is required, which is what Matt and other authors here are saying all the time. Yes, I am obviously aware that buffering the connection is potentially advantageous (as I mentioned, can be done via capacitors even if you needed to). And I am aware that lead acid batteries are mature and cheap, and so it is an easy solution.
It is not required. End of story. And it certainly wouldn’t need to be 12V. There is nothing technologically special about 12V DC, and almost (I would say every, but I could be wrong) every single electronic piece connected to it has downconversion for IC purposes. Displays do not actually run at 12V etc.
The sheer inertia of the assbackwards electrical and communication systems in the automotive industry is mindboggling.
I typed out a long response to this, but now I realize it’s completely pointless, because it’s obvious you have no idea what an electrical bus is, or why and how they are used in literally all modern electronics and electrical systems. Suffice to say, your proposal of stepping down directly from the HV battery to power everything on the car is technically possible and yet hilariously terrible engineering that would ensure an utter disaster of a car.
I’ll only defend Matt here, and point out that in neither this article nor any of the others does he actually say 12V is not required (as you claim), simply that it is the weak link. Which is the whole point- because 12V components are cheap and widely available.
You have missed something very critical in your analysis here: Cars spend most of their time parked, and they still need 12V power during that time so that you can do important things like lock the doors and run alarm systems. Providing that power via a DC-to-DC converter 24/7 would be inefficient and result in significant range loss when the vehicle is parked, in addition to the electrical safety issues of having the HV battery connected when it doesn’t need to be. Lead-acid batteries are a mature and effective solution to provide 12V power when the car is not running and they’re not going anywhere.
See above commentary. But regardless, I’ll additionally note that the way Tesla has their 12V powered is much better than the awful examples of some others here. I (and many others) have had the batteries fail, and other than a warning + indeed higher passive draw, the effect on the cars functioning is nothing. I’m sure even they have some incredibly dumb electrical issues somewhere, but that is not a hard issue to resolve in a way that only uses the benefits of the LV battery buffer and minimizes the drawbacks.
Like most people according to pro-EV auto journalists, I may not need 350 miles of range in any EV I would consider, but most vehicle owners don’t need more than 150hp to get where they’re going either, but most of us demand higher horsepower for the capability of greater performance, else we’d all be owning Subarus.
In the case of range, I’d want enough to allow me to drive multiple days between charging if I so desire. Sure, It’s lazy FUD to early EV adopters since it only technically takes a few seconds to plug and unplug, but so what? Those of us who prefer to exit our vehicles and forget about it will find it less convenient to manage daily charging of two and possibly more household EVs in crowded garages not designed with EV charging in mind versus a quick stop at the gas station of our choice every few hundred miles or so.
In any case, I like the Ioniq 6, but its small trunk gives me pause. Sure I may not need more than 11 cubic feet of trunk space on a day-to-day basis, but I want it.
This. And if I’m shelling out that much money (or a monthly payment) on a car, it needs to do everything I *want* it to do. Not just what I *need.*
I really like the idea of an EV for a second car. I’m going to need knobs/buttons for HVAC, radio, heated seats, cruise control, a standard turn signal stalk. And most important, door locks and latches that don’t require electricity to open.
I think I can manage 200km of range.
But, I’m not buying an ev until the tech is settled down a bit. I feel it’s still highly likely a new tech pops up in the next 5 years making almost everything else redundant overnight. I’m not really prepared for that kind of loss. So we’ll prob end up with a hybrid of sorts, or just drive what we have in to the ground.
A real world 150 miles would work. I have a Bolt, it’s ideal range is about 250 miles, in the winter it gets down to around 180, and I live in Charlotte so not seeing the super cold temps.
This is all guestimates from the guess-o-meter, I haven’t tried driving it as far as it could go in either condition, and I suspect the winter guess is a little lower than true for the climate.
Long way to say a posted 250, and then you can skip a day or two of charging if you have to, not worry so much about winter range hit, go on the occasional longer drives, etc.
350 seems a bit much, especially if you have a decent charger, unless all the above being applicable and we’re talking a lot of highway and then it’s real range in the winter on the highway would be more like 200-250.
As an anecdote, we took the Bolt on a Saturday trip to a fresh fruit/farm place down in SC on 601(speed limit 55 😉 ), about 65 miles away, it was fall so decent range weather, think we actually didn’t charge the night before, and we made it there and back no problem.
