Car boom looks like last hurrah for petrol power: Electric vehicles look set to take over?

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frednz

1431 posts

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#218047 23-Jul-2017 22:04

I would be interested to hear your views on this article by Brian Gaynor, where he asks the following question:

“Vehicle sales are booming but are we buying cars that will be obsolete before the end of their working life?”

Brian’s answer to this question is that:

“The issue for New Zealand consumers is that the resale value of petrol-based vehicles could decline more rapidly than previously as electric vehicles become more popular and cheaper to operate.

Astute buyers, with a long-term perspective, will take this into account when purchasing a new vehicle or a second-hand import.”

But could the opposite situation also apply? Electric vehicles (EVs) are just in their infancy and new EVs (or near new) are quite a lot more expensive than their petrol-based equivalents.

Because EV technology is developing so fast, isn’t it possible that owners of relatively low-range EVs are also likely to experience a rapid drop in resale value as the range and price of newer EVs improves? Also, some higher priced older model EVs, such as the BMW i3, are taking quite a long time to sell and this factor needs to be taken into account when investing in electric vehicles!

The table of NZ vehicle sales in Brian's article is very interesting. It shows total vehicle registrations at 31 May 2017 of 4,090,313, an increase of 171,632 in just one year. And the previous year, registrations increased by 212,456.

Brian says these vehicle registration figures explain why our roads have become more and more congested. So, shouldn't the Government have some controls over the huge number of petrol based vehicles that are coming into the country and causing even more pollution?

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871 posts

Ultimate Geek

#1828655 24-Jul-2017 20:04

He is right, so far as he goes but he misses a few tricks.

The changes coming to the personal transport field are much greater than just a switch from internal combustion engines to electric vehicles.

Today, the car industry is all about the individual ownership of internal combustion engine powered vehicles that we drive ourselves.

The end point of the changes that are about to hit will be a world where vehicle ownership will vest in companies like Uber, the vehicles will be electric and they will drive themselves.

When we reach that end point, the value of a vehicle with an internal combustion engine and a steering wheel will approach scrap metal value unless it is something that a devout petrol-head will want to own for use on a few track days each year and one annual outing on a few rural roads that will be opened for individual drives on the Monday of the Queen's Birthday Weekend holiday.

How soon will the end point arrive? There are people out there who actually try to model changes and work out that sort of thing. They predict around ten or eleven years from now. That is only part of the story. Four years from now, Uber, Lyft, Grab and the rest of them will be rolling out millions of autonomous electric vehicles for so called transport as a service operations over the whole world.

At that point, it will be clear to all but the most blinkered that the days of individual vehicle ownership are coming to an end and the value of cars that you own and drive yourself will crash. That's just four years away and the value of your vehicle will be heading to zero.

Now, try this: what will that do to the world?

Today, most new car sales to individual owners are done through some sort of finance/lease package. The most popular is called 'Personal Contract Purchase'. The terms of these packages are such that the purchaser agrees to buy a vehicle with a down-payment or deposit and a monthly lease fee and at the end of the deal, the vehicle can be handed back with no further financial implications or the purchaser can make a residual payment and take ownership of the vehicle. In addition, at any time, they purchaser can simply hand the vehicle back and make no further payments. The bank or finance house that arranged the original deal then owns the vehicle and they have to cover the outstanding finance with the value of the vehicle.

So, what will happen in four or five years time when a hundred million or more people who 'own' a vehicle with an internal combustion engine and a steering wheel see the writing on the wall and realize that they need to get rid of this liability as soon as they can? They will all hand the vehicles back to the finance companies and banks and walk away from the deals. The size of this collapsing value / liability is far greater than the sub-prime mortgage that came close to bringing down the global financial system in the 2008 crisis. In 2008, the nations of North America and Western Europe were in a pretty strong state and they could manage the crisis by bailing out banks and other institutions. Right now, Western nations are in a much weaker fiscal position and have little ability to deal with another financial crash let alone one that is bigger than the last.

It is not good and it is going to hurt.

You read it here first.

vexxxboy

3174 posts

Uber Geek

#1828691 24-Jul-2017 20:53

when 6 out of the top ten cars sold new in NZ are not cars as such , what equivalent in electric cars, that can be used in rural areas and for most tradies, are available .

Common sense is not as common as you think.

