The Electric Vehicle Climate Is Warming With New Competition And Tax Breaks

Wine pressed from grapes growing in vineyards worked by self-driving, electric tractors, batteries that last longer but cost less, expanded model choices, wider recharging options, broader fleet adoption and tightly targeted spending by venture capitalists. Those are all present, in the works or coming as the world's inevitable drive into an electric future accelerates.

Here's a look at all that, plus some predictions, from experts coming at it from vastly different angles.

The Current Climate

Push, push, push. That's what automakers are doing right now to convince customers to swap their gasoline or diesel-burning rides for a fast-growing portfolio of battery-electric cars and trucks. It's a tough sell in some corners with many consumers not ready to change their habits or are concerned about running out of juice between here and there. Right now EVs account for only about 5% of the U.S. market.

Affordability has also been a concern, but the combination of a broader range of coming EVs across price points and impending federal tax credits could break down that barrier.

“I think we're going to see continued growth,” predicts Jenni Newman, Cars.com Editor-in-Chief. “What I think is going to help spur growth are those federal tax credits that were revised this year. Also, EVs are more affordable at the used level. Right now EVs are positioned as more of a luxury purchase or near-luxury purchase for people but with those tax credits, and used EVs I see some potential there to pull in people of various incomes who may be interested in this.”

The federal Inflation Reduction Act, or IRA, is something that will pop up several more times in this story.

Rewiring the Battery

During a session with reporters last week at meeting of the Automotive Press Association, General Motors GM Co. chair and CEO Mary Barra said it all in one sentence. “An EV is all about the battery and the battery is all about the cell.”

Indeed the battery not only powers EVs but is its most expensive component. Reducing its cost and its weight helps solve two issues for consumers—price and range.

That's where companies like OneD Battery Sciences are stepping in. That company is working with GM through a joint venture to produce a more efficient battery using OneD's Sinanode platform. It uses silicon nanowires to enhance graphite, can pave the way for smaller, lighter and more efficient battery packs.

“If you add 20% by weight of silicon nanowires to the graphite you triple the specific capacity and you quadruple charging speed of the silicon so you basically go from, for a 75kw battery, you go from 58 kg of graphite to 22 kg of graphite per silicon to a lighter, smaller battery, charges faster and is less expensive,” explained OneD Battery Sciences co-founder and CEO Vincent Pluvinage in an interview with Forbes.com.

Then there's the IRA. It comes into play with regard to battery production as well, Pluvinage added, explaining, “ thanks to IRA..if you have at least 40%-50% of the battery materials coming from a U.S.-based, or North American-based supply chain, then OEMs will be able to claim a car is eligible for government rebate. If you get a rebate of $7,500 for a 75kw battery that's making the battery free for the consumers.”

Free is always the best price

Fleeting's interest

Many fleet operators and the companies that build vehicles for them are rushing to transform their inventories to EVs as a matter of cost-savings or as an element of their environmental, social and governance (ESG) goals.

“We've actually got reservations for 40,000 EVs, for over $2.5 billion,” said Brendan P. Keegan, chairman, CEO and president Hooksett, N.H.-based Merchants Fleet in an interview. “We're extremely, extremely bullish on the future of EVs in North America.”

Merchants Fleet specializes in cargo vans and pickup trucks, but filling all those reservations is a challenge. Keegan points out production of those vehicles is 12-18 months behind what the automakers told him a year ago and the shortfall is likely to grow.

“Prediction I had made 2 years ago, I said in 2025-26 if you look at supply and demand there was going to be a shortage of five million EVs in North America,” said Keegan. “I think that is increasing right now. I think we're going to see a five, six, seven million shortage when we look at three, four, five years.”

Keegan said he's telling customers to get their EV orders in right away, warning those who haven't done so for 2023 delivery are out of luck, adding even those hoping for 2024 and beyond deliveries may also be disappointed because production just isn't keeping up with demand.

“If people are saying we're not going to go EV till '25 and they think they're going to show up in January, 2024 and put their orders in, I'm gonna say 'time out',” warned Keegan. “Those orders are going to have to been placed in '22 and '23 and '24, you could be looking at '26 or '27.”

One commercial vehicle producer is living up to its name. Lightning eMotors CEO Tim Reeser tells Forbes.com his company's business model is all about moving fast.

The Loveland, Colo. Company builds zero-emission powertrains for everything from electric cargo vans to motor coaches, work trucks, shuttle buses and school buses—especially school buses, built by other companies but powered by Lightning's electric system.

“They build both the chassis and body and looking for someone to build the powertrain and that's the business we're in and see tremendous growth in that business,” said Reeser. “It's partially driven by catch up post-Covid and partially by over $5 billion in EPA money and additional IRA money stacked on top so we see school buses really taking off.”

Ah...there's that mention of the IRA again. Those tax credits through IRA and others may just be the difference between making the switch to electric or not.

