The Race to Affordable Electric Vehicles

We are now entering a new age where electric vehicles (EV) are starting to gain momentum. This is the first stage of electrification. With that said, the EV market share is barely a 3% as of writing this while vehicles with internal combustion engines (ICE) own the rest of the market. The EV market has so much more challenges to overcome before reaching at least 30% of the global market share. Is it impossible for EV to reach 30% market share? I believe that electrification will eventually push EV sales up to 50% at some point in time. Electrification is much greater than what people understand, and it goes beyond EVs but that is a topic for another discussion. The market share of EV is very tiny, but it is growing year over year. I would not be too quick to make uneducated assumptions regarding EV companies. The EV industry had caught many short sellers off guard and analysts are falling behind on evaluation.

There are cities, states, provinces and countries promoting EVs and want them to replace internal combustion engine vehicles (ICEV) by the year 2040. This is in line with making the planet greener. We will see EVs taking up more than 30% of global market share very soon. A greater percentage is obviously expected by the current EV investors today. The next question is, how do we get there?

The very first thing we must look at is the battery. What makes EV so expensive is that batteries are not cheap to produce. Who are the leaders in making batteries more affordable? I think we need to look at the two companies who have a growing demand and revolutionizing the battery development to bring more EVs in the hands of consumers. These key companies are Tesla and Panasonic, but I will add a few more players working on affordability.

Engineering designs are also key to making EVs much more suited for mass production and efficiency. I will cover some of it in this article.

The Batteries

As discussed above, we have Tesla and Panasonic partnership to develop and manufacture their batteries. By manufacturing their own batteries in Nevada Gigafactory, Tesla has leverage on efficiency and lower production costs.

BYD is another contender in battery development. Just like Tesla, they benefit from producing their own batteries as well. They have many different ranges from short to long versions, but their short-range EV versions are very affordable and cheap. They have also been developing affordable longer versions using their new battery tech which will be discussed later in this piece.

The next one is from Nio. Battery as a Service or BaaS is a creative business model used in China to make EVs more affordable. Instead of buying EVs with batteries, consumers have the option of leasing batteries instead. The unique perks of Nio and BaaS is that owners will have the option to buy with or without a battery pack and upgrade their batteries when they require. Nio has battery swap technology in their vehicles which makes them very well suited for BaaS.

Xpeng Motors is also another company to offer BaaS. BaaS might become fully developed in China if it is adapted by more companies which is inspired by Nio.

Battery Recycling and BaaS

Battery recycling will probably become one of the biggest and key operations that would make BaaS a bit more sustainable as a business for lithium-ion battery packs. While we are waiting for the development of solid-state batteries, battery recycling would be able to recover some of the key elements for producing new lithium-ion batteries. The metals used on leased batteries can be reprocessed again into new batteries.

BaaS is an ideal business for lowering the cost of EVs and while this is perfect for China, this can also be greatly beneficial outside the country as well. BaaS would be able to support battery recycling businesses and vice versa. BaaS businesses can directly provide batteries in their last life cycle to companies recycling batteries and help provide battery manufacturers neccessary metals for battery production.

CATL and Brunp Recyling announced in a joint venture called Ningbo Brunp CATL New Energy back in 2019. The purpose is to recycle key cathode elements from lithium-ion batteries. Nio’s partnership with CATL on BaaS makes sense. CATL is giving Nio a big discount on batteries but they will make their profit from BaaS. Both Nio and CATL are sitting on top of a battery ecosystem.

Design and Efficiency

What makes Tesla unique from other makers is that they design all their components. From their chips to autopilot and from their batteries to powertrains. Compared to other EVs, Tesla vehicles have the advantage of using less components and parts to build their vehicles.

Due to Tesla using lesser parts, they are making mass production more efficient and they have specialized on this key process. Tesla is still in an aggressive development and they show lots of trials and errors. Even so, they still deliver acceptable performance.

Autopilot

The autopilot is a new technology and while it is under development, the price will remain high. Once this technology becomes more efficient, the cost of duplicating and putting it in every EVs produced will become cheaper. This is a technology that will not be exclusive to Tesla, but it is very reasonable to see it within all brands in the coming future as a basic feature.

Nio, Xpeng and Lucid also have their own autopilot tech today.

Kandi

Kandi is some what a cheaper EV for those who just wants an EV. Their vehicles are good enough to take you from point A to point B in a shorter distance. They have a 100-mile and 180-mile range cars. This may not be the best choice for everyone, but it is affordable and has the gas saving benefits of EVs.

BYD Blade Battery

BYD has produced cheaper medium range vehicles but do not forget, they are also a battery company with great resources to develop a higher range battery for EVs. BYD launched the Blade battery pack.

BYD claims to have created a battery pack that has a longer life-cycle than conventional battery packs and does not ignite. They claimed that the utilization of their battery pack has 50% more energy capacity and much cheaper.

This battery technology might transform the industry and make the costs of 400-600km range battery packs more affordable.

What makes this battery tech very impressive is passing a nail test. The battery pack was punctured by a nail and it has continued to perform its job. Most batteries that undergo the nail test are usually caught on fire.

My knowledge regarding the Blade battery is still very little but it is worth looking at. I believe that this will be a game changer to many EVs in China in terms of battery development and safety.

Expectations

We are seeing a very fierce competition among EV makers and are aggressively duking it out in a good way. EV companies have been developing so fast that many researchers and analysts do not know what is going on anymore.

The EVs that we know today may not be the same EVs 5 to 10 years from now. Car makers will no longer be car makers but will be in the energy business as well. In 2030, EV companies are probably going to be remarkably diverse as EVs requires a lot of industries put together in producing innovative EVs.

I would put Tesla, Nio and BYD on the top watch list and compare them with other EV brands. Why Tesla, Nio and BYD? Because these are the 3 brands, I know that are taking the most difficult tasks in the industry in terms of bringing EVs in the hands of more consumers. Tesla and Nio would be the busiest among all other companies in my view.