Tesla Model S
While we’ve seen the availability of battery electric vehicles in Canada jump from five models in 2011 to 17 by the end of this year, the reality is much of that increase has been driven by the need for automakers to reach tougher fuel economy and vehicle emissions targets.
At the individual level, OEMs tend to have their own views on battery electrics. Most understand that they can’t afford to gamble on pure EVs as the wave of the future, rather they see them as one of a suite of technologies that will have to be employed to meet consumer needs, improve fuel economy, reduce emissions and ultimately preserve their ongoing viability.
Some see electric vehicles as a bridge technology to the commercialization of hydrogen fuel cells, though infrastructure challenges mean the possibility of widely available fuel cell vehicles is still some years away.
BANKING ON ELECTRIC
For companies like Tesla Motors however, the focus is clear — the future is electric. The Palo Alto, Calif., based-automaker recently announced plans to have a $5 billion battery plant — its Giga Factory — built in Nevada to supply batteries for its new mass-market intended Model III (scheduled for launch in 2017). There are plans to employ as many as 6,500 people at the new plant and it is said the state provided $500 million in incentives to lure Tesla to Nevada.
Beyond financial incentives, another reason for locating the plant in Nevada is the fact that the state is home to the only active lithium mine in the U.S., particularly important since lithium supplies are deemed vital to battery production.
With its Model S luxury sedan, Tesla has become the poster child for electric vehicle technology but costing between $75,000 and $125,000 in Canada (depending on the battery pack and options chosen), the Model S is by no means inexpensive.
Given the current cost of batteries — the Environmental and Energy Study Institute (EESI) pegged a 24 kWh battery pack in the neighbourhood of about $12,000 U.S. — battery costs are currently much easier to accommodate in high-priced luxury vehicles than those aimed at more mainstream audiences. The EESI did note however that battery costs could fall from $500/kWh today to around $125/kWh by 2025.
Tesla CEO Elon Musk is banking on the economies of scale accruing from his new battery plant to bring down the cost of batteries by 30 per cent (to around the $350/kWh range) as a key factor in being able to sell the Model III for about $35,000 U.S.
INFRASTRUCTURE AND INCENTIVES
Nonetheless, electric vehicle battery costs and range limitations remain key factors in hampering EV take rates among consumers. Polk registration data reveals that through January 2014, there have been almost 5,900 EVs registered in Canada. If we assume that most of these sales occurred in the last two years during which time 3.4 million new vehicles were sold in Canada overall, EVs and plug-in hybrids accounted for two tenths of one per cent of the overall market.
Another issue concerns the supporting charging infrastructure. Currently in Canada there are over 1,000 charging stations. Most are Level 2 charging stations that operate at 240 volts but still take 4-8 hours to fully charge the vehicle. There are a number of Level 3 stations that are able to charge a vehicle in between 20 and 40 minutes, though only around 200 locations are believed to currently exist.
Governments, notably in Quebec, B.C. and to a lesser extent Ontario have been working to improve the viability of EVs by investing in infrastructure projects to support them and providing financial incentives to consumers.
Ontario currently provides up to $8,500 while Quebec offers incentives of up to $8,000. Up until April of this year, B.C. also offered incentives of up to $5,000 towards the purchase of a pure electric or plug-in hybrid vehicle. The sales results tell the story. Through June of this year, Quebec has retained its sales leadership in EV demand selling 1,085 electric vehicles or 93 per cent of all electric vehicle sales in Canada for 2013. Through the same period, B.C. witnessed sales representing 62 per cent of total EV demand in 2013 while in Ontario, sales through June were 74 per cent of that same total.
Given the current high cost of batteries and ongoing issues concerning limited range, it is likely that EVs will continue to represent an overall small percentage of vehicles on the road for the foreseeable future. If electric vehicles are truly important from a public policy perspective then governments will continue to have to provide financial incentives for EV buyers as well as further investment in the charging infrastructure to ensure sales growth continues in this sector of the market.
