Why the electric vehicle ‘cost parity’ conversation doesn’t make any sense

Published

2 years ago

June 28, 2023

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GM CEO Mary Barra was recently asked about profitability targets for the company’s electric vehicle line and said that it’s on track for EV profitability in 2025.

But, frankly, the whole conversation about EV profitability and cost parity doesn’t make a lot of sense, and here’s why.

Barra is at the Aspen Ideas Festival this week, and conversations have predictably included lots of talk about electric vehicles. She sat down with Andrew Ross Sorkin from CNBC for an interview about the company’s EV transition, and the question of EV profitability came up, as it often does.

Barra gave the kind of answer we’ve heard before – EV profitability isn’t here but is coming soon, and affordable vehicles are going to be the hardest ones to make profitably.

Here’s the full exchange:

Sorkin: You’ve also talked about the challenges of producing cheaper vehicles, so $30,000 to $40,000 vehicles, and doing that profitably, that’s gonna take ’til when now?

Barra: Well a lot of the vehicles that we’re putting out now as we get to scale, because we’ve brought battery manufacturing inside, we have plans and we’ve said – I don’t talk about individual product line profitability – but we’re on track for 2025 to be in that low mid single digits, and that’s before IRA, and then we’ve said later in the decade we’re gonna be at parity with ICE. So a lot of it is going to rely on continuing to improve battery chemistry and getting cost of out of the battery, ’cause that’s where the cost opportunity is.

Sorkin: Is the idea that there will be vehicles that you will sell, effectively unprofitably, to “seed the market,” if you will?

Barra: I would say we’re going to where we know the consumer has to be to get to the volume, and we’re gonna drive to profitability as quickly as possible, and then when you put things like IRA on top of it, along with the software services, I think we’re gonna see profitability even in those affordable vehicles more quickly than anyone’s expecting.

The most crucial statement here is that Barra reiterated that the company’s EVs will be profitable in 2025, and she specified here that this is without accounting for Inflation Reduction Act tax credits. IRA includes significant credits both for consumers and manufacturers.

Barra’s comments didn’t split out individual product lines, so perhaps she was talking about overall profitability across all of GM’s EV projects. This is necessarily going to be low at the moment because GM is currently spending a lot of money building manufacturing for its Ultium platform, which hasn’t produced many EVs yet. Product lines usually don’t become profitable until they’ve been manufactured for a while, as companies recoup initial investments and get costs down over time.

But what about the Bolt EV? It’s been in production for a long time now – to the point that it’s about to be discontinued. Has GM really not made any money on any of the units it has sold? Could it have done so if it had produced the car in higher volume or hadn’t dealt with an extended recall (which LG ended up paying for anyway)?

But this whole conversation is strange and has been for a long time for several reasons.

A short history of “cost parity” in EVs

There is a long history of car companies saying they can’t produce EVs profitably. One of the earliest was Fiat’s late CEO Sergio Marchionne, who famously told customers not to buy his company’s Fiat 500e because Fiat supposedly lost $14k per unit (among a lot of other bonkers EV-related comments).

Currently, most manufacturers will tell you that they are not making a direct profit on their electric vehicle lines. The most notable exception is Tesla, a company that’s focused entirely on making electric cars and, at times, has had higher margins than anyone in the overall auto industry. Those margins have now dropped as Tesla has dropped prices, starting a price war that is threatening other automakers due to Tesla’s significant apparent cost advantage.

So it is definitely strange to have every company saying that EVs are less profitable, except for the one most profitable company. That company also happens to be the one that has taken EVs the most seriously and for the longest period of time.

And, importantly, Tesla is one of few companies that doesn’t have an interest in making the public think that EVs are inferior in some way or otherwise pushing back the timeline for EV adoption. Because Tesla’s current product mix isn’t heavily fossil-based like the rest of the industry is.

But lest we think Tesla is the only exception that proves the rule, it’s not the only company that has generated a profit on EVs. The unassuming Nissan Leaf, which is currently and has historically been one of the lowest-price EVs (and lowest-price vehicles period – after state & federal credits, many buyers can get one for under 20k), started making a profit in 2014. At the time, more Leafs had been sold than any other EV worldwide, which remained the case until the Model 3 eclipsed it in 2020.

So we know that EVs can produce profit – even a lot of profit – and we know that this has been the case for a long time, even for low-cost EVs.

What does this mean for consumers?

The question Barra answered assumed that cost parity would be hard to meet, particularly in “cheaper vehicles” in the $30-40k range.

But for consumers, the cheapest vehicles have already reached price parity in many cases.

