First Impacts of EVs

[T3slaOwner]

As EVs start to enter the mainstream of car buying, it seems to me one of the first effects we can expect to see is a lowering to the price of gas. Right now there are almost 700,000 BEVs on the road in the US and the number is growing rapidly. That is barely 0.25% of all light vehicles which amount to nearly 1 per person in the US. But how many ICE need to be displaced before the gas consumption is reduced enough to affect the price?

We had $4 a gallon gas before the economy dropped and enough people were out of work that the price of gas dropped to $2.

I'm wondering if this will create a reverse incentive to buy EVs? In say, 5 years when 5% of cars are EVs will the price of gas drop to levels cost comparable to the electricity used by an EV? Will that slow the introduction of EVs?

 

[ewoodrick]

The current prices have absolutely nothing to do with EVs. It's more tied to the world economy and politics. (and greed)

If gas gets cheaper, that's great, but that's "if". EVs will be getting cheaper as production increases, technology increases, and competitors appear. So it's pretty close to a given.

 

[T3slaOwner]

The current prices have absolutely nothing to do with EVs. It's more tied to the world economy and politics. (and greed)

If gas gets cheaper, that's great, but that's "if". EVs will be getting cheaper as production increases, technology increases, and competitors appear. So it's pretty close to a given.

I'm not sure you understood the point I am making. I'm not trying to consider current price of gasoline. EV use detracts from ICE use. As ICE use decreases, demand for gasoline decreases. As we have seen, the supply/demand curve for gasoline is fairly steep because of the expense of the facilities involved I assume. When you have hundreds of millions invested in a refinery, oil wells, distribution, etc. you want to keep it productive. So if demand eases the price goes down.

Sure EVs will become cheaper with higher volumes, but don't expect a model 3 to be much cheaper in 2023 than it was in 2018. Gas on the other hand may be well below $2 gallon by then or soon after.

I'm just trying to explore a thought.

 

[adiggs]

You might find the Shorting Oil, Hedging Tesla thread interesting in the Investor forum. This question of the timing, scale, and impact of EV adoption on the price of gas, diesel, oil, natural gas, etc.. has been an ongoing topic of conversation for a few years now.

It's kind of overwhelming to start at the beginning to try and read everything, but you might get a lot out of starting a few pages back - say roughly the beginning of the year, and reading forward from there. There's a whole mess of intertwined topics - we've had reasonable hypotheses that EV adoption will be involved in higher gas prices, lower gas prices, higher oil prices, lower oil prices, etc.. That's the challenge with dynamic systems - sometimes the obvious effect is drowned out by other impacts.


I think everybody's in agreement with the long run impact - the price of gas will go to 0 because there won't be any gas produced and distributed, because there won't be anything that uses gas. But that's REALLY long run - decades or centuries (think antiques that don't get converted to something else).

The really interesting question is what'll happen the next few years or a decade or so.

 

[T3slaOwner]

You might find the Shorting Oil, Hedging Tesla thread interesting in the Investor forum. This question of the timing, scale, and impact of EV adoption on the price of gas, diesel, oil, natural gas, etc.. has been an ongoing topic of conversation for a few years now.

It's kind of overwhelming to start at the beginning to try and read everything, but you might get a lot out of starting a few pages back - say roughly the beginning of the year, and reading forward from there. There's a whole mess of intertwined topics - we've had reasonable hypotheses that EV adoption will be involved in higher gas prices, lower gas prices, higher oil prices, lower oil prices, etc.. That's the challenge with dynamic systems - sometimes the obvious effect is drowned out by other impacts.


I think everybody's in agreement with the long run impact - the price of gas will go to 0 because there won't be any gas produced and distributed, because there won't be anything that uses gas. But that's REALLY long run - decades or centuries (think antiques that don't get converted to something else).

The really interesting question is what'll happen the next few years or a decade or so.

Ok, when I get some time I'll check it out. I don't expect EVs to be the total solution any time soon. There are no small number of use cases where people really don't want to spend the time charging and need more than 240 mile range (maybe a model 3 does better than my X, but no one uses 100% of their battery). There is also the issue of some people just not wanting to adopt a new technology now that the ICE has actually been pretty well tamed as a vehicle that we are comfortable with. Call it "future fear" reminiscent of the book from some time ago called "Future Shock". Or maybe think of gun owners, "you'll have to pry it from my cold, dead hands".

I am impressed that the technology looks even better for the trucking industry than for personal cars. They will need to invest in charging infrastructure for that since it's a whole other level of charging current.

