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jhm, there are a lot of consumers out there. If the world auto industry builds something like 100 million total per year and plug-in sales currently at under 300K per year, then it is a .3% replacement rate per year currently, and growing. A 1% replacement rate will never replace ICE vehicles. It must be over 10% ongoing to make a substantial dent - that is 10 million plug-in vehicles sold per year worldwide. That also means 15K to 20K new public charge points per year at least, hopefully most DCFC. If the preference is long-range BEV, then such charge points need to be a loss-leader to attract consumers (they see them "everwhere" and can trust the infrastructure).

Consumers act on value exchange. If EVs are cheaper than ICE, consumers will still need lots of charge points (DCFC is the primary convenience factor and still does not beat their fast gas station "recharge"). This is not a bear-outlook. It is simply looking at the consumer acting with Ayn Rand's supposition that people are selfish and act in their own interests. Demographically, the income spread between upper and lower continues to widen and the number of people who can afford something beyond the ASP of ICE is lessening. It will be important to sell EVs below the ASP of ICE to push growth faster.

It took 100 years to get to where we are in terms of ICE proliferance. Change is coming - primarily in the form of battery-assist (BMW's angle, along with Ford/Chevy/Volvo). Give people their first <n> miles electrically and their total annual gas usage will drop 50-90%. The biggest danger to BEV is very high density batteries allowing for stuff like the Volt to become $25K MSRP with 100 mile range before engine kicks in. The value of that is "stronger" than if Tesla went to a 200 kWh battery to offer 500 mile range.

In terms of this thread, the short-term price movement is basically a gamble position on the speed of new-proliference of BEVs. Some bet on faster build-out than others, some look at it like "that would be hard to do" and so on. The gamble is with our grand-children's lives and the outcome will not be seen for a long while. I guess it is basically a quasi-religious call or put on the future. I am looking at it rationally and feel that it is not the automakers fault that people do not want to pay more to buy electric and yet have lower cost of ownership. Simple economics right now are keeping price-parity at odds with what the consumer chooses to do. The consumer says "we got gas now" and it's cheap and they gravitate toward that. Economically, If Model S60 were the same selling price as a Ford Fusion ICE, I think the Fusion would still out-sell the Model S (consider no production constraint), for example, due to the mindset of the consumer.
 
Bonaire, I understand these long term dynamics, and I have even posted mathematical growth models in the long-term thread to help us understand how long it will take for things to play out. The basic thing to keep our eyes on is the annual growth rate for Tesla and other plug-ins. If Tesla is able to grow by 40% per year or faster, then by about 2023 new ICEV has peeked and begins to decline while EVs pick up more sales than annual growth in the market. This will be a crisis point for the auto industry when investors really that conventional auto sales have no growth and will be in pertetual decline. Automakers lagging in the development in electrics will lose serious market share and go into finanial distress. But through the next decade the total fleet of conventional vehicles is still growing, and this is the core segment for demand for gasoline.

This fleet, however, ages and reaches its peek around 2032. After that the fleet of gas burning cars goes into perpetual decline. This is the crisis point for the oil industry; demand for oil falls by several percentage points every year. I don't think that the oil industry will be able to curtail production fast enough, so the price of oil must fall to parity with electricity which at that point should be price dominated by renewables and batteries, i.e. cheaper than today. So in the 2030s the price of oil will likely go below $25/bbl and never again see a sustainable price above $40. Also keep in mind that by this point in time battery density is about 4x what it is for the Model S, so we are talking about $50 per kWh. So BEV drivetrains are clearly cheaper than any ICE. Extending range with ICE will be more expensive than simply adding more kWhs of batteries. So if there are any new ICE vehicles at this time, they will be serving niche markets willing to pay a premium in sticker prices. Nobody will care that it cost per mile for a gas vehicle is as cheap as an electric vehicle because electrics will be much cheaper to buy in the first place.

