Opinion: Electric vehicles will be in limited supply until ICE cars run out

Ask: When does a car with an internal combustion engine work? become worthless?

Answer: When the cost of buying or leasing an electric vehicle along with paying for maintenance and miles becomes less expensive than using a free gas car.

That’s been the case for years for drivers who put in a lot of miles, but with higher gas prices, we’ve now reached the point where the cost comparison becomes more acute. Now it’s noticeable even to consumers who don’t drive a higher mileage range.

In a story this week, Bloomberg highlighted the plight of an Uber driver who had the option of keeping his extremely common ICE vehicle, the Toyota Camry, or renting a Tesla Model 3:

Barnes opted to rent a standard Tesla Model 3 for a month through Hertz, which has a deal with Uber Technologies Inc. that offers drivers a $344 weekly rate that includes insurance, basic maintenance and unlimited miles. Even after factoring in the cost of fueling the car, Barnes was paying roughly $450 a week for “his dream car,” less than the nearly $600 needed to fuel his Camry.

Obviously, Uber drivers operate at the higher end of the mileage spectrum. But there is much more to consider here. First of all, renting a vehicle from Hertz is rarely on most economists’ list of profitable vehicle management. There is at least one additional middleman involved, even if Uber is helping to subsidize that cost. $450 per week extrapolates to about $2,000/month.

But also, let’s acknowledge that the Uber vehicle in question, a Tesla Model 3, even in standard range configuration at $47,000 is not a cheap EV. A 2023 Chevy Bolt EV ($26,500) or Nissan Leaf (less than $20,000, after the full federal incentive for electric vehicles) with a similar range costs almost half. That changes the math drastically, since the purchase price of an EV is the outsized cost in an ROI equation versus a gas car. ICE vehicles typically cost about twice as much per mile to drive and maintain, and that was before gas prices skyrocketed.

With gas prices at $5 and not moving at least through the summer, more and more people are turning to electric vehicles. But, after many years of excuses from automakers that there was no demand for electric vehicles, now no automaker can make enough electric vehicles to meet demand.

We can’t make enough electric vehicles and prices will reflect that.

In ElectrekWe used the Electric Vehicle Best Price Guide to highlight the best deals we could find at dealerships across the country. We often saved our readers thousands and sometimes ten thousand dollars. As supply chain shortages have combined with gas price increases, we now cover cars that you can actually find on lots and are selling at or near sticker price.

Tesla, which doesn’t use a dealer model, has been raising prices for most of the past year, raising the Model 3, which once started at $35,000, to $47,000. The Model Ys have increased even more. It doesn’t seem to matter: There’s a many-month wait for Teslas, even with two new factories underway.

But I have to imagine that once the supply chain comes back online and more competition emerges, Tesla could lower its vehicle prices again. Even if not, cheaper electric vehicles will come.

Coming soon real and cheap electric vehicles

Chevy just dropped the price of its 2023 Bolts by $6,000 and has a $30,000 Equinox on the way. Ford CEO Jim Farley has championed the need for ~$25,000 budget electric vehicles while he set the base price of the Ford F-150 Lightning at $40,000. Hyundai and Kia sell $34,000 vehicles before the $7,500 tax credit. Volkswagen has been testing its ID.Life vehicle for as little as $24,000, and every low-cost Chinese automaker is salivating at the thought of entering the US market.

Sure, dealers are raising prices due to shortages, but that won’t last forever. At some point, the production of electric vehicles will begin to meet demand. Or will it?

Who would buy a $26,000 gas Chevy Equinox when a slightly more expensive electric one was available and cost less than half a mile? If the refined Build Back Better bill passes, electric vehicles will be even cheaper. The economy will keep electric vehicles more expensive than gasoline vehicles, perhaps until there are no more gasoline vehicles?

What keeps internal combustion engines running?

The biggest hurdle still to be overcome by electric vehicles is infrastructure, whether it is needed explicitly or implicitly. City dwellers and apartment/condo dwellers don’t always have access to full overnight charges, so a five-minute gas fill is still guaranteed. But if having a few hundred feet of 240V power lines is all there is to saving a few hundred dollars a month on gas, I think HOAs will do it (and some states have implemented “right to charge” laws for help tenants load options). It’s the same with street parking. The citizens will demand it.

But even us suburbanites need assurances that we can make the trip to grandma’s house 500 miles away or take the quintessential American road trip. Tesla owners can do it right now with little to no effort.

For other EV manufacturers, it can still be done, but sometimes it takes a bit more effort to find charging locations and hope they’re online and charging at optimal speeds. This is getting better, and the US government is even spending $5 billion on a national charging network, putting chargers every 50 miles on the nation’s interstate highways.

Return to basic

Let’s also not forget that electric vehicles are simply a better experience overall. Smoother, quieter, pollution-free vehicles make for happier drivers and, in the case of the Uber driver mentioned above, happier customers:

His new ride is also a hit with passengers. “They are much more generous,” Barnes said. “Usually I’m lucky if I get $1 to $3 tips, but now it’s $10 or $15, sometimes consecutively.” In all, he earned more than $2,600 during his 25-day rental, more than double the $800 to $1,000 he normally made driving the “Beast,” according to earnings screenshots he provided to Bloomberg.

That EV happiness can be seen directly financially. Doubling or tripling tips is another great benefit to the bottom line.

And while this article has focused primarily on the direct consumer costs of gas versus electricity, there are also the huge social costs of pollution. Fossil fuels are more expensive than you think, and even oil companies have started (pretending?) to support carbon pricing to bring fossil fuel costs more in line with reality. Society has to switch to electrified transportation sooner than most of the industry is ready. But that will take a decade, even if we move as many batteries as we can into electric vehicles, and this will affect the stock of electric vehicles for many years. The solution to that is for manufacturers to increase production of electric vehicles and stop production of gasoline cars, even sooner than they think is possible.

FTC: We use automatic affiliate links that generate income. Plus.

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