An article about a year ago talked about how as ICE ramp down and EVs ramp up, the transition for repair centers will be very abrupt. First use of ICE will drop with older cars becoming the dominant ICE species meaning more repairs per mile, so less impact on the service centers. Then as the number of miles driven continues to drop the repair centers will see business go away quickly. Then it will be hard to keep your ICE running. I think this report talked about this happening by mid to late 20's, but I don't see it happening so quickly.

But then I didn't see cell phones taking over from land lines either. lol

 

[adiggs]

Ok, when I get some time I'll check it out. I don't expect EVs to be the total solution any time soon. There are no small number of use cases where people really don't want to spend the time charging and need more than 240 mile range (maybe a model 3 does better than my X, but no one uses 100% of their battery). There is also the issue of some people just not wanting to adopt a new technology now that the ICE has actually been pretty well tamed as a vehicle that we are comfortable with. Call it "future fear" reminiscent of the book from some time ago called "Future Shock". Or maybe think of gun owners, "you'll have to pry it from my cold, dead hands".

I am impressed that the technology looks even better for the trucking industry than for personal cars. They will need to invest in charging infrastructure for that since it's a whole other level of charging current.

An article about a year ago talked about how as ICE ramp down and EVs ramp up, the transition for repair centers will be very abrupt. First use of ICE will drop with older cars becoming the dominant ICE species meaning more repairs per mile, so less impact on the service centers. Then as the number of miles driven continues to drop the repair centers will see business go away quickly. Then it will be hard to keep your ICE running. I think this report talked about this happening by mid to late 20's, but I don't see it happening so quickly.

But then I didn't see cell phones taking over from land lines either. lol

The use cases where oil and refined products will live on is a long one, for a long time. The easy ones that get replaced pretty fast are what I think of as "on road" applications. LDV, commercial trucks (medium and heavy duty), buses (many kinds). The technology exists and is either in production, or nearly so, so that for these applications - in my opinion, it's all over but for the shouting. The timing is definitely open, but it's not > 50 years, and I think the time to bankruptcy for the creators of gas burners is < 10 years (in these markets).

The reason being that these are all capital intensive businesses with high debt levels - they need big unit volume in order to be profitable. A 10% decline in the market is enough to put them on the edge. A sustained 20% decline puts these businesses in contraction, consolidation, and bankruptcy.


Then there are the "off road" applications. For now, pretty much everything in the air and over water is still mine and burn based. There are signs of life and early use cases that are electrifying - short run ferries are proving particularly popular in Norway and that area of the world. Even aircraft have some signs of life for electrification.

But big aircraft running international routes - not yet.

Big cargo vessels moving cargos long distances over the ocean (Asia - Europe, Asia - Americas) - not yet.


Others I see that I think of as "heavy equipment". Take a beefy frame and attach an energy source and a tool, and some kind of wheel (tracks, etc..). Think forklifts, front loaders, road grinders, graders, back hoes, steamrollers. All the different agriculture equipment - combines, tractors.

A lot of that stuff never visits a gas station - the gas station comes to the equipment. How do we charge that stuff up?

There's also lighter duty tools - the hand tools are riding the improvements in battery tech real nicely - cordless drills, nailers, and so forth - the big pile of tools you can get to attach to your Dewalt battery being one example. That's doing well and will continue evolving. Then again, we never had a cordless, gas powered Dewalt drill / screw gun in the first place.

Other light duty tools are getting better, but have a ways to go. Lawn mowers, blowers, edgers, hedge trimmers, riding lawn mowers. Some of these start working their way up into the bottom end of the heavy equipment earlier (small tractors with mower attachment for example).


All of that heavy equipment - I don't see a pressing need to electrify it today. The technology will be improved by electrification of the commercial truck segment and get us ready to electrify. The problem I see coming is that when commercial trucking starts electrifying seriously, and with LDV pickups electrifying, that's going to start putting a big dent in diesel demand. That will change the economics of the diesel refining business, and the ones that are going to feel that most directly are the heavy equipment operators (both construction and ag). Or so I think.

As a thought experiment, pretend there's 0 electrification in heavy equipment, and 100% electrification of commercial and light duty diesel vehicles. That's a dramatically smaller demand level of diesel, as well as a big change in the distribution and rest of the supply chain. Somewhere down this path, I see a market flip from skepticism about this electric thing, to a dramatic need to DO SOMETHING for these markets.

Maybe they convert the engines to nat gas / methane. Maybe the tech gets there and they electrify. I don't know what it'll be - I just see a situation where the heavy equipment diesel burners will need to spend a lot more / gallon to get the energy they need if it's diesel (which means the rest of us will be spending more to buy whatever service they provide to the economy - food, roads, supply chain, etc..).

Balancing that, the finished goods and raw materials that the commercial trucks need to move - that stuff will be cheaper due to electrification