Currently, and for the better part of a year, the Chevy Bolt has been a screaming deal with its $26k base price. Then you can apply the $7,500 federal tax credit and potentially state and regional credits or other various discounts, bringing it down to a price competitive with the cheapest new vehicles in America.

And that’s not just some bare-bones get-you-there car like the universally-panned Mitsubishi Mirage, but a vehicle good enough to earn Electrek’s Vehicle of the Year award despite being at the end of its lifecycle. So you’re not just getting a low-price car, but a good car – meaning the quality-for-price metric is through the roof.

While the Bolt is being discontinued, the Leaf is still around, is still cheap, and is also a good car. The package is a little worse on value than the current Bolt is, but there will still be a solid EV in the $20k range post-credit, which is about as low as you can expect new gas cars to go.

This holds true as you go up in price, with EVs standing out in terms of value against price competitors. The Tesla Model 3 is a phenomenal car and starts at around $30k after credits. Meanwhile, its cousin, the Tesla Model Y, is currently the best-selling vehicle on Earth because of its value proposition against the competition.

And throughout all of this, we’ve only talked about the purchase price. Running costs, both fuel and maintenance, tend to be cheaper on EVs and, as such, make the total cost parity calculation even more beneficial.

And this all has been the case for some time as well. There’s been no shortage of great EV lease deals in the past, with periods where EVs could be leased at $100-200 a month with little to nothing down (after taking into account state rebates). Admittedly, many of those have dried up recently due to excessively high EV demand.

So it doesn’t make a lot of sense to say that EVs can’t reach price parity for consumers until some time in the future because it’s clear that they’re already there, even in low-price segments.

How this conversation damages EV adoption

But really, is this even a productive conversation to be having?

The constant discussion of EV profitability and “cost parity” tends to migrate out of the purely financial press and make its way into consumer circles. And through the stock market, retirement plans, and so on, some consumers are concerned about a company’s ability to make a car profitably and don’t want that company to make cars with less profit, even if that could mean lower costs for them as a consumer.

So by stating that EVs are unprofitable, companies throw cold water on the idea of EVs and make everyone feel like the “proper time” to “switch” to EVs is some time in the future rather than now. These companies that are so heavily invested in the status quo want consumers to keep buying the models they offer – which are majority-ICE for nearly every automaker out there.

The conversation itself is harmful to EV adoption, at least in the way it is commonly presented – that this timeline is coming “in the future” rather than now (that said, Barra did say that this would come “sooner than anyone’s expecting,” which is a nice improvement in messaging).

The fact is: it doesn’t matter that much if an individual car, line, or effort is profitable, depending on how it fits into the company’s strategy. And companies know this because they keep making these EVs even though they claim they’re not profitable.

Why would companies do “unprofitable” things?

Companies exist to make a profit above all. But in the course of their existence, this doesn’t mean that every decision a company makes must drive a profit immediately.

Lower-cost vehicles, regardless of powertrain, tend to have lower profit margins. These are made up for by high volume and the expectation that the company may build brand loyalty amongst customers who, as they proceed in life, may end up in a position to purchase higher-priced, higher-margin vehicles.

And as mentioned in the Barra interview, everyone sees that the market is turning towards EVs, and companies are trying to establish a presence in the EV market, which is growing rapidly while gas car sales plateau. This means that companies may consider current EVs a “loss leader” to attempt to establish market share, especially if upfront investments in future capacity – growth of the company’s EV line – are accounted for as “losses” in the present due to the high upfront costs required.

Additionally, government requirements around the world are getting stricter in terms of required EV share. Companies simply have to sell a certain amount of EVs, so it doesn’t matter if they make a profit on any individual vehicle because if they don’t do it, they will be punished. The cost of that punishment (or the cost of credit-trading schemes) is greater than whatever they claim they’re losing on EVs.

This is why, for example, Fiat still sold the 500e in 2014 despite claiming it lost money – because selling the car meant it could continue selling in California, which made Fiat more profit than not doing so.

Companies and governments have different goals

One could call this “picking winners and losers,” but that is, again, a narrow view of the situation. Companies and governments (should) have different goals. Companies are in it for profit, but governments ought to be in it to enhance the public good. And these goals can be in opposition to one another.

To a company, the costs are whatever dollars it has to spend on materials, labor, distribution, etc. But other costs are ignored by a company, and instead absorbed by the rest of society. There is a long history of doing business by externalizing costs and privatizing profits – see the parable of the tragedy of the commons.

With cars, this means exhaust pollution, which is the largest contributor to smog that harms human health. The air is a common resource that all of us need, and the pollution put into that air by automotive and oil company products is responsible for enormous health and environmental costs (e.g., wildfires due to climate change, which are currently devastating much of North America, causing lung problems and property damage). Those costs are largely not borne by the polluters that are largely responsible for them, but instead borne by all of us on the back end.

