In the battle for market share over industry leader Tesla Inc (NASDAQ:TSLA), automakers are pulling out all the stops to get their electric vehicles (EVs) on the streets. However, they are struggling to do it profitably, particularly for entry-level vehicles.
The obstacle to profitability at the lower end of the market is that battery costs are still too high to build profitable, mass-market EVs, according to General Motors Company (NYSE:GM) CEO Mary Barra.
The solution, according to companies including First Phosphate Corp. (CSE:PHOS) and RecycLiCo Battery Materials (TSX-V:AMY, OTCQB:AMYZF), is to follow Tesla’s lead and move to lithium iron phosphate (LFP) batteries and to take control of their battery materials supply chain.
Barra told a Sanford Bernstein conference earlier this month that she doesn’t see profitable electric cars in the US$30,000 to US$40,000 range until at least the end of the decade.
While acknowledging Tesla's lead in EV technology, profitability, and scale, the autoevolution.com website reported that Barra was still confident that this lead will not be permanent.
GM currently sells its Chevy Bolt EV from US$26,500 but the vehicle is going out of production at the end of 2023, and it was never clear whether it made any money out of it, according to a report on electrek.co.
Chevrolet’s Equinox EV is expected to be released in the fall of 2023 as a 2024 model, with a starting price of around US$30,000 for the base model which will follow.
Ford is another traditional carmaker chasing the EV market leadership, although its EV business is projected to lose about $3 billion this year, autoevolution reported.
Tesla is already selling the Model 3 below $40,000 right now, so making a profit at this price point is possible, the website noted.
LFP batteries and the circular economy
All EV manufacturers will have no choice but to follow Tesla and move to LFP batteries in the low- to mid-range segment to meet government requirements to bring about mass adoption, John Passalacqua, CEO and founder of First Phosphate Corp. (CSE:PHOS) told Proactive.
“Tesla will likely get it down close to US$25,000 using LFP batteries,” Passalacqua said in an emailed comment.
“Tesla leads the game in North America, the others need to follow or risk being left behind. Just because the traditional auto manufacturers don’t lead, it doesn’t mean that it’s not possible. Tesla has a technology-based approach and an innovative mentality and that is all the difference. Tesla builds technology-based forms of transportation and not automobiles.”
Embracing the circular economy with recycled materials forms part of the solution, added RecycLiCo CEO Zarko Meseldzija.
“I firmly believe that the costs associated with EV batteries are primarily determined by both manufacturing and material expenses,” Meseldzija told Proactive.
“Consequently, a viable approach to lowering these costs entails companies assuming control over their battery materials supply chain and embracing vertical integration. By integrating RecycLiCo's battery recycling technology, we foster a circular economy that directly reintroduces recycled battery materials, thereby diminishing dependence on mined resources.”
Contact the author at stephen.gunnion@proactiveinvestors.com