Living in Electric Times
Times are truly very interesting when it comes to all things EV.
I selected this month’s topic by popular demand. It seems that EVs are one of the most frequent topics discussed, when we meet with our clients. Many of us, including myself, have a significant professional curiosity about the future of transportation in general. We believe that more and more EVs and Plug-in Hybrid Electric Vehicles (PHEVs) are coming to the nation’s driveways, but are generally uncertain as to how this will all roll out.
So, if we look out over the next few years, what should we expect to see? I believe we will see more and more normalcy, as EVs become quite common, causing the negativity surrounding EVs to eventually fall by the wayside. EVs will become business as usual, a new electric normal.
Admittedly the number of EVs and PHEVs being sold today is still small. However, you might be surprised to learn the average sales tempo this year is just below 4,000 units per month, which represents much more rapid sales growth, this year.
This growth is occurring for the simple reasons that there are more and more electric products being introduced, while more consumers are starting to see the merit in them.
Early EVs faced fundamental challenges throughout many iterations, which hampered mass adoption and even earned them a bad reputation. I compare these early EVs to black and white televisions of days gone by, that some of you may remember. Sure, there was an image on the screen, but there was a lot to be desired about the whole experience.
I vividly recall several years ago, when I had one of these “black and white” EVs to drive on loan from the manufacturer. Each evening, before I went to bed, I would verify my travel plans on Google Maps to decide if the EV would make it or not. The limited range (well below 200km) made them a great second car, and only a decent primary vehicle, if your commute was reasonably short and predictable. The next generation of EVs offers ranges well over 200km, and some up to 400km, making range less of a concern for most.
CBB conducted some research earlier this year with IPSOS and found 26 percent of Canadians would consider buying an EV, while 21 percent would consider a PHEV if gas prices continued to rise. We had been on a bit of a holiday from high gas prices, which did not help the adoption of electric vehicles. Now that we are back to gas price levels approaching record highs, this should help “fuel” greater consumer interest in EVs and PHEVs.
A key drawback of EVs to date, is that they have been very poor at retaining their resale value over time. Of the five worst performers for retained value in Canada, based on Canadian Black Book’s data, three of them are EVs. This poor performance and resulting weaker forecasted residual values, make them more expensive to lease for consumers.
That said, I don’t think EVs will be at the bottom of the class for long. What I expect over the next 10-15 years is that EVs will inevitably become more normal, in terms of their retained value performance. Exactly when this happens really comes down to consumer behaviour. The market acceptance of hybrids is still an ongoing process and we have had those for almost 20 years.
Do consumers buy into the whole EV value proposition? That is the multi-billion-dollar question. OEMs are investing a staggering portion of their product development budgets, and converting factories to build EVs. At this point however, these moves are still highly speculative.
What makes me a confirmed optimist about the future of EVs, are the products themselves. At Canadian Black Book we are fortunate to be able to evaluate many vehicles, often before they see the showroom, which helps greatly in our forecast of future residual values. Every time we drive an EV they are so much better when compared to those early “black and white” EVs. I don’t think we are at the “flat screen high definition” stage yet, but we have leapt forward to full colour in a hurry.
There are several new vehicles that illustrates this sentiment, the Chevrolet Bolt being one of the best examples. It is priced at less than $45,000 and can go 383 km on a charge. Its driving experience and onboard technology is impressive and easy to use. At the luxury end of the spectrum is Jaguar’s new I-PACE all electric performance SUV, which has similar range to the Chevrolet, but drives like a Jaguar, and is fantastic. Tesla is now building and delivering “affordable” model 3s at an impressive pace, despite the frequent Twitter drama.
Hyundai has both an electric and a plug-in Ioniq and a 400km-range Kona coming. The Nissan Leaf, now in its second generation, has over 240km of range. Volkswagen’s eGolf will go 200km, and is packaged in that loveable Golf platform. Audi just announced the e-Tron, Mercedes-Benz the EQC, and Porsche allegedly is making an announcement soon.
There is a lot on the EV tv these days, the “black and white” days are now in the rear-view mirror. Interesting times are indeed here.