It costs manufacturers more money to install pollution control equipment and engineer more efficient vehicles than it would if they didn’t have to do either of those things. Companies lobby fiercely against any requirement that might save you money – even if it costs them little to implement – because they only care about their own costs, not society’s.

But government at least should be different than that. Governments ought to account for these additional costs to society and tell polluters they need to pay those costs upfront.

Until they do, any discussion of “cost parity” is incomplete. If each EV saves $10,000 for society in health costs alone, then it is in the public interest to have more of them and fewer of the vehicles that are choking us. And if we spend all our time focusing on the cost of EV subsidies and not the much higher costs of fossil fuel subsidies, then we aren’t truly calculating which of these technologies has higher actual costs.

For these reasons, I believe we need to retire (or at least reframe) the whole conversation about “cost parity” for EVs. Consumers can already see parity in low-cost EVs and quality-for-price across various price ranges. Companies can already see it, assuming they’re taking their EV lines seriously and not just trying to throw cold water on the whole idea of EVs in the first place. And society can already see it, given that EVs are already making the air cleaner, resulting in lower societal costs that will compound in the future.

So why do we keep talking about some incredibly narrow definition of cost parity and perpetually say that it’s coming sometime in the future when, by so many meaningful metrics, we’re already here, and everybody in the industry already knows why they have to make EVs anyway? It just doesn’t make any sense.

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Environment

Trump tariffs push Asian trade partners to weigh investing in massive Alaska energy project

Published

19 mins ago

April 20, 2025

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Trump tariffs push Asian trade partners to weigh investing in massive Alaska energy project

Japan, South Korea and Taiwan are considering investing in a massive natural gas project in Alaska in an attempt to reach trade deals that would both satisfy demands from President Donald Trump and avoid high U.S. tariffs on their exports.

Alaska has long sought to build an 800-mile pipeline crossing the state from the North Slope in the Arctic Circle to the Cook Inlet in the south, where gas would be cooled into liquid for export to Asia. The project, with a staggering price tag topping $40 billion, has been stuck on the drawing board for years.

Alaska LNG, as the project is known, is showing new signs of life — with Trump touting the project as a national priority. Treasury Secretary Scott Bessent said earlier this month that the liquified natural gas (LNG) project could play an important role in trade negotiations with South Korea, Japan and Taiwan.

“We are thinking about a big LNG project in Alaska that South Korea, Japan [and] Taiwan are interested in financing and taking a substantial portion of the offtake,” Bessent told reporters on April 9, saying such an agreement would help meet Trump’s goal of reducing the U.S. trade deficit.

Taiwan’s state oil and gas company CPC Corp. signed a letter of intent in March to purchase six million metric tons of gas from Alaska LNG, said Brendan Duval, CEO and founder of Glenfarne Group, the project’s lead developer.

“You can imagine the geopolitical enhancements whether it’s for tariff or military reasons — Taiwan is really, really focused on getting that signed up,” Duval told CNBC in an interview. CPC has also offered to invest directly in Alaska LNG and supply equipment, Duval said.

March trade mission

Duval and Alaska Governor Mike Dunleavy traveled to South Korea and Japan on a trade mission in March, meeting with high-ranking officials in government and industry. Japanese and South Korean companies have asked whether their development banks can help finance Alaska LNG, Duval said.

“Lately, there has been quite a lot of inquiries from India, so there’s a fourth horse that’s entered the race,” Duval said. Thailand and other Asian countries have also shown interest, he said.

The Alaska LNG project has three major pieces: The pipeline, a gas processing plant on the North Slope and a plant to liquify the gas for export at Nikiski, Alaska. These facilities are estimated to cost roughly $12 billion, $10 billion, and $20 billion respectively, Dunleavy said at an energy conference in Houston in March.

The permits for Alaska LNG are already in place, the CEO said. Glenfarne expects to reach a final investment decision in the next six to 12 months on the first phase of the project, a pipeline from the North Slope to Anchorage that will supply gas for domestic consumption in Alaska, Duval said.

Construction on the LNG plant is expected to begin in late 2026, the CEO said. The goal is to complete construction on the entire Alaska LNG project in four and a half years with full commercial operations starting in 2031, he said.

Alaska LNG plans to produce 20 million metric tons of LNG per year, equal to about 23% of the 87 million tons of LNG that the U.S. exported last year, according to data from Kpler, a commodity researcher.