Sidestep

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#1828692 24-Jul-2017 20:55

No: similar change has happened many times through distant - and more recent - history. It'll follow a bell curve.

Steamships replaced sail in the late 1800's, Electric lights replaced lamps, Cars replaced horses in the early 1900s ..
And yet sail was still being used in the 1920's for cheap bulk cargoes, as were horses for local transportation until the 30's.

People and businesses did adopt the new technologies in ever increasing numbers, but with the amount of legacy investment in production and support industries, old equipment continued to be used, adapted as long as it viably could.
Previous technologies - Instead of burning out - just faded away.

When things were completely worn out, uneconomical and unsupported, and unable to be adapted anymore they were grudgingly replaced.

Edit: ex horse drawn firepump converted to motor driven.

frednz

1431 posts

Uber Geek

#1828726 24-Jul-2017 21:51

jpoc:

He is right, so far as he goes but he misses a few tricks.

The changes coming to the personal transport field are much greater than just a switch from internal combustion engines to electric vehicles.

Today, the car industry is all about the individual ownership of internal combustion engine powered vehicles that we drive ourselves.

The end point of the changes that are about to hit will be a world where vehicle ownership will vest in companies like Uber, the vehicles will be electric and they will drive themselves.

When we reach that end point, the value of a vehicle with an internal combustion engine and a steering wheel will approach scrap metal value unless it is something that a devout petrol-head will want to own for use on a few track days each year and one annual outing on a few rural roads that will be opened for individual drives on the Monday of the Queen's Birthday Weekend holiday.

How soon will the end point arrive? There are people out there who actually try to model changes and work out that sort of thing. They predict around ten or eleven years from now. That is only part of the story. Four years from now, Uber, Lyft, Grab and the rest of them will be rolling out millions of autonomous electric vehicles for so called transport as a service operations over the whole world.

At that point, it will be clear to all but the most blinkered that the days of individual vehicle ownership are coming to an end and the value of cars that you own and drive yourself will crash. That's just four years away and the value of your vehicle will be heading to zero.

Now, try this: what will that do to the world?

Today, most new car sales to individual owners are done through some sort of finance/lease package. The most popular is called 'Personal Contract Purchase'. The terms of these packages are such that the purchaser agrees to buy a vehicle with a down-payment or deposit and a monthly lease fee and at the end of the deal, the vehicle can be handed back with no further financial implications or the purchaser can make a residual payment and take ownership of the vehicle. In addition, at any time, they purchaser can simply hand the vehicle back and make no further payments. The bank or finance house that arranged the original deal then owns the vehicle and they have to cover the outstanding finance with the value of the vehicle.

So, what will happen in four or five years time when a hundred million or more people who 'own' a vehicle with an internal combustion engine and a steering wheel see the writing on the wall and realize that they need to get rid of this liability as soon as they can? They will all hand the vehicles back to the finance companies and banks and walk away from the deals. The size of this collapsing value / liability is far greater than the sub-prime mortgage that came close to bringing down the global financial system in the 2008 crisis. In 2008, the nations of North America and Western Europe were in a pretty strong state and they could manage the crisis by bailing out banks and other institutions. Right now, Western nations are in a much weaker fiscal position and have little ability to deal with another financial crash let alone one that is bigger than the last.

It is not good and it is going to hurt.

You read it here first.

Thanks for your very thoughtful reply. You certainly raise some very important issues that will no doubt influence the buying decisions of motorists over the next few years!

I go back to my original point that electric vehicle (EV) technology is now developing so fast that people who buy a current EV or who invest in existing plug-in charging technologies, may face writing-off their investments as fast as people who now own petrol-based vehicles.

You mention that, in 4 years time, millions of autonomous (self-driving) EVs will be rolled out and this means that the days of individual vehicle ownership are coming to an end and that the value of cars that you own and drive yourself will crash! This includes, of course, EVs that people are just starting to buy now.

But isn’t there a serious problem to the notion of self-driving EVs taking over the world that needs to be solved before this concept can take off?

This article describes the problem as follows:

"For vehicles to be truly driverless, they need to be able to refuel on their own too. Wireless charging -- though still in its early days of consumer adoption -- is one reason why EVs are considered the preferred platform for autonomous cars. Wireless charging liberates vehicles from gas pumps and plugs, and allows for virtually limitless electric range if chargers are strategically placed.

