The EV Affordability Equation

This episode is sponsored by DriveItAway. Whether you’re looking to rent, buy, or simply test out an EV, DriveItAway puts you in the driver’s seat. Visit driveitaway.com for more details. OTC: “DWAY”

Links

Connect With Alex Mitchell

Transcript

Elena: I’m excited for our conversation today because you are a wealth of knowledge in the electrification EV space and also in the startup world, in the clean tech world. So I would love for you to bring the listeners up to speed. Talk a little bit about your background, and of course, how you got to where you are today.

Alex: Sure. And again, thank you so much for having me. You know, I grew up in what you and I might call like, just being a car nut. I grew up about two miles down the street from an automotive stamping facility. And I think that was my first exposure to like there is a process behind the building of cars. And so as a youth I was just really interested in cars in maybe a way that even was more notable than other young kids. And that continue to manifest itself throughout my professional career. So when I was in college, at a time when a lot of folks were maybe looking to go work as an intern at a software company or whatever. I did my college internship at a car company that was then called Chrysler and that was maybe the beginning of me working in the industry. I’ve always loved it, because it’s this real big connector for people. It’s how we get to work. It’s how we get to education. It’s how we see our family members is all these choices we make about mobility and how we get around and it’s this insanely complex mix of very pragmatic things, you know, what’s the most reliable car and our transportation solution, but also really emotional decisions. That car looks ugly. I like that paint job, you know, whatever else it is that sort of is on that spectrum of how we make these both rational and emotional decisions about how we get around. And so that led me to working at Toyota first and working in a lot of sort of central functions for Toyota and deeply grateful for sort of having my real baptism by fire in the car industry at a company that’s known for being really intentional about processes and systems and how you go about the process of doing r&d, manufacturing and sales and marketing. And that was also the period though, where I started getting really tuned into the climate impacts of of some of the mobility choices we make. I’m a data driven individual and I don’t think you can believe in things like your sales results of you know, a profit and loss statement or whatever else and not give that same data credence to climate scientists who sort of are telling us hey, there’s sort of this unhealthy relationship between mobility and our climate, you know, obviously, nobody second guessed is the benefits of mobility in terms of giving people access to economic opportunity, health care, education, etc. But you know, we do have to admit that the some of the choices we make around how we move are having some pretty big climate impacts I spent about the last 15 years of my life working on how do we keep getting people and goods moving around cities and around the planet, but without creating a lot of negative environmental impacts. So I left Toyota and I worked for an Eevee startup and what we would now call clean tech 1.0 that was called Kona automotive. I was with them for a while and then I worked for the World Economic Forum doing a lot of free competitive research on sustainable mobility. More recently, I was working for what was then a French car company called Cujo. And it’s now called to Lantus on a lot of their work on electrification. And then for last, just about five years, I’ve worked for the Los Angeles clean tech incubator, which is a nonprofit clean tech incubator and investor in the clean tech space. And about 40% or so of our portfolio is in the vehicle electrification, space, everything from EV retrofits to EV charging technologies, battery solutions, sort of you name it, the full gamut of folks working on sort of sustainable mobility.

Elena: We were chatting prior to us recording an episode today and you’d mentioned you were at Toyota, and you were there when they first launched the Prius. Am I remembering correctly?

Alex: Yeah, we’re the second gen Prius which is sort of the one that everybody really remembers that iconic vehicle, which is still you see all around the streets in the US and Europe and Japan. And I think for me, the Prius was a realization moment for myself where I said, look, if we can put a small battery in a car and help some of our environmental issues, why can’t we put a much larger battery in a car and I do think the Prius was a helpful stepping stone for the industry to realize some of those benefits maybe not as big of a stepping stone is something like the Tesla Roadster where people go oh my gosh, you just put a giant bank of batteries in a lotus roadster and you know, have a car that has zero emissions. So I’m really grateful for the insights of the sort of stepping stone of the Prius, but the fact that somebody like Elon Musk really took that to the extreme and said, I’m gonna just literally create a company that’s built on fully fully electric. So yeah, I’m really grateful for having had some experience with what Toyota is doing at the Prius, but also really grateful for the fact that I think Elon Musk said, Hey, I’m gonna just electrify everything. And you know, sort of, I would argue Elon Musk probably brought forward the electrification process of powers by like a decade with his more radical approach.

