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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

Go deeper

Mitt Romney calls Ray Dalio's China investments a "sad moral lapse"

Sen. Mitt Romney walks to a Senate Republican caucus meeting at the Capitol on Oct. 7. Photo: Stefani Reynolds/Bloomberg via Getty Images

Sen. Mitt Romney (R-Utah) on Thursday criticized billionaire Ray Dalio's investments in China, writing in a tweet that "his feigned ignorance of China's horrific abuses and rationalization of complicit investments there is a sad moral lapse."

Driving the news: Romney's comments come after Dalio's firm, Bridgewater Associates, the largest hedge fund in the world, raised $1.3 billion in November for a new private fund in China, Bloomberg reports.

Updated 1 hour ago - Politics & Policy

Omicron dashboard

Illustration: Aïda Amer/Axios

  1. Health: First known U.S. case of Omicron variant identified in California — America probably won't lead the effort to understand Omicron — CDC prepares tougher testing rules for international travelers.
  2. Politics: Omicron travel bans are sign of what's to come — Meta removes accounts linked to COVID disinformation effort by China.
  3. Vaccines: Omicron adds urgency to vaccinating world — Omicron fuels the case for COVID boosters — Moderna loses patent battles tied to COVID vaccine.
  4. World: Germany approves new restrictions for unvaccinated people — Omicron variant detected in more countriesWHO advises people 60 or older to postpone travel due to Omicron
  5. Variant tracker: Where different strains are spreading.
Updated 3 hours ago - Politics & Policy

U.S. faces urgent anti-hacker crisis

Illustration: Allie Carl/Axios

The Biden administration is accelerating efforts to fill nearly 600,000 vacant cybersecurity positions in the public and private sectors bogging down efforts to protect digital infrastructure.

Why it matters: Following a deluge of ransomware attacks targeting critical government and corporate infrastructure this year, clogs in the talent pipeline are leaving federal, cash-strapped local governments and Big Business even more susceptible to hacking.