So, if wireless charging is the only practical way forward, then aren’t current EVs and plug-in charging technologies going to be obsolete fairly soon?

gzt

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#1828735 24-Jul-2017 22:11

It won't be soon. Plug in charging requires a lot less weight and equipment. On top of that plug in is more efficient which matters for cost etc.

tdgeek

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#1828738 24-Jul-2017 22:13

It will be a slow transition, bell curve as stated. I read a lot here that petrolheads will be the last bastion. There are many reasons why its good to have a car. Not uncommon for me to zip down to BP as milk or bread is low early birds in the morning. Need to pop to the other place to get my hedge trimmer I forgot to bring back last time. Guy at work today, his kid missed the private school bus, he drove him. Many many many day to day reasons. Im not ringing Uber and waiting for a car to arrive.

But first it will be EV. Too expensive, too niche, etc, hence bugger all exist. Over time as they become cheaper, every gas station has outlets, range is good, then people will migrate to the lower running cost option. It wont suddenly happen. When we think, yes, I must think about that, EV becomes "normal" people will prepare by keeping the car a bit longer to see what happens. Anyone buying a new ICE now has no fears. Over time ICE and EV will be common, then it will slowly move more to EV.

Self drive with no ownership. Nah, not for a long time. You can do that now. Sell your car and live on cab fares or buses. NZ is to low population and spread out to lose that independence. Two EV's in the garage, quality solar/gas dominating every home, makes more sense. Holidays could turn into a train and plane affair, keeping the car for day to day stuff, smaller trips. If EV are cheap, then there is no real need to have Uber self drives everywhere.

Why are EV's costly? Is it that they are a lot cheaper to build, as limited drivetrain, and no complex multipart ICE? But the R+D needs to be recovered? Like when blank CD's were $5 each and CD Writers were $2500? I remember those days. EV's will get a lot cheaper. Cheap to run. Thats all we want.

linw

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#1828739 24-Jul-2017 22:14

Thanks, guys, for this interesting and thought provoking thread.

Sorry I can't add anything of value but if/when we transition from fossil fuel to driverless electric, I feel we will see some major upsets as I wonder if Sidestep's historical comparisons will work in a vastly different 'sped-up' environment.

tdgeek

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#1828744 24-Jul-2017 22:25

linw:

Thanks, guys, for this interesting and thought provoking thread.

Sorry I can't add anything of value but if/when we transition from fossil fuel to driverless electric, I feel we will see some major upsets as I wonder if Sidestep's historical comparisons will work in a vastly different 'sped-up' environment.

Maybe in reverse? We grudgingly dropped horses. Apart from a niche few into cars, most of us will be happy to move from a nice, good looking car, to another nice, good looking car that is EV. I can see a 20xx Honda, you can get the 2.0L one or the equivalent EV one. We will be swayed by running costs. Two cars? yes, one will migrate to EV quicker, the round town, school, shop runabout, thats easy. Our sped up environment went matter but low running costs will. I can'r see driverless zero ownership for a loooooong time, I can see where 90% are EV in a shorter time. Its not that far off. Prices need too drop, then big Plug signs on gas stations to make it "normal"

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#1828748 24-Jul-2017 22:45

Not until I've bought my Audi S4 .... (note: it will take more than a lifetime of saving)

Involuntary autocorrect in operation on mobile device. Apologies in advance.

Linuxluver

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#1828751 24-Jul-2017 22:53

frednz:

I would be interested to hear your views on this article by Brian Gaynor, where he asks the following question:

“Vehicle sales are booming but are we buying cars that will be obsolete before the end of their working life?”

Brian’s answer to this question is that:

“The issue for New Zealand consumers is that the resale value of petrol-based vehicles could decline more rapidly than previously as electric vehicles become more popular and cheaper to operate.

Astute buyers, with a long-term perspective, will take this into account when purchasing a new vehicle or a second-hand import.”

But could the opposite situation also apply? Electric vehicles (EVs) are just in their infancy and new EVs (or near new) are quite a lot more expensive than their petrol-based equivalents.

Because EV technology is developing so fast, isn’t it possible that owners of relatively low-range EVs are also likely to experience a rapid drop in resale value as the range and price of newer EVs improves? Also, some higher priced older model EVs, such as the BMW i3, are taking quite a long time to sell and this factor needs to be taken into account when investing in electric vehicles!