So given that oil will be capped at about $25/bbl in the 2030s, what should a rational oil producer do today? Oil wells are developed and financed under the assumption that the will produce for 20 years or more and that the price of oil will remain reasonably high. So under the scenario that oil is $25 or less past 2030, most new oil wells will not be profitable as a long term investment. This is why most new oil well development must be curtailed today. Of course, people in the oil business are not likely to believe the scenario I am putting forward, which is why they have been rushing headlong into developing wells that are unprofitable at $80/bbl. The sooner these producers stop drilling new wells the better it will be for the rest of the oil industry.

But frankly I don't care if the oil industry remains solvent. What I look to is how quickly is Tesla growing its business. It needs to be able to double its business every 16 to 24 months. So rolling out a series of Gigafactories is the most crucial endeavor. But even doubling Supercharger every year right now is an important part of scaling. Tesla is the tip of the spear. As Tesla scales at high rate, it puts pressure on all competitors. It may be small now, but it is tearing a hole in the auto and oil industries. The most important thing is that Tesla keeps applying pressure.
 
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Good points. We also see dealerships giving the cold(ish) shoulder. Nissan dealers have lack-luster support of the Leaf. None here in the USA import/support the e-NV200 yet. Chevy dealers generally scoff at the Volt. Ford dealers line up their trucks along the road and have scant Energi models for show. California dealerships of the above differ versus other states due to the interest and wealth of buyers there. But go to West Virginia and try to buy a Leaf - in coal country where electricity is about as cheap as anywhere else in the country. Dealers and existing mindset is the general problem. People may still want to buy from their favorite Ford dealer to stay loyal and if that dealer tells the customer "plug-ins are dumb" then they avoid. If the auto industry could change, I feel EVs and EREVs will stand a chance of substantial growth. VW appears to be "talking the talk" about their future of plug-ins. I just wonder how the USA-based VW dealers handle it. 2020 is not far off but 2030 is. Risks of larger-scale war, financial collapse and other stuff between now and then are still on the horizon. Here's to hoping nothing really bad is headed our way (including the strange, such as the asteroid apophis or any of its friends).

Battery tech is poised for growth but there are certain physics and chemical uncertainties. We could go Li-S now but have less than a requisite # of recharges available before the batteries need to be replaced. The triangle is "cost, scale, cycles" If costs can be lowered and the scale of input ingredients ramped up and support a certain # of cycles without issues of loss of capacity - then we will see plug-ins grow. Scientists are really key to a lot of this and we have to really wonder if the estimate of 4x capacity is really going to happen or it is just a hope that it does. Nothing is guaranteed - other than change.

One general point. Oil allowed our population and society grow to the size it is. We really must be ready to make more intelligent decisions worldwide and perhaps limit our choices for child-rearing so that the population resource usage does not stay at the same level it is today. I just don't think we can support 7+ billion on the planet when oil runs out. Maybe we can but nobody has proven that point yet. So many now are reliant on oil, coal, nat gas and other fossil-fuels.
 
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Dealers probably suffer from the shortest term thinking in this whole mess. Peak ICE in the the early 2020s will be a crisis poit for "traditional" dealerships. The dealers that aggresively sell electrics will be growing, while the knuckle draggers watch their year over year sales decline. The stupidest thing a dealer can do right now is insult and misinform customers who expess an interest in electrics. Even if they close a sale on a guzzler tonight, do they really think these customers will come back in 4 years to to get the same treatment? In four years, there will be even better electrics on the market to choose from. Dealers who insult technology curious customers today are chasing away the best customers for tomorrow. This is why the Apple store concept is so important to Tesla. Tesla sells leading edge technology, while dealer just sell cars.

I would love to see a chain of electric only dealerships emerge. I think "Electric Avenue" would be an awesome name. Such a dealership could be the go-to place for just about all the BEVs on the market. It would franchise with multiple auto makes. Manufacturers struggling with EV resistant dealers could have an option to place their electrics where they will be propperly represented and sold. If Tesla ever decides to work with dealers, I think they would prefer to work with a dealer that only sells electrics.