Elena: Well, I think in a lot of ways the Prius if you think back the Prius was like the OG right, I mean, thank you. You see the different Priuses on the road still to this day, and that was the one where it was, you know, the light bulb went off. So I think that’s actually a good segue talking about affordability. This whole conversation around Evie affordability, just vehicle affordability in general. But I feel like Alex, you would be a great person to ask this question too. And that is where are what do you see on the horizon in terms of EV affordability for more of a mainstream customer and not just this EV being this luxury niche product? What do you see on the horizon there?

Alex: Great question that obviously has been sort of the Achilles heel of this transition so far is that most of the products in the market had really been in that luxury premium category that were out of reach for so many people. And in fact, in some ways, probably gave some people like a little bit of distaste because they’re like, Well, I can’t see myself in a car that expensive. So EVs aren’t for me. And that’s not the message that I think the industry wanted to send. The good news is that basically car manufacturers go through a process of long term product planning. You know, it’s roughly a 10 year calendar. And so companies can’t shift on a dime and all of a sudden say, hey, this, this product that was gasoline powered, we can just make that battery powered tomorrow. That’s sort of got to be whenever that product, cadences of the product refresh, but we’re now getting to a point where most of the product refreshes that are happening the new vehicle launches that are happening this year, next year, the year after will all involve you know, either an alternative that is fully battery electric or at least plug in hybrid. And so we’re now starting to see if we’re getting so much better in terms of having a product that is more price acceptable. So you know, if you look at average transaction prices in q1, they were on the order of like, actually pretty high 45,040 $6,000 So the average new car is like quite expensive in my mind is especially as you think of an average household income, probably closer to like, you know, 80k we’re talking about, you know, an average car now costs more than half a year’s person average salary and that’s inclusive of electric and gasoline powered, but Tesla sent five price cuts on the Model Y this year so far. And so that the model Y base price is now just about 4140 $200,000. So you’re talking like $4,000 below the average transaction price. So like we’re now at that point where the model Y the base level, you go okay, that’s below the average transaction price, and you do have more value oriented EVs like the Chevy Bolt and the Nissan Leaf. But we’ve also got to acknowledge and pretend that we have every market segment covered and every party everybody’s sort of desires. So I’m looking forward to sort of each of the respective categories that you think of that player that will sort of pierce the market first likely with a premium product and then a more affordable one. So like the big watershed moment, I think last year was the Ford f150 Electric also the rivian electric truck, but you know that sort of now Okay, now we have pickup trucks. Yes, they’re expensive electric pickup trucks, but by the way, so as a regular Ford F150 It’s pretty expensive. And you know, we’ve even got a Dodge Challenger muscle car coming relatively soon, there’ll be a product segment that hasn’t had an EV yet. So you know, long answer your questions. I think we’re getting there, but it would be definitely sort of dismissive for the industry to not realize that in a lot of locations. For a lot of consumers from an income perspective. They live in a rural community access to charging might be difficult if they live in a multi tenant household, whether that’s an apartment or a condo access to charging might be difficult. So even once we get the price points where we need to be, which again, more work needs to be done. There’s a lot of other things around the overall equation that needs to be done. To make that easy transition feel superior for people from what they were driving before because we’re not there yet. We’re only there for some use cases, some consumers etc.

Elena: No, you’re right. And I think it is some use cases some consumers we do still have a long way to go. What are your thoughts on some of the new federal tax incentives now for EVs? I know we just had a whole switcheroo happen last week, right? Last week was tax week. So your thoughts on Do you think that’s going to bring more people into the market entice more people or just confuse people because they don’t know what they qualify for? Because it’s just a big old cluster? What are your thoughts on that, Alex?

