One of the biggest barriers to normalising the use of electric vehicles is cost, as Simon Southgate observed last month. As long as they carry a higher price tag than petrol and diesel cars, it will be difficult to persuade those with average incomes to invest in electric vehicles. But with the government’s target to ban new petrol and diesel cars by 2030, not to mention the obvious effects of climate change, the cost has got to come down.
I believe that the cost will come down in time for 2030, not because of science but because of economics.
Henry Ford faced this problem back in 1908 when he first started producing cars. His cars were all hand made and expensive to buy. There’s a problem with luxury goods: they only appeal to a very small market, because there are fewer rich people in the world than poor people. Henry Ford saw that his market was soon going to be saturated, so the only way for him to keep selling cars was to broaden their appeal. He did this by producing a car that his workers could afford, not just his shareholders. He lowered the cost of car production by refining the production process. In numbers, this meant the price of a Ford dropped from $825 in 1908 to $575 in 1914. With every passing year, the cost of the car dropped while the number sold, and Ford’s market share, increased.
The production of affordable cars made Henry Ford a very wealthy man. Anything affordable has a larger market than a luxury item. Look at the companies that have gone under as a result of coronavirus and you’ll see that Primark is not among them, even without an online shopping platform. Mobile phones have come down in price considerably since the mid-90s and have gone from being a luxury item to an everyday necessity. By making mobile phones affordable, the telecoms industry is now worth $2.4 trillion, with considerable benefits to other industries too. Affordability is where it’s at, so it makes good economic sense to make electric cars affordable.
We can see from Ford, fast fashion and telecoms that it can be done, not by reinventing the wheel but by refining existing processes. We’re already seeing refinement of electric car production that will make them a realistic transport option – battery costs are coming down, and scientists in Scandinavia are looking at ways of automating the battery recycling process. All these developments will help to reduce the cost of electric cars.
If electric car manufacturers aren’t thinking like Henry Ford, I’d be very surprised. New tech always comes with a hefty price tag because the research costs are being passed on to a small number of consumers. But electric car use already has a large enough market to justify more investment in refining EV technology.
We have to increase electric car use, because of the government target, because it’s the right thing to do and because, in the long term, it makes financial sense for car manufacturers. People may not do the right thing for its own sake, alas, but they’ll often do the right thing if it will make them money. Electric car manufacturers must know that making their cars affordable is the way to revolutionise our roads and increase their sales. The price of electric cars is not going to reduce overnight, but I believe that with a bit of patience, most drivers will be able to afford one in time for 2030.
- Tesla: Pixabay