Another thought, might Tesla stores one day become this Electric Avenue? Suppose Tesla stores start franchising with other EV makers. For instance suppose an EV maker emerges in India or China to make cheap Tesla clones (unique models, but using Tesla compatible technology including Tesla patents). These clones could franchise with Tesla to sell their cars in the US. As a franchisee, Tesla could get around the existing franchise laws in many states. But more importantly, Tesla would be able to offer consumers a wider selection of products at all price points, but all the technology could be within the Tesla ecosystem. So for instance all these products could have full Supercharger access.
 
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Battery tech is poised for growth but there are certain physics and chemical uncertainties. We could go Li-S now but have less than a requisite # of recharges available before the batteries need to be replaced. The triangle is "cost, scale, cycles" If costs can be lowered and the scale of input ingredients ramped up and support a certain # of cycles without issues of loss of capacity - then we will see plug-ins grow. Scientists are really key to a lot of this and we have to really wonder if the estimate of 4x capacity is really going to happen or it is just a hope that it does. Nothing is guaranteed - other than change.

I accept your general point. We do not at present know which research paths will lead all the way to 4x current density. But there are three things I keep in mind. First, as the market for high performance battery grows, increasingly more research dollars will be spent on advancing the technology. The scale of the laptop battery market lead the way to the batteries Tesla uses now. But the EV market is orders of magnitude larger than the laptop and consumer electronics markets for batteries ever could be. So increasingly there will be more money to fund and attract the best scientists and engineers. So all promising research paths will be explored. Second, as the cumulative production doubles manufacting efficiencies through the whole supply chain will progressively drive down costs. This is the experience curve concept, as cumulative production doubles, the cost per unit declines by x percent, around 15% is typical for many products. This is primarily what will drive the 30% cost reduction the Gigafacory will bring. Third, it is not necessary for density to be 4x for my 2030 scenario to play out. 1.5x to 2x should be sufficient. The more important thing is that the price come down about 50% to around $100/kWh to get to price parity where the cost of fuel whether gas or electric is not an issue. Musk thoroughly expects this by 2020, and I respect that he has much more visibility into the path than any of us.

So these three points leave me fairly confident that we'll at least get close enough to 4x density in economic terms for the fleet of conventional cars to enter perpetual decline some time in the 2030s. The peak year in my model is actually fairly robust to different growth rate assumptions. It pretty much stays with the 2029 to 2035 range. So the peak could be pushed out a few years, but not a whole decade, so long as Tesla or some other EV maker is applying pressure to the market.
 
jhm, thoroughly enjoying your posts, if you have time, please keep it up. :smile: Also, please take a job with State, CIA, or better yet some major think tank as the strategic implications of your views are enormous.

Thanks, I happen to be taking a sick day today. Usually I would not have as much time to write.

I'm happy to have TMC as our own little think tank. I know we are being watched. ;)
 
I saw a post elsewhere where a member recalled long road-trips in the family car as a cheap alternative to flying, and I got to wondering, how do gas prices today compare to back then? On a nominal basis, of course, gas prices are higher -- I can recall "gas wars" when the price got down to $0.299 -- but we've also had a fair bit of inflation since the 1960s.

If we take a look at the historical data, along with current gas prices and an appropriate price deflator, we can get some answers. In 2005 dollars, regular gas is selling (nationwide average) at about $1.74 (2005$). Historically, this is about the same as prices in the 1950s. Gas prices drifted down through the 1960s, reaching a low of $1.354 (2005$, $1.60 in 2014$) in 1972. The OPEC issues in the 70's jacked prices up to a high of $2.508 (2005$, $2.97 in 2014$). Gas prices softened in 29183, then went back to historically low levels in 1986, when the price bottomed out at $1.361 (2005$). Prices stayed low, drifting down to an all-time low of $1.25 (2005$, $1.48 in 2014$) in 1998. Then in 2002, prices started a steep ascent, peaking in the summer of 2008 at $3.74 (2005$).

