Apr 10, 2019

Billion-dollar bets on electric vehicles await payoff

Illustration: Aïda Amer/Axios

If carmakers have any hope of making money on electric vehicles, they'll need to re-think how they design and sell them, a new McKinsey study suggests.

Why it matters: Automakers will pour $255 billion into EVs by 2023 but are resigned to losing money on them for the foreseeable future — an expected outcome of a market dictated by regulators and lawmakers, rather than consumers. But because they're key to future self-driving cars, they'll keep investing in them.

The big picture: Right now, electric vehicles are an expensive black hole for carmakers.

By the numbers: The high cost of rechargeable, typically lithium, batteries is the root of the problem.

  • EVs cost $12,000 more to build than comparable gasoline-powered models, McKinsey says.
  • The "payback period" for a $30,000 EV — how long it takes to recoup the higher price through savings on fuel and maintenance — is 5 to 6 years for a typical owner who drives 13,000 miles per year.

Yes, but: Most consumers aren't willing to pay more for an EV, so carmakers need to either swallow the extra cost or make them simpler — and cheaper — to build.

  • Instead of designing cars that can accommodate either an electric or gasoline powertrain, carmakers could save money in the long run by investing in a new, simpler EV platform with fewer parts.
  • But it's a big bet: a dedicated EV platform costs about $1 billion to develop. (Both GM and VW are doing so.)
  • Another problem is that today's EVs have either too little range (100 miles or less) or too much (300 miles) based on actual driving patterns. McKinsey suggests a 40 kWh battery with a 160-mile range would suit most drivers and shave $2,000 in cost.
  • Using more basic materials for things like electronics, seats and interior trims is another cost-saving tactic to make EVs more affordable. However, it's one of the oldest tricks in the industry, and consumers know when they are getting a lesser product.

It's not all about cost-cutting. Targeting fleet customers with EVs or leasing batteries apart from the vehicles could stoke revenue and help carmakers crawl toward profitability, McKinsey says.

What to watch: Consumer attitudes are shifting, with more people indicating they would consider buying an electric vehicle. If so, that black hole might not be as deep as feared.

Go deeper: Debating the future of electric vehicles in oil country

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America's rundown roads add to farmers' struggles

Illustration: Sarah Grillo/Axios

American farmers are struggling to safely use the roads that cut through their fields; decades of neglect and lack of funding have made the routes dangerous.

The big picture: President Trump has long promised to invest billions in rural infrastructure, and his latest proposal would allocate $1 trillion for such projects. Rural America, where many of Trump's supporters live, would see a large chunk of that money.

South Korea and Italy see spikes in coronavirus cases

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.

The novel coronavirus continues to spread to more nations, and the U.S. reports a doubling of its confirmed cases to 34 — while noting those are mostly due to repatriated citizens, emphasizing there's no "community spread" yet in the U.S. South Korea's confirmed cases jumped from 204 on Friday to 433 on Saturday, while Italy's case count rose from 3 to 62 as of Saturday.

The big picture: COVID-19 has now killed at least 2,362 people and infected more than 77,000 others, mostly in mainland China. New countries to announce infections recently include Israel, Lebanon and Iran.

Go deeperArrowUpdated 4 hours ago - Health

Centrist Democrats beseech 2020 candidates: "Stand up to Bernie" or Trump wins

Bernie Sanders rallies in Las Vegas, Nevada on Feb. 21. Photo: Mario Tama/Getty Images

Center-left think tank Third Way urgently called on the Democratic front-runners of the 2020 presidential election to challenge Sen. Bernie Sanders on the South Carolina debate stage on Feb. 25, in a memo provided to Axios' Mike Allen on Saturday.

What they're saying: "At the Las Vegas debate ... you declined to really challenge Senator Sanders. If you repeat this strategy at the South Carolina debate this week, you could hand the nomination to Sanders, likely dooming the Democratic Party — and the nation — to Trump and sweeping down-ballot Republican victories in November."