“These are all stackable so all of a sudden we go from a very tough total cost of ownership sale and really trying to show fleets this really made sense to some that, even if fleets aren't willing to do the total cost of ownership math they get a free vehicle so they don't have to do a whole lot of math,” said Reeser.

For some concrete predictions related to fleet EV adoption for 2023, we turned to Vic Shao, President, bp pulse fleet who worked up a list of four specific prophesies.

• Slow and steady won’t win the race to electrify. “In 2023, we will see leaders going all in on electrification,” Shao predicts. He says it's not a matter of whether companies should electrify but how to do so. Shao points to the partnership between bp pulse fleet and rental car company Hertz to build a recharging network to serve Hertz's huge fleet, predicting such a deal is indicative of others to come, saying, “Light-duty fleets like these are moving quickly, but medium and heavy-duty operators are also developing large-scale charging solutions. And not just as pilot projects—the leading companies are aiming to place a larger stake in the ground to shape the electrified transportation ecosystem.”
• An economic downturn makes the case for electrifying fleets. “Next year, corporate belt-tightening will open doors to new investments in electrification,” Shao wrote.”More and more C-suite transportation decisions will be based on questions of resilience and long-term efficiency, not upfront vehicle costs. For example, our work with Red Hook Terminals revealed an 81% reduction in fuel costs after just the first quarter of operations.”
• EV leaders are laying the foundation for the future of energy infrastructure. “The most advanced players in the space are already thinking about things like controlling for energy costs and long-term charger maintenance today, so that drivers can trust charging stations just as much as they trust the way they’ve fueled up for decades. We may not find all the definitive answers in 2023, but these big-picture infrastructure plans will take center,” predicted Shao.
• Cleantech becomes a talent magnet. “As the tech market is marked by recent layoffs, 2023 will see an influx of top talent into cleantech. For such a mission-driven cohort, the opportunity to contribute to a more sustainable future will be a powerful draw.”

Electrifying the Farm

The combination of a tight labor pool, safety concerns and, of course, tough economics, has led to growing adoption of electric and autonomous electric farm equipment. Most notably, earlier this month Monarch Tractor rolled off the first of its production robo tractors, quickly snapped up by spirits giant Constellation Brands which plans to use them in their vineyards.

Just last week, at its Tech Days, heavy equipment manufacturer CNH Industrial CNHI unveiled the New Holland T4 Electric Power, what the company described as “the industry’s first all-electric light utility tractor prototype with autonomous features.”

CNH says the New Holland T4 reduces operating costs by up to 90% by eliminating diesel fuel costs and associated maintenance fees.

Sales have been brisk for Ideanomics subsidiary Solectrac which is now producing more than 300 zero-emission electric tractors per month, and, the company says, “we are selling every unit that rolls off the assembly line.”

VC's Pony Up

Batteries may power electric vehicles but money powers innovation and speed to market. Germany company Schneider Electric's California-based SE Ventures is aggressively backing a wide variety of businesses that support EV development.

Amit Chaturvedy, Global Head and Managing Partner at SE Ventures explained to Forbes.com he believes his company has a role in funding not only startups creating innovations for the automakers are using to develop electric vehicles but businesses related to “what goes into” EVs such as batteries as well as a recharging structure.

It's all a good investment bet for SE Ventures because global market trends for Evs are all pointing up, with Chaturvedy citing global EV sales during the third quarter grew 73% to 2.9 million units. Concerns over headwinds such as inflation or supply chain issues are no concerns at all.

“Honestly, the headwinds that exist today, inflation and supply chain issues are no different in the EV space,” said Chaturvedy. “Our view is over time these things are cyclical, so inflation, supply issues will get sorted out. The longer-term trend has continued to stay stable. We are patient investors, nothing happens in overnight in the areas we invested so we know this game and we're willing to back startups that are bringing new knowledge to these areas.”

That all brings us back to Cars.com's Jenni Newman who kicked off this discussion. With EV adoption growing in all sorts of corners of the economy, what about the driveways, garages, lots and curbs where private citizens park their rides? How willing will consumers be to spend the extra bucks to swap their gas or diesel burners for those powered by batteries?

Newman is optimistic the average EV price will come down from today's $65,000 observing, “We're seeing EVs coming at lower prices. We're going to start to see slightly more affordable EVs. Will we see more interest in used EVs.” And, of course, the prospect of federal tax credits.

Tesla De-throned?

Perhaps it's best to end this discourse with one final prediction as to whether 2023 will be the year Tesla is knocked from the top of the EV heap by other automakers that are quickly converting their portfolios from internal combustion engine to electric vehicles.

Tough to say, but Newman offered, “I do think Tesla's got a lot of competition all of a sudden, and I'm really curious to see what kind of moves they're going to start making and I think they have to start making them really quick.”