So, taking history into account, one narrative is that gasoline is normally priced between $1.40 and $1.70 (2005$), aside from disruptions in the Middle East, be they an OPEC embargo or a series of US-led wars in the Middle East.We're a little above that range today, so perhaps we'll see a little further softening and gasoline will stay in this historical band for the foreseeable future.
 
I saw a post elsewhere where a member recalled long road-trips in the family car as a cheap alternative to flying, and I got to wondering, how do gas prices today compare to back then? On a nominal basis, of course, gas prices are higher -- I can recall "gas wars" when the price got down to $0.299 -- but we've also had a fair bit of inflation since the 1960s.

If we take a look at the historical data, along with current gas prices and an appropriate price deflator, we can get some answers. In 2005 dollars, regular gas is selling (nationwide average) at about $1.74 (2005$). Historically, this is about the same as prices in the 1950s. Gas prices drifted down through the 1960s, reaching a low of $1.354 (2005$, $1.60 in 2014$) in 1972. The OPEC issues in the 70's jacked prices up to a high of $2.508 (2005$, $2.97 in 2014$). Gas prices softened in 29183, then went back to historically low levels in 1986, when the price bottomed out at $1.361 (2005$). Prices stayed low, drifting down to an all-time low of $1.25 (2005$, $1.48 in 2014$) in 1998. Then in 2002, prices started a steep ascent, peaking in the summer of 2008 at $3.74 (2005$).

So, taking history into account, one narrative is that gasoline is normally priced between $1.40 and $1.70 (2005$), aside from disruptions in the Middle East, be they an OPEC embargo or a series of US-led wars in the Middle East.We're a little above that range today, so perhaps we'll see a little further softening and gasoline will stay in this historical band for the foreseeable future.

I think I may have been the one you were talking about. Ha! But yeah, I miss those sub 1$ days at the pump... 1998 was a good year. To keep things in perspective... at least in today's dollar by my estimates the Model S is somewhere around the equivalent of paying between .40$ - .60$ "per gallon". Which based on your price adjusted data would seem to indicate that prices have NEVER truly been that low for fuel. And the argument has been made previously that even if oil continues to drop, it will at some point have an affect on electricity costs driving them down. So electricity is likely to always be a cheaper option compared to an ICE mobile. Until you get into some crazy high MPG number like 100MPG... but all those types of cars get their efficiencies from being some kind of hybrid gas/electric.
 
At what point do states stop making money from the sale of gasoline, before the tax on gasoline is significantly raised? I suppose abnormally low gasoline could encourage the introduction of new taxes to bring the price of gasoline back to $3-4 per gallon without imposing any burden on consumers?

At what point does it become not profitable to own and operate a gas station?
 
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At what point do states stop making money from the sale of gasoline, before the tax on gasoline is significantly raised? I suppose abnormally low gasoline could encourage the introduction of new taxes to bring the price of gasoline back to $3-4 per gallon without imposing any burden on consumers?

At what point does it become not profitable to own and operate a gas station?
 
At what point do states stop making money from the sale of gasoline, before the tax on gasoline is significantly raised? I suppose abnormally low gasoline could encourage the introduction of new taxes to bring the price of gasoline back to $3-4 per gallon without imposing any burden on consumers?

At what point does it become not profitable to own and operate a gas station?
States make more money when the price of gas is down. They are all flat taxes like $.20-.40/gallon or something. Lower price of gas people slowly start driving more or buying less fuel efficient cars.
 
At what point do states stop making money from the sale of gasoline, before the tax on gasoline is significantly raised? I suppose abnormally low gasoline could encourage the introduction of new taxes to bring the price of gasoline back to $3-4 per gallon without imposing any burden on consumers?

