Lithium prices have crashed by about 80% from last year’s peak but… Tesla battery packs only contain 5 kg of lithium so the potential saving are not great.
Cheaper EVs come from a small lithium ion battery pack for dealing with acceleration and on ramps and a bigger sodium ion pack for cheap range and hyper fast charging.
In terms of prediction: the future is going to be like the past, only more so! Oil prices, and gasoline prices tend to go up and down, with the odd spike and crash tossed in. I’m guessing that we will see more spikes and crashes but they will be short lived.
I would wager the price of an imported beer that that prediction turns out to be fairly correct but it is kind of useless when it comes to understanding what is happening in the industry.
Understanding takes work (curses!) and even worse a spreadsheet won’t capture some of the more important aspects of the market.
The first thing to realize is that oil is not ‘a free market commodity’, OPEC is a cartel after all. Middle East producers can pump oil out of the ground for $5-$8 per barrel. A few years ago the CEO of a major offshore oil producer (I can’t remember if it was BP or Shell) claimed a break even price of $15/barrel. Offshore oil is capital intensive to tap but fairly cheap to operate.
Next up is US fracking, this beast is different: wells are cheap to drill, and fast! you can easily go from drilling to first oil in less than a week! The oil is expensive costing about $30-$50 per barrel, and the wells run fairly dry in 2 years. Every time oil prices spike US frackers go nuts and drill new wells whose output they sell into the futures market at spike prices.
Assuming that $40 is the US fracking average cost, then we can expect ‘normal’ oil pricing levels to be about $50 until oil consumption falls to 40 million barrels per day. 10 million barrels to each of S. Arabia, Russia, the US, and the rest of OPEC.
Now we consider refineries which are the main consumers of oil. They take crude oil and turn it into products like gasoline, diesel, jet fuel, and products to supply the chemicals industry. Refineries can alter their product mix within limits but that generally involves making physical changes to the plant and that qualifies as a capital expenditure. At the end of the oil era people are not happy with the usual 20 year capital expense payback period and so money starts being really expensive.
Refineries will retune to minimize the amount of gasoline and diesel produced but as demand for their products falls the industry will shrink.
Finally we take a look at the system at this particular point in time.
US refinery capacity is constant over the last decade, but imports have fallen from 7,500 barrels per day to 1,660 bpd, exports of ‘petroleum product’, i.e. the output of refineries, has grown from 1,360 bpd to 4,500 bpd.
US domestic consumption of oil products is down by 2,900 bpd or about 15% over the last decade. Most of that change happening recently.
Those growing exports are masking falling demand but they are based on developing demand for 1st world used ICE vehicles.
Then I came across this item: “Introducing the MG5, which is known as the Roewe Ei5…” in an article on InsideEVS about how well that EV held up in fleet that drove the cars 100K miles in 2 years. Big change? Battery capacity down 14% after 100K miles. The rest of the of the vehicle is mechanically sound and the interior is holding up very well!
If that is typical EV quality, then the developing world will stop buying used 1st world ICE vehicles as fast as China can supply the EVs. Falling 1st world used ICE exports lead to a domestic glut and crashing prices. That in turn makes new vehicles more expensive (What trade-in value?) and crashes those sales.
ICE seems to be much closer to extinction than expected. The model I’m thinking of is a core collapse supernova, instead of burning through fuels at an accelerating rate, export markets disappear at an accelerating rate, then rebound through the originating markets blowing it into the proverbial rodent’s dropping.
Toyota should just shut down or at least shut up.
Sensible people would just admit that they got EVs wrong and promise to work twice as hard to get themselves out of that hole and catch up to the leading edge companies.
Stupid people, make a mistake, refuse to admit it, then double-down (or go all in!, pick your favorite cliché).
Back in the middle of the last decade Samsung and MIT announced a solid state battery (SSB) that could last for 500 years, or more. That was the research part of work and Samsung took it back to its factories to ‘bring it to market’. We are still waiting.
We do have solid state batteries but they are hand built by very expensive technicians. Musk has complained that robots lack the dexterity to do the job.
This is a hard type problem, trying to figure what is really going in the face of unreliable corporate messaging.
But it is fun to try. The framework for this stab in the dark is politics, industry, and economics which includes trade.
Politics comes into play because the automotive industry in the US, and the EU is a huge driver of the economy.
Industry obviously makes the decisions about which direction to take and how fast to move.
Economics of course is the stage on which the above actors play.
Since the topic is Ford scaling back the question is why? and the answer is given as disappointing demand. That is not a completely satisfying answer. Cutting prices is the accepted way to increase demand per economics and ‘but that cuts margins!’ is the usual industry reply.
The politics I want to highlight here is the ongoing tariff war on Chinese EVs, batteries, and such going on the US and EU trying to protect their automotive industries. The major problem that I’ve seen is that both US and EU negotiators keep talking about containing China. I think they mostly mean keeping low China prices in China. Politics also enter into it since the government wants a domestic battery industry as part of the energy security mandate.
Economics tells us that as sexy as solar panels and batteries are today, tomorrow they will be commodities. Oops! The government want energy security and when it comes to domestic capacity the government wants enough in place so that going to 4 shifts a week would keep the economy running. Not a bad plan but who pays for it? Industry doesn’t want to run that much excess capacity.
Back to industry again. I was just reading that CATL’s sodium ion battery is as energy dense as LFP, I imagine that automotive execs are just as surprised as I was. Scaling back the current factory is probably to the lowest contractual allowable lithium purchasing. Make up the difference later when we can use domestic sodium ion…
50 km is just 30 miles. That is only a half hour commute each way. A lot of scooters are working vehicles and would easily do 350 km per day.
Yesterday I argued that it is wrong to label auto execs as stupid. The argument is basically that these are intelligent people with the resources to get a good picture of what is coming down the pipes. As little as we may like their moves, they are in fact acting in their and their company’s best interests.
A deeper critique is that demonizing, or stereotyping those executives blinds us to actual facts and trends and so renders our analysis useless.
Now we get to politicians. The current crop of politicians is mostly about feathering its own nests. The US house of representatives and senate have been corrupted and are now seen as a quick road to wealth and power. Since you can’t get elected without a massive war chest billionaires buy politicians by the simple expedient of funding the morally pliable.
The stupidity comes in when you look at the policies: compare and contrast to lead up to the Great Depression! That is one of the classic definitions of stupid, doing the same thing over again and expecting different results.
Are the results this time going to be the same? No. Why not? because the Great Depression happened in a bipolar world the US versus Europe. Today we have a multipolar world, with the US, EU, China, Russia being the major poles.
Only the US and EU are going down the rabbit hole this time, and the EU still has time to avoid falling in.
The rest of the world will have a moderately bad recession and the US economy will crash. The EU as stated can go either way.