‘Unleashing’ Alaska’s resources

Alaska plays a central role in Trump’s goal to boost production and exports of U.S. oil and gas, part of the White House’s agenda for U.S. “energy dominance.” The president issued an executive order on his first day in office seeking to tap Alaska’s “extraordinary resource potential,” prioritizing the development of LNG in the state.

“We’ll have that framed on our walls in Alaska for decades,” Gov. Dunleavy said at the Houston conference last month, referring to the executive order.

Once a net importer, the U.S. has rapidly become the largest exporter of LNG in the world, playing an increasingly vital role in fueling power plants in Asia and Europe for allies with limited domestic energy resources. Japan and South Korea, for example, each took about 8% of U.S. LNG exports last year, according to Kpler data.

The Trump administration views Alaska LNG as “an important strategic project,” Interior Secretary Doug Burgum said at the Houston energy conference. LNG exports from Alaska would reach Japan in about eight days rather than having to pass through the congested Panama Canal from terminals on the Gulf Coast, Dunleavy said at the same conference.

“They can have the opportunity to get delivered to them the most efficient LNG from an allied partner,” while avoiding chokepoints, Duval said. “This is the only LNG the U.S. can supply that has a direct route, and they are very cognizant about that in today’s environment.”

North Pacific talks

Trump told reporters during a joint press conference with Japanese Prime Minister Shigeru Ishiba in February that the two countries were discussing the pipeline and the possibility of a joint venture to exploit Alaska oil and gas. Trump said he discussed the “large scale purchase of U.S. LNG” in an April 8 phone call with South Korea’s acting President Han Duck-Soo, and Korea’s participation in a “joint venture in an Alaska pipeline.”

Japan wants to maintain its security agreement with the U.S. against a rising China and avoid tariffs, officials at the Alaska Industrial Development and Export Authority told the Alaska Senate finance committee during a February presentation. “We are now in a completely ‘transactional’ trade world,” the executives said. Tokyo must invest more in the U.S., buy more LNG and enter a joint venture linked to Alaska oil and gas, they said.

The project would likely be a structured as a loose joint venture, with Asian partners signing contracts for large volumes of LNG, Duval said, and won’t necessarily translate into Japan, Taiwan and South Korea holding direct equity stakes in Alaska LNG, though Glenfarne is open to the possibility, he said.

Glenfarne’s goal is to be the long-term owner and operator of Alaska LNG with partners, Duval said. Glenfarne is a privately-held developer, owner and operator of energy infrastructure based in New York City and Houston. The company assumed a 75% stake in Alaska LNG from the Alaska Gasline Development Corporation in March, with AGDC keeping 25%.

Roadblocks and commercial viability

The Trump administration is clearly pressuring Japan, South Korea, and Taiwan to invest in Alaska LNG, said Bob McNally, president of Rapidan Energy and former energy advisor to President George W. Bush. Although Japan wants to both placate Trump and diversify its LNG supplies, Tokyo may yet hesitate to invest in Alaska LNG due to the project’s cost, complexity and risk, McNally said.

Another roadblock is that Democrats could return to power in 2028 and try to stop the project from advancing, citing environmental effects, McNally said. President Joe Biden, after all, paused permits for new LNG exports to countries including Japan that don’t have free trade agreements with the U.S. But Trump reversed Biden’s suspension as part of a torrent of executive orders tied to energy on his first day in office in January.

In addition to political risk, Alaska LNG “doesn’t have a clear cut commercial logic,” said Alex Munton, head of global gas and LNG research at Rapidan. “If it did, it would have had a lot more support than it has thus far, and this project has been on the planning board for literally decades,” Munton said. There are more attractive, existing LNG options for Asian customers on the Gulf Coast, he said.

The project is expensive even by the standards of an LNG industry that builds some of the costliest infrastructure in the energy sector, Munton said. The price tag of more than $40 billion likely needs to be revised upwards given that it is two years old, the analyst said.

“You have to assume that the costs are going to be much higher than the publicly quoted figures,” Munton said. Alaska LNG will likely need “public policy or a public commitment of funds to bring it to life,” the analyst said.

Duval said Alaska LNG will be competitive with no government subsidy. “It is a naturally competitive source of LNG, independent of the geopolitical benefits, independent of the tariff discussions,” he said.

“We have the support of the president of the United States,” Dunleavy said in Houston. “We have Asian allies that need gas. Geopolitical alliances are changing. Tariff questions are coming up. When we really look at it in that context, it’s a very viable project.”

Environment

Can an electric bike really do 100 miles on a single charge?

Published

5 hours ago

April 20, 2025

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Can an electric bike really do 100 miles on a single charge?