At what point does it become not profitable to own and operate a gas station?
I guess it belongs here anyway but here is the wiki too:
Fuel taxes in the United States - Wikipedia, the free encyclopedia

As you can see gas taxes are not by percentage. They are a flat per-gallon tax. So oil could be free and the states would be just fine and would actually get more revenue because people do start consuming more the longer gas prices stay down.
 
At what point do states stop making money from the sale of gasoline, before the tax on gasoline is significantly raised? I suppose abnormally low gasoline could encourage the introduction of new taxes to bring the price of gasoline back to $3-4 per gallon without imposing any burden on consumers?

At what point does it become not profitable to own and operate a gas station?

Gas tax is a flat rate as far as I am aware. Although it varies from state to state, so maybe your state is different? I would think it being a "percentage" of the price of fuel would be bad, since it would cause high gas prices to be EVEN HIGHER... which would really drive down travel and keep people from spending money. A flat fee works best ESPECIALLY when the prices are low, because travel goes up with low prices and the state/federal is still raking in the same amount of money per gallon.

Federal tax has been 18.4 cents a gallon since 1993.

Virginia (my state) suggested trying to switch to a percentage based tax, but it seems that didn't go through. Although as of Jan 1, we now pay an additional 5 cents a gallon making it 16.4 cents per gallon. So 34.8 cents per gallon is taxes. There are other local taxes that contribute to a higher number than that for people living in Virginia. According to Wikipedia the VA average is 40.8 cents as of January/2015.

For Florida (where you look to be from) it is a state average (including federal taxes) of 54.8 cents.

Anyway, point is... they don't need to touch gas taxes *just because prices are dropping*. The falling prices for VA is actually helpful because it was a pretty big deal when they decided to raise our taxes on fuel by 5 cents (just happened as I said, took effect Jan 1) which was to help fund our transportation expansions that has just recently happened and is still continuing.

As for owning a gas station, they don't make their money on fuel. They get like pennies on the dollar for the fuel which is likely barely enough to help pay for the upkeep of the fuel pumps and such. The gas stations all make their money from the convenience stores inside. So I would assume, again, lower prices, means more travel, which means more people stopping in to grab a coffee or a snack. This would HELP gas station owners, not hurt them.

If taxes were to try to raise prices back up above 3$ that would be around a 300% increase on taxes for VA, which would be pretty devastating to the economy... and there is NO WAY voters would stand for such an increase... when we just got through fighting over the rather tiny (in comparison to what you are suggesting) increase by 5 cents.
 
States make more money when the price of gas is down. They are all flat taxes like $.20-.40/gallon or something. Lower price of gas people slowly start driving more or buying less fuel efficient cars.

Why It’s Time to Raise the Federal Tax on Gasoline - Jeffrey D. Sachs - POLITICO Magazine

It would be very very bad for the US economy and the world if consumers become complacent to the idea that gasoline will remain at $2 per gallon. What percent of people are aware of what the tax on gasoline is?
 

Seriously, if they would use the taxes on just transportation instead of funneling money elsewhere this would be a non-issue. The part that everyone misses is that there is no "trust fund"... not really... it is like Social Security... there is no "fund" for that. They spent all that money as quickly as it came in back when it was implemented, and have been paying out SS out of both SS funding and the general budget. It is the same with the various transportation taxes. And it is even worse on a state level. But good ole politicians never missing an opportunity for an excuse to raise taxes are jumping all over this. Funny how the only things that congress ever seems to agree on is taxing us more and spending more money...
 
I would correct that negative statement about raising taxes to say that I am actually in favor of some form of carbon tax. But consumers don't really have a choice in the matter so sticking that tax burden on them is not really fair. The poor people are going to be the last ones to switch to electric through largely no fault of their own... sad to say. anyway, all of this has nothing really to do with the price movements of TSLA so hopefully it will get thrown into the gas prices thread... sorry for the OT rant...