If we had something with 150 mile range, that’d have been VERY tight, wouldn’t have tried it. I note this as I had considered getting a compliance EV(Soul EV, e-Golf, Focus EV) when we got the Bolt but pricing at the time was crazy and the newer compliance cars with just over 100 miles of range cost as much as a Bolt with 250(probably due to the recall).
So if I’d have gotten one of those, then there’s no way I could drive an hour away to get some pumpkins for fall season on a fairly spur of the moment thing. And Americans kind of like the ability to just go for a road trip on kind of a spur of the moment thing.
If the range is big, I won’t worry so much about charging speed. If charging speed could be better, I wouldn’t worry about range much. But ideally, I’d like to be able to travel from my home in Tucson up to Phoenix and back on a single charge, which we’d be looking at 250 to 300 depending on where in Phoenix and number of stops.
There is a black barber shop in my city that just got some fast chargers installed with a government grant. This is in a sketchy neighborhood with no EVs. When do the sales start and at what point does that government spending money on chargers that no one is going to use become a boondoggle?
The CNG tank (filled with CBG = compressed biogas – same shit) in my current car is good for 4-500 km on highway. It also has 9 l gas tank for the times you run out, which has only happened a few times. And there are at least 10 times more fast chargers than CNG/CBG stations, meaning that the 400+ km electric range would be plenty. In that case the 5-80% recharge would net some 300 km more range, which would be fine for one day of driving.
But the winter… 300 km would be enough, probably. So with perhaps 250 wh/km — 75 kWh?
Ergo: 60 kWh usable would probably be enough, 75-80 kWh would be fine. But of course we are talking about a car here, not a truck.
And for reference, the location of this scenario has the lowest population density in Europe, so the much coveted public transportation is available in some form within and between towns and cities. Elsewhere – not so much.
In America we would call it compressed renewable methane. Biogas still has 30% CO2 until it is removed and upgraded into renewable methane. It would probably still work in your car but the range would drop by 30%.
edit to add:
renewable natural gas is also used so the acronym would probably just be CrNG
Interesting. CBG is probably used for marketing purposes, to signify the interoperability. In practice, biogas (or some translation) is the term used most.
I think it is very interesting how words can mean slightly different things in different parts of the world. Especially technical terms where this could cause problems. If you gave me a tank called CBG or biogas I would assume I need to open up the valve to let in 30% more fuel.
From a US prospective:
raw biogas (contains sulfur and CO2) -> biogas (contains CO2) -> RNG (full interoperability pipeline grade)
Can you look at how the EPA rates EV range it’s nothing like freeway range. Folks see an EPA rating of say 310 miles for an EV6 but it’s actual freeway range in my experience is not much more than 200 miles in SoCal temps in January.
I’ve actually given extensive thought to this because I’ve been looking at getting an EV for a second car for quite a few years now. Minimum I would consider is 250 miles. What I actually want is 150 miles so I can make round trips to the city 75 miles away, but to get that comfortably I need 250 – 50 for winter weather – 50 of buffer for really bad winter weather or any other unexpected side trips and such.
Ultimately I went with a hybrid because my charging situation isn’t great for an EV and I couldn’t justify spending the money on an EV when there is a much cheaper alternative that works better for me. Plus my used Prius was pretty much at the bottom of the depreciation curve so when I sell it some day I’ll probably get back almost what I put into it. 🙂
I’m still unable to grok the reality people are willing to pay $50k+ for a daily driver.
They’re not, really. They just sign on the dotted line when the dealer and finance company offers them a stomach-able monthly payment.
“Closing the cost-profitability gap will require help from elsewhere, whether through more aggressive efficiency programs, additional public support, or both.”
So EVs can’t be sold at a profit unless the government starts forking out tax payer dollars to offset the cost. Sounds like a rock solid fiscal plan we got here.
If they took all the money that currently subsidizes the oil industry and put it toward EV costs, it could easily happen.
