Why people aren’t buying electric cars and what lithium producers can do about it

By Siddhartha Sengupta | December 4, 2019

Remember when we hailed the electric car as the next biggest environmental revolution, poised to replace all fuel-based vehicles before you can say carbon neutral?

In reality, the production of electric vehicles (EVs) has not taken off as quickly as we thought it would. Compared to the total global production of ninety-five million vehicles in 2018, EV production was less than three million.

In this article we’ll discuss what the biggest roadblocks are to greater market penetration for EVs, what new investments and technology are on the horizon, and what lithium producers should be looking for to better manage volatile supply and demand issues.

Five roadblocks to greater market penetration for EVs

1. Range anxiety and lack of charging infrastructure

Perhaps the most significant roadblock, and the one we hear talked about the most, is consumer range anxiety. While current technology can take the average electric car from 200-250 miles, consumers are demanding 500-600 miles from their vehicles. On top of that, charging infrastructure has lagged, so running out of charge in an under-served area is a legitimate concern.

2. Safety

With the evolution of the technology, lithium-ion batteries are storing increasingly higher densities of energy. Higher energy density is required to increase range, but doing this without compromising safety is very challenging to achieve.

3. Unknown grid load

The total impact of an increase in EVs on the energy grid is relatively unknown, but grid loads are expected to increase massively due to increased demand for charging power. The impact on peak loads in the evening is also a concern, as people typically plug in to charge when they return home at the end of the day.

4. Lack of cost parity

Central to this is that an EV is not a new technology in the minds of the consumers. Consumers view this as an alternative for mobility and they are used to paying a cost for this convenience. Unless EVs achieve comparable costs and prices to internal combustion engines (ICEs), mass penetration will be challenging. Battery makers are targeting from current levels of $175+/kWh to $75/kWh by 2030, which is viewed as the tipping point for EVs and ICEs to achieve parity.

5. Subsidies

Electric power trains cost two to two-and-a-half times more than ICE power trains. Lower production volumes drive up indirect costs of research and development, amortization, and overheads. Subsidies help manufacturers absorb these additional costs and sell EVs at parity with ICE. In Norway, subsidies make an EV cheaper to own than an ICE vehicle. But EVs have only penetrated 31% of Norwegian sales in 2018. This implies that cost parity is not the only factor preventing 100% EV adoption. Other factors, such as charging infrastructure, are also important determinants.

A bright future

Despite the challenges to greater market penetration for EVs, the future is bright for lithium producers. No other metal faces such a strong and positive outlook.

There are many promising new developments in financing and technology for electric vehicles coming from around the world. These include: solid state batteries, investments in charging infrastructure, changes to the global battery supply chain, car manufacturers bringing new EV models to market, better electricity grid management, and innovations in autonomous mobility.

In a future article we'll discuss the details of these new changes, and how and when they'll help stabilize the volatility of lithium supply and demand.