When it comes to electric bikes, range anxiety is real — but it might be less of a concern than you think. In a recent real-world endurance test, Priority Bicycles’ Will Maurillo and Connor Swegle set out to answer a simple but ambitious question: Can a Current Plus e-bike hit 100 miles (160 km) on a single charge?

The test was part of the ongoing series Will Will Do It?, where Priority Bicycles’ Will Maurillo attempts new feats on bikes to see if he can pull them off.

The Priority Current Plus was upgraded late last year with a new 720Wh battery, or around 40% larger than the previous version. The bike is rated for up to 75 miles (121 km) on a single charge, and Will outfitted a stock Priority Current Plus with the company’s range extender battery to add another 500 Wh of battery as a reserve. Considering the bike is rated for 75 miles of range, that reserve battery was likely good planning.

It may seem like attempting a century, or a 100 mile (160 km) ride, would be problematic on a bike rated for just three-quarters of that distance. But that’s where real-world riding clashes with spec-sheet numbers. While the spec sheet can give riders an idea of an e-bike’s range on a single charge, the same e-bike can achieve drastically different ranges when ridden in different power modes.

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You’ll have to forgive the quick math here, but to put it simply, many e-bikes can achieve as little as 5-8 Wh/mile in the lowest power pedal assist mode. For comparison, an average electric car uses around 30-50x as much energy to travel the same distance. So, for a 720 Wh battery, 100 miles on a charge would require just 7.2 Wh/mile. That’s on the extreme end of efficiency for a commuter e-bike, but not totally impossible.

Environment

What’s happening with Tesla’s solar roof?

Published

21 hours ago

April 19, 2025

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What's happening with Tesla's solar roof?

The Tesla Solar Roof tiles are still alive, but the product is on the back burner at Tesla as it failed to achieve its promises.

When launching the solar roof in 2016, CEO Elon Musk presented it as a critical product to accelerate solar power deployment, as it opens up the market to people who want to go solar but also need to replace their roof soon.

He said that he aimed for Tesla to produce 1,000 new solar roofs per week by the end of 2019.

However, Tesla didn’t reach volume production of the solar roof tiles until 2020, and even then, it was at a fraction of the deployment it was aiming for.

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In 2022, Electrek reported that Tesla installed solar roofs for the first time and confirmed that the Company deployed 2.5 MW of solar roofs during the second quarter of 2022, equivalent to approximately 23 roofs per week, which is far short of its goal.

Since then, Tesla has even further pulled back its solar effort – and even stopped reporting its solar deployment.

Many people are asking what it means for the solar roof, which Musk touted as a revolutionary product.

In 2023, we reported that Tesla began phasing out its solar business, particularly its in-house installations.

Tesla shifted its focus on deploying Powerwalls and solar inverters through third-party installers.

The same thing is happening with Tesla’s solar roof tiles. The company appears to be giving up on installing them itself, but some installations are still happening with third-party certified installers.

Tesla doesn’t even give online quotes on its solar roof anymore and has people submit requests for quotes through third-party installers:

“In order to receive pricing and product information, Tesla will share your contact information with a Tesla Certified Installer.”

We are hearing less about solar roof installations lately, as Tesla has gone virtually silent on the program; however, some ongoing installations are still being carried out by third-party installers.

Weddle and Sons Roofing just posted about a new 20 kW Tesla Solar Roof installation in Topeka, Kansas:

It’s challenging to determine the exact deployment rate of the solar roof, but based on our checks with a few installers, it doesn’t appear to have increased since 2022.

Tesla-certified installers are even convincing potential buyers to opt for a regular roof with solar panels instead of a solar roof. Potential buyer Jeff Betty shared this text from an unnamed installer:

This is not entirely surprising, as the primary issue with the Tesla Solar Roof tiles is their pricing. Tesla aimed for the solution to be competitive with higher-end roofing options, but it remains expensive and much less affordable than many durable roof options, plus solar panels.

Electrek’s Take

In short, the Tesla Solar Roof is still alive, but it’s nowhere near the revolutionary product Tesla claimed it would be.

Instead, it has become a very niche higher-end roofing product that Tesla deploys in very low volume through third-party installers.

It’s not in any way a significant part of Tesla’s energy business, which is now almost entirely Megapacks and Powerwalls.

While Tesla’s solar roof is not for everyone, now is a great time to go solar with rooftop solar panels.

If you want to make sure you’re finding a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage. EnergySage is a free service that makes it easy for you to go solar – whether you’re a homeowner or renter. They have hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20 to 30% compared to going it alone. Plus, it’s free to use and you won’t get sales calls until you select an installer and you share your phone number with them.

Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisors to help you every step of the way. Get started here.

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