Triple Pundit’s BC Upham chronicled the partnership, recently announced, between Toyota and Tesla Motors to reopen part of the NUMMI plant in Fremont, CA, creating a coup for the green economy and the SF Bay Area as it establishes itself as the hub of sustainable enterprise and green jobs. For those of us who’ve watched green economy trends, the news was a bit of a surprise in its scale. One thousand workers will be hired to manufacture electric cars using Tesla’s industry standard EV technology, combined with Toyota’s manufacturing and marketing prowess. Toyota’s investing $50M in California-based Tesla as part of the venture.
What does the news really mean, on a grander scale, for the EV industry? Several factors have traditionally held EV’s back as a main ‘driver’, if you will, of transportation solutions. One is the cost of the battery. Tesla’s Roadster, its top of the line EV that costs roughly $100,000, has a 53 kW hour Li-ion battery that accounts for roughly half the cost of the vehicle. As technology improves, as it undoubtedly will for the Tesla-Toyota machine, that cost should come down pretty quickly. Tesla is certainly not on the only one pushing the envelop in this arena. The San Francisco Chronicle cited Chinese company BYD Auto as recently announcing a battery that produces power for half the cost of Tesla’s. BYD is starting to produce an electric car with a 48 kW hour battery with a price tag of $40,000.
The other main issue is the anxiety many drivers have about the range of these vehicles. Just like the cost of batteries, improvements in the range of EV’s are sure to continue. At what point does the range no longer matter? According to a survey by the US Bureau of Transportation Statistics, 75% of Americans drive less than 40 miles per day. Chevy’s Volt is engineered to go about this distance on pure electricity. The Volt, however, has the added benefit of a backup generator that you can fill with gasoline, so that if you do run over the 40 miles, the generator kicks in and can extend your range an additional 250 miles. Thus, in a simplistic way, 75% of your days will be powered purely by electricity.
One of the other major issues is the cost of these cars, which remains on the high end, for now. Many of us can’t afford a $100,000 vehicle. However, with federal and state tax incentives, the cost of some of the lower end EV’s will be in the low to mid $20K’s. And why not? Electricity can be produced domestically, from clean sources, and EV’s therefore play a critical role in reducing our dependence on foreign oil.
It’s already cheaper to ‘fuel’ an EV for a mile than it is for a typical gas-powered car, and that cost looks to continue a downward trend. Tony Seba, author of Solar Trillions–7 Market and Investment Opportunities in the Emerging Clean-Energy Economy, says that within the decade, we should be able to ‘fill up’ our electric cars for 53 cents.
The bottom line in this whole scenario is that the economics are starting to make sense for EV’s, which explains why Toyota would make such a large bet in the industry. It probably doesn’t hurt that Toyota is trying to win back some PR points after its recall failure, but a large investment like this is certainly not made just for PR’s sake.