Can anybody catch up with Tesla in time?

Because I live in London, I do not own a car. It is just too cumbersome and expensive to own one. Yet, I am flirting with the idea of buying an electric car. The new Polestar 2 is just so much better looking than any Tesla and has the same specs as a Model 3 and I wonder if I should buy one?

But, I digress. What I really wanted to talk about was the speed at which electric cars become competitive in price and range with internal combustion engine (ICE) cars. I have discussed before how renewable energy is one of the few areas where analysts are notoriously underestimating the speed at which our world changes.

The same holds true for electric cars, where the cost of producing batteries with large capacity and low weight is the key obstacle to compete with ICE cars. Only nine months ago, Bloomberg New Energy Finance (BNEF) predicted that it would take until 2025 before electric cars would become available at the same price as comparable ICE cars. Obviously, once we hit that inflection point, one would expect the sales of electric cars to accelerate because thanks to tax incentives in most Western countries mean that running costs of electric cars are significantly lower than running costs for conventional cars.

In early July, BNEF updated its forecasts for battery costs and lo and behold, now they project that for luxury cars and SUVs, price breakeven may be achieved as early as 2022. For smaller cars, breakeven is still five to seven years away due to the need to sell these cars at very low price points. But we will get there eventually.

Expected price breakeven for electric cars vs. comparable conventional cars

Source: BNEF

In the meantime, we have to be aware that the dominant producer of electric cars in the luxury segment remains Tesla. And while I have to admit I am no fan of the company and its CEO, it seems that traditional car manufacturers are about to miss the train. Yes, Audi, Mercedes, and Jaguar Land Rover are all launching their fully electric SUVs, but they haven’t really got anything in the luxury sedan category. And that is where the tipping point will be reached first.

Furthermore, the cars that the German manufacturer are launching or have launched, are either too expensive, too ugly or both. At least the Jaguars look nice, but then again, they are Jags, while a Polestar is essentially a Volvo with a different badge. And I know which car is going to end up in the shop for essential repairs first…

But, I digress. What I am trying to say is that the big carmakers better get their act together or they will follow in the footpath of makers of buggy whips while Tesla is going to become more and more dominant.