Alex: Well, it’s definitely the actual inflation reduction act the way the tax credit worked, you know, sort of at the outline of the big picture in in the inflation Reduction Act bill itself, I thought was a really smart blend of like, economic policy and industrial policy, because what it did for the first time was really linked that tax credit to domestic content. I applaud the Biden administration for acknowledging that we can’t build this electrification approach to transportation if we don’t have pretty significant amounts of battery r&d and manufacturing and even up to the mineral stream happening either domestically or with our trade allies. You know, we all live through the moments of COVID of shortages of various products and services, and partly that was driven by a pretty long supply chain that often originates in China and pork blockages at the Port of Los Angeles, Long Beach, etc. And if we don’t have that resilient supply chain domestically, we run the risk of somebody else, sort of metaphorically and literally pulling the plug on our battery ambitions. So I thought the design was was smart of saying, Look, we’re gonna make it tough but achievable. To get the tax credit and you as the car manufacturer, the battery manufacturers, you’re gonna have to nearshore stuff. So I thought the actual bill itself was quite astute. implementation has been really difficult in the communication and the concern about really clarifying what qualifies what doesn’t you know, even last week, you had a couple of I believe VW and rivian weren’t in the initial list posted by the government, and then they were sort of later And so it feels a little bit like the rules are still being clarified to agree where anybody can actually just look up online and I’m talking about an automaker would be able to pre determine for themselves whether they would be able to make a list. So I think we have more refining to do one to make it easier for automakers to understand under what conditions would be actually qualify what counts when you get down to the nitty gritty and then to your point, much more important than the automakers understanding the process is really making it simple and understandable for consumers. So that anybody who’s purchasing a car can understand. I think what everybody just needs to appreciate about that process is last week’s clarification the Feds wasn’t the end of that process. It was really more the beginning of that process. Now this requires a lot of work by everybody from automotive dealers, car manufacturers, trade bodies, etc, to really help consumers understand this process because yeah, it’s still not the easiest process to get through.

Elena: And a lot of ways you’re right, this is the beginning and this chapter is still being written and it’s I think, from my point of view, where I’m kind of you know, sitting and observing all of these different stakeholders. It’s certainly interesting, but that’s a good segue to the next question, which is all about myths. I love talking about myths on this show, because there just seems to be a lot of myths around EVs from Hey, am I going to get electrocuted if I have an EV in the rain to like, I don’t know all kinds of like crazy off the wall things. Your perspective?