The table of NZ vehicle sales in Brian's article is very interesting. It shows total vehicle registrations at 31 May 2017 of 4,090,313, an increase of 171,632 in just one year. And the previous year, registrations increased by 212,456.

Brian says these vehicle registration figures explain why our roads have become more and more congested. So, shouldn't the Government have some controls over the huge number of petrol based vehicles that are coming into the country and causing even more pollution?

Bunch of issues here.

Yes, EVs are more expensive to buy right now, but they are *aleady* far cheaper to run and maintain.

Yes, the lower-range EVs definitely are experiencing faster depreciation in value as the newer, more capable models begin to appear.

Yes, new petrol cars have seen the same rapid loss of value in their own time when faced with cheaper second-hand imports.

That's all true.

So what's next?

Battery prices are falling rapidly. That is reducing the price of EVs. One local example is the Renault Zoe. Six months ago Renault were selling the 22kWh model for about NZ$69,000. Yesterday, as Renault sales person told me they are going to be selling the 41kWh Zoe - twice the battery - for $68,000. He said they should have some next week.

Alongside that you have EV Central in Taupo importing new/"used" 41kWh Zoe EVs from the UK and selling them for $40,000. That's an EV with a guaranteed local driving range of at least 250km.....and more like 300+ if used as a city car. Last week Elon Musk said he expects the Tesla Model 3 to be NZ$50,000 plus taxes....and that assumes nothing changes in the meantime to provide incentives. In a couple of years the cost of EVs will match the cost of new petrol cars. But they only really need to come close they are so much cheaper to run. Paying even 10% more for an EV will still show huge savings the first time the new owner realises s/he never has to buy petrol again...and servicing is limited to new tyres, brake pads very occasionally, lube the suspension....and a new 12v battery every few years.

But for now petrol cars are selling like hotcakes. I suspect that is partly due to the rise in property values and people using a chunk of the mortgage to buy the car they want. I've never seen so many Porches....and they would be $80K brand new at least.

This is what Gaynor is saying.......with EVs looking like having the price / cost advantage in 5 years, is it a good idea to spend a large amount on a petrol car that will be seen as an expensive rolling dirty ashtray of emissions in a handful of years?

The other issue is public awareness of climate change. This government whispers about it occasionally but gives no sign of comprehending how grave the situation now actually is. They do pretty much nothing. In that regard they are no different to most conservative parties around the world that have abandoned any pretense of making policy based on evidence.

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MikeB4

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#1828778 25-Jul-2017 07:43

There will need to be a big advance in power generation plants and infrastruction or the whole thing will be chaos. Power stations take time to build and longer to plan and gain consents, if we are looking at a five year target New Zealand is already in trouble.

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#1828790 25-Jul-2017 08:07

Until you build a reliable power network ... hmm ...

Involuntary autocorrect in operation on mobile device. Apologies in advance.

tdgeek

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#1828798 25-Jul-2017 08:49

MikeB4: There will need to be a big advance in power generation plants and infrastruction or the whole thing will be chaos. Power stations take time to build and longer to plan and gain consents, if we are looking at a five year target New Zealand is already in trouble.

I love solar, the concept. I only have Solar HW though

If there was a huge push on Solar HW and/or PV where you can outlay 10k and get that solution, that will reduce drain on the network to I assume a reasonable degree. Then you can charge the car for free, and off grid, even if that meant a small powerbank mainly for that purpose. We have the ability to add solar panels to1.6M houses theoretically. What about a small, slimline, nice looking panel on the car roof, bonnet? There is a lot we can do, big things, small things, we can do a lot more than use the fusion reactor to tan our skin.

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#1828806 25-Jul-2017 09:19

Batman:

Until you build a reliable power network ... hmm ...

The Powerwall concept, along with solar, makes the reliability of the power network less important.

tdgeek

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#1828813 25-Jul-2017 09:26

frankv:

Batman:

Until you build a reliable power network ... hmm ...

The Powerwall concept, along with solar, makes the reliability of the power network less important.

And correct me if I'm wrong, its not about the reliability but about the capacity? Low lakes, cold weather, causing high demand and lower hydro generation?

I feel that the power network is very reliable. Yes, some may have dodgy poles, but overall, reliable

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