- EV sales across the global front are now gaining traction EV makers drop price to cash-in on the government subsidy and increase sales.
- In the recent past, China further extended the subsidy on EV purchase with scaled reductions from 10 per cent to 30 per cent, in line with its aim of putting 400,000 NEVs on the road by the end of the year 2020.
- The strategic increase in EV subsidies across China came in the limelight of its target to improve the air quality more in 2020.
- Apart from that, the ICE engines and EV motors are now approaching a price parity, thanks to high subsidy and ever-changing battery chemistry.
- Tesla million mile and GM Ultium could be the potential game-changer ahead.
- The growing concerns regarding climate change along with improving cost of EV engines and rising subsidies are turning out to be the trident of the EV industry.
The EV market is growing with the extension of subsidies on a global scale, cushioning the demand.
China further extended subsidy on EV purchase with scaled reductions from 10 per cent to 30 per cent over the next three years for EVs in the price bracket of USD 42,400 a unit.
The recent increase in subsidies on EV sales by China traces back to early 2019, when the scaling back of subsidies supported consumption, and many industry experts believe that the recent move would result in the same and support the EV adoption going forward.
The anticipation of the industry players seems to be hitting the bull’s eye with Tesla reporting a record sales of Tesla Model 3 in China during May 2020.
The strategic increase in EV subsidies across China is in alignment with its target to improve the air quality more in 2020.
- China has decided to cut its smog levels further in 2020 by putting more new energy vehicles (or NEVs), trimming the number of diesel-operated vehicles while tightening supervision of vehicle and refined oil products emissions.
- In 2019, the red dragons recorded an average concentration of 42 micrograms per cubic metre of PM2.5 smog particles, which represented the lowest level since the country started the anti-air pollution campaign in 2016.
- However, despite a considerable improvement in the quantity smog particles, it remains significantly high against the guidelines of the World Health Organization (or WHO), which calls for a maximum of 10 micrograms in per cubic metre of air.
In February 2020, the Beijing Municipality government announced that the country would make best efforts to improve the air quality while suggesting that the annual PM2.5 concentrate along with three-year average continued to decline.
- Moreover, adding to the announcement, the government body also mentioned that it plans to put 400,000 NEVs – plug-in hybrids, battery EVs, and hydrogen-powered vehicles on the road by the end of the year 2020, representing an increase of ~ 77.78 per cent against 225,000 units that were recorded in 2018.
- Additionally, Beijing aims to speed up the elimination of high-emission vehicles by replacing the diesel-fuelled engine with NEVs while strengthening the supervision of in-use vehicles though a check on a minimum of 1.5 million heavy-duty diesel-powered trucks.
China also plans to impose strict standards on gasoline and diesel, calling for lower olefin, aromatics, and polycyclic aromatic hydrocarbons contents.
Likewise, the U.K. has also fast-tracked the ban of its diesel-powered vehicle.
To Know More, Do Read: U.K. Fast Tracks Ban on Petrol and Diesel Engines, ASX Lithium Stocks Top Gainers
ICE and EV Engines – The Price Parity
The cost of EV power train is one major challenge that the industry is facing, as the cost marginally exceeds the running cost of the internal combustion engine (or ICE); however, the changing battery-chemistry and commitments of global EV behemoths such as Tesla to reduce the running cost of EV engines could propel the demand for EVs ahead.
Tesla produces ~ 10,000 units of EV a month in China at its Gigafactory, and in the wake of a change in the subsidy policy across China; the Company had reduced the price of its Model 3.
- Furthermore, Tesla is also committed to reducing the cost of its vehicle by adopting new battery chemistry, eliminating the large portion of cobalt from the picture while adding more lithium into it with a large running capacity.
- The industry believes that the changing battery chemistry in Tesla models could lead to a reduction of USD 100 a kilowatt hour, bringing more parity in the ICE and EV engines, which in turn, could support the EV demand.
Apart from Tesla, its competitor- GM is also moving front on the same road with the development of its Ultium batteries.
To Know More, Do Read: Tesla Million Mile Battery, GM Ultium, and the Position of Lithium Mining Community
The declining prices of EV in the wake of manufacturing cost-efficiency along with high global subsidies now seems to be unfolding on the global scale, with the EV sales across Europe and the U.K. picking momentum during March 2020 quarter with a drop in prices from EV makers.
- Volkswagen dropped prices on the e-Golf to USD 27,000, which furthermore witnessed considerable advanced booking, months ahead of its release, reflecting that the price parity between ICE and lithium engine gap is narrowing in Europe.
- Furthermore, GM gave USD 10,000 discounts on the e-Bolt model, which is also reflecting that the crossover point for ICE and EVs is much closer.
In a nutshell, the growing concerns regarding climate change along with improving cost of ICE engine and rising subsidies are turning out to be the trident of the EV industry.