Alex: There’s sort of a myth that we as consumers create for ourselves about how much range we really need. You know, we’re at a point where a lot of vehicles have really large battery packs to provide people with a range of, you know, 354 miles, etc. And that’s definitely useful for the occasional road trip. But I think a lot of that is informed by people not quite understanding that if you are privileged enough to live in a residence that has overnight charging, you’re leaving your garage most days with a full charge. And so the number of days per year that you’re like, I’m gonna drive 400 miles today and not even take a break for a meal or whatever. It’s a little bit of probably over resourcing what you need. And so I think I do have some concerns that as an industry, we’re like, equipping cars with battery packs and, and by the way, like, there’s an opportunity cost to that very large battery pack, it could also go into, you know, another smaller end, it could go into battery storage for your home, whatever, like we’re using a pretty, you know, that sort of resource of the future and cramming a lot of them into cars where you go to people really need 450 miles of Evie range or is that more of like emotional security and not actual range that they use all that often, especially now is so many more vehicles are equipped with capability for pretty high charge rates and the public charging infrastructure has a lot of DC fast charging available. I have another myth about public charging, that’s one that we need to work on or reality we need to work on. So that’s that’s one is that like, you know, we probably need to work with consumers on this myth of like, I need to own an EV that’s got 400 450 miles of range because that’s probably paying too much. It’s sort of like being a house seeker and you’re a couple with one child and you’re like, I want a six bedroom house and it’s like, do you really need a six bedroom house? Or could you have like a two to three bedroom house and grow into a six bedroom house in time? Just one I think another is if we think about sort of making this whole transportation system sustainable, I’m not sure that more EVs is always the answer. And sometimes it’s different, you know, solutions. So an example my sort of Least favorite Eevee on the market is probably the GMC Hummer, and just not sure we need like giant giant vehicles all the time that we electrify again like with really large battery packs. And I do think one misconception is that, you know, just electrifying all these vehicles will solve our challenges. We’ve got other challenges it relates to battery resources, it relates to congestion in cities, it relates to a bunch of other things where I do think we need to rethink what’s the right balance in cities between cars, public transit, walking, biking, and so I’m a big proponent of the idea of a federal tax credit for electric bikes. There’s a lot of people’s trips in cities that we take by cars that could be replaced by other form factors sort of my my classic example there is food delivery. When you’re getting a two to three pound meal delivered to your home I’m not sure that a 4000 pound vehicle is the most efficient form factor for getting that pizza from point A to point B there’s probably a much lighter vehicle that can deliver that you know, sushi or pizza or whatever to your to your home. So there’s a myth that sort of like every person, whether they live in urban rural or whatever in America should have a car to get from point A to point B. And that’s pretty true, I would argue in rural and a lot of suburban communities but there’s a lot of urban in some suburban communities where you go actually owning a car, you know, is probably not the best way to get around. We probably got to invest in solutions that make it easier for people to get around our cities with lighter vehicles, whether that be two or three wheels, you know, whether that be an E bike or whatever. So that’s something that I think we need a lot more sort of public policy attention on but also innovators coming up with like the next breakthrough that goes oh, okay, I used to ride the bird scooters, but now I have an additional solution that I liked, that’s more permanent and reliable. So that’s a sort of a myth of sorts to deal with. And I think the last one is, we’re getting over the myth of public charging infrastructure of you just install the asset and everything else will work out over time. That’s not really the case. I definitely think those who’ve owned EVs know the experience of feeling like sort of working as their workplace charging and home charging generally is reliable. If you’ve got access to it. You sort of get in a rhythm. You know how it works. You’re like great, I know when I had home or I go to the office I’ll be able to charge the public charging experiences is quite different. You know, you log onto an app and it tells you go to this charger. You can go charge you go and you’re like No, I cannot charge there’s some sort of problem here. The app is inaccurate the screen will not accept this, they won’t take my credit card, etc. The public charging experience is one where there’s probably a lot of lot of resources that are out there, but that are offline for various reasons, having anything to do with site system reset software updates, you know, the end of the 3g support for a lot of wireless connectivity, and it’s a challenge we’re all going to have to address because you know, nothing sort of torpedoes the would be easy buyer. When their neighbor says yeah, I had a really crappy experience. I tried to recharge here and I couldn’t so I couldn’t make the road trip or whatever. There are startups that are working on that topic in the LaCie portfolio. There’s a company called charger help that really does predictive maintenance and tier one support for Evie chargers that allows the charge point operators, the site house etc. To say I’m going to have a maintenance contract and the minute something goes down, we’re going to send an alert to somebody they’re going to roll a truck and they’re going to diagnose immediately. Is this a software system? Is this a hard system reboot that’s needed? Is it a Wi Fi connectivity problem, cellular connectivity problem, whatever it might be? So I I’m excited about businesses like charger health because they are solving a very real challenge of the public charging infrastructure, but it’s definitely an experience that needs to be improved if we’re going to reach people and get them excited about the public charging experience because right now it’s kind of suboptimal.

Elena: You’re right because that one person that tells their neighbor tells her friend tells her family member oh, by the way, I had this horrible experience, then it’s like you have to work that much harder to overcome that objection at the sales floor, whatever point of sale online brick and mortar whatever the point of sale happens to be. You’re going to have to overcome that objection. And that’s never a fun time. So we also know that you will not be purchasing a Hummer anytime soon. So let’s just note that, if the listeners would like to connect with you, Alex, were on the interwebs is the best place to connect with you and maybe even get involved with Clean Tech Incubator?

Alex: One of my gigs is I run a newsletter that’s about sustainable mobility. That’s actually the title of newsletter is sustainable mobility and so that’s Alex mitchell.substack.com. People can go on there, check out what I write about. I’m sort of writing about this transition both you know what it impacts in terms of startups working on this topic, but also policy angles, etc. So that’s one way people can reach me connect me and sort of learn what I’m working on. And then the Los Angeles Clean Tech Incubator, just do Google search and get on a website and learn there’s an opportunity for startups to apply to become part of our incubation program. And we also have pretty deep partnerships with corporates and governments. So for folks who work at those entities, they can they can reach out as well. And yeah, that’s probably the best way to reach me.

Elena: And that’s it. So I’ll make sure that both of those items are in the show notes so people can easily access them. Alex, you’ve been a joy, a pleasure to have on the show. Again, I feel like you’ve just elevated our conversation about five decibels above what’s, where we’re going here. So appreciate your time. Appreciate your insights. And I look forward to just staying connected with you and just continuing to learn. It’s great. Thank you, Alex.

Alex: Thank you so much for having me. I really appreciate it.