The development of electric vehicles may slow downJune 21, 2021
There has been a wave of innovation in electric vehicles in a very short period of time. However, it will be difficult to maintain this pace.
At least that’s what Jeremy Michalek, professor of engineering and public policy at Carnegie Mellon University and head of the vehicle electrification team, says. In a review written for MarketWatch, the professor warns against bullish predictions that EV innovation and adoption will continue at this pace forever.
Michalek’s main arguments come down to battery manufacturing and pricing. While batteries have recently dropped in price and improved in performance, the economies of scale that helped propel these changes are now nearly exhausted. Even manufacturing process improvements that have helped reduce battery costs are reaching a limit they cannot go beyond.
The professor points out that car companies should make a profit. And this need for profit is likely to mean that prices for electric vehicles will be as low as they can fall in the near future.
As companies seek to gain a foothold in the market and subsidize cross-subsidies to meet regulatory requirements, some have been willing to lower their vehicle prices. Even Tesla is making significant money selling emissions credits to other automakers. But as more and more brands enter the EV market, these benefits will diminish and EV prices are unlikely to drop much lower than they already have.
The good news for EV fans is that innovation remains an area where automakers can cut prices, but it is likely to be gradual and slow. All of this means that the decline in prices for electric vehicles is likely to slow down. In fact, prices could rise if materials costs rise or if governments decide to stop subsidizing the industry, although that doesn’t seem to pose a risk to America in the next four years.
“We should remember that past performance is not a guarantee of future performance,” Mikhalek writes.
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