I think the government shouldn’t be subsidizing any industry when they tax me like they do… BTW, did you know that of the $20.2 billion spent by the US in energy subsidies, $15.6 billion went to renewable energy and $3.2 billion to fossil fuels. This yields a split of 77 percent of energy subsidies going to renewables and 16 percent going to fossil fuels (the remainder go to nuclear and other energy types). Fossil fuels produced 80.8 quadrillion British thermal units of energy in 2022, while renewables produced 13.3 quadrillion—meaning that, on average, renewable energy is subsidized 29 times as much as fossil energy. Your talking point doesn’t really capture the fact that your electric cars desperately need those “oil industry” subsidies in order to have electricity to charge them. Not to mention the entire renewable energy craze is being propped up by a US government that is so insanely broke that we need scientific notation to capture the scale of the national debt ($34.55×10^12).
TLDR: Let’s not subsidize anything when we don’t have any money.
Contrary to what the IMF really, really, desperately wants you to believe, the oil industry is not actually subsidized to any significant extent, at least in the US and Europe- and it doesn’t need to be.
You can play the “indirect subsidies” game all day long (which is where this canard comes from), but actual direct payments to incentivize the behavior of oil companies are essentially zero, so there is nothing to redirect to EVs.
I have a 2017 Bolt and a 2018 Model 3. The Bolt did indeed stop working when the 12-volt failed. The Model 3, on the other hand, kept on going. It had an ever-present on-screen warning, and a couple convenience systems like the USB ports stopped working, but the car stayed entirely drivable.
Need/want 300 miles, at least. Why should I be satisfied with less? I hate being told I “don’t need” 350 miles of range. My ICE car can take me nearly 600 miles on a tank. Granted, I can’t refuel it while it’s sitting in my garage, but I can refuel it in a couple of minutes and with far less frequency and planning than I would need to charge some 200 mile EV. I’ll be buying a new ICE vehicle this summer, and likely another one in year or so (maybe some sort of hybrid). A full EV is likely years off for me, hopefully by then these kinds of compromises will be in our rear view mirrors or backup cameras.
We had Arthur Andersen Consulting come in to “help” us with intregration a new document writing software (Interleaf). It was only found out after they went away that they didn’t even know about a really powerful piece of the software which could have reduced our effort for every document we produced. Yeah, I too am significantly sceptical of any “consulting” company and their actual real expertise. Well, other than thier skills at extracting a significant chunk of funds from my company.
Arthur Andersen, BCG, Accenture, McKinsey, and the rest of them can all suck it. (McKinsey can suck it and choke on it.)
The ~250 miles of range we have right now works quite well, what I would like is faster charging (say 150 kW consistently, instead of 50 kW, and less when even chilly) and more charging stations, especially in remote locations. Driving out by Hite, UT to do some slot canyons last fall with the 3 year old was a bit nerve racking, when we had over 200 miles between charging spots, but just a single 25kW charger out there at a ranger station would make it fine. If charging infrastructure was fully built out everywhere, and stops were 15-20 minutes instead of 45-60, I would be fine with closer to 200 miles of range.
Yes. I’m in Salt Lake and recreational travel is the question. Going to Hite is a great example. I want to be able to get from SLC to Boulder (Utah). Right now my thought experiment is the 100 miles from a fast charger in Richfield to Boulder, maybe in cold weather, over two passes, one I think about 8500 and the other 9500 ft. There’s a level 2 in Boulder but I still visualize my waning percentage as I climb those hills. And yes, the case is for more chargers, not more battery.
I’m not familiar with that particular drive, but a couple passes at under 10k feet over 100 miles doesn’t sound like an issue as long as you can charge at the L2 in Boulder. I’m used to driving just under 200 miles to my parent’s house, over 5 passes (2 small at 9k feet, 3 big at close to 11k feet), and usually don’t charge even in winter, snow packed conditions. Regen on the way down is great (never touching the brake pedal over any pass in CO is normal), what really matters is the overall net elevation change, and the speed. Lots of steep hills that ends at a similar elevation, but has lower speeds can easily give good range, better than advertised. It certainly takes some getting used to though, first couple trips over 11k mountain passes were a bit worrying years ago.
Thanks for replying.
I’d be pretty happy with 200 miles of real-world range if they could make a car under 3500lb and $40k that was Supercharger-compatible and whose interior wasn’t “minimalist” (i.e. cost-cut). If the Ioniq series can get under that weight in 2-3 generations (they’re already fairly close), it’ll be a very tempting proposition for me, especially if they offer some sort of N-package suspension/seats along the way.
But really, I’m not their target market, it would take a major lifestyle change for me to buy a car that’s less than 10 years old, so I don’t think manufacturers should listen to me.