An Electric Vehicle in Every Driveway?
To meet ambitious climate goals EVs need to be more than niche product for rich people.
It has been over a decade since Tesla introduced the original Roadster. At $100,000+ the Roadster was not for everyone, but the promise of Tesla, and of EVs more generally, has always hinged on EVs eventually reaching a broader audience.
This is not just about equity. Policymakers are setting ambitious goals for EV adoption. California, for example, aims to have 5 million EVs on the road by 2030. But to meet these ambitious goals, EVs will need to stop being a niche product and appeal to as many drivers as possible.
Today I look at newly available data on U.S. EV buyers. Updating an earlier analysis I did with Severin Borenstein, I want to ask: Is it still mostly high-income households driving EVs? Or are there signs that the market is opening up? Are we headed toward an EV in every driveway?
New EVs; Old Story
I constructed the figure below using newly available nationally representative data from the 2017 National Household Travel Survey (NHTS). I first divided households into eight categories based on annual household income. Then for each category, I plot the percentage of households with EVs in two vintage categories: early EVs (2010-2014) and later EVs (2015-2017).
Bottom line — it is mostly high-income households that have EVs. This is true for older EV vintages, but also true for newer EV vintages. Where you really see EV penetration taking hold is in the very highest income category ($200K+). About 2% of these households own an EV vintage 2010-2014, and another 2% own an EV vintage 2015-2017, for a total EV penetration of about 4%.
If newer EVs were appealing to a broader spectrum of buyers, you would expect to see a flatter relationship for the newer vintages. You don’t. Instead, newer EVs are just as skewed toward higher income households as older EVs.
Is this Just a Tesla Effect?
Is this just a Tesla story? The NHTS data were collected in 2017, so almost completely miss the Model 3 which launched in July that year. So for Tesla these data include mostly the Model S and the Model X – two very expensive vehicles. But what about all the other EVs? To shed light on this, I constructed the table below using these same data.
Tesla indeed occupies a particular high-income part of the market. But the other best-selling EVs are also mostly in high-income households. The average annual income for households with the recently discontinued Chevrolet Volt, for example, is $147,000.
Thus, overall, the pattern looks quite similar to a couple of years ago, when Severin and I used tax return data from the IRS to perform a similar analysis. At the time, we found that 90% of electric vehicle tax credits went to households with adjusted gross income (AGI) above $75,000 per year.
EV Revolution Will Not be Cheap
It will be interesting to see how this pattern changes with the Model 3, the Chevrolet Bolt, the Kia Niro, and other emerging EVs aimed squarely at the broader market. Maybe it just takes time, and early expensive EVs are paving the way for the next wave of vehicles.
But to me it underscores a point that Max Auffhammer made in a recent blog post, “The EV Revolution Will Be Heavily Subsidized”. As an economist I believe deeply in revealed preference (i.e., look at what I do not what I say), and most people are not yet running out to buy EVs. So far, EV buyers are mostly “affluent drivers in coastal areas” as Steve Forbes recently characterized it. Buyers do respond to EV subsidies, but we are starting from such a low baseline, that it will not be easy to meet ambitious goals for EV adoption.
It also points to the need for more publicly-funded basic R&D. Echoing Severin’s recent blog post, knowledge creates positive externalities, so we need to be doing much more of it. Perhaps in no other sector is this as important as reducing carbon dioxide emissions from transportation, which argues for supporting innovation in batteries and related technologies for a future generation of EVs.
Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.
Suggested citation: Davis, Lucas. “An Electric Vehicle in Every Driveway?” Energy Institute Blog, UC Berkeley, May 13, 2019, https://energyathaas.wordpress.com/2019/05/13/an-electric-vehicle-in-every-driveway/
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Lucas Davis View All
Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is a Faculty Affiliate at the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Research Associate at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.
Energy Institute Blog 
The electric revolution in the automotive market is here, and is growing faster. Electric cars are among us. They are few compared to traditional ones but are expected to increase in these next years. And the price is expected to descend. We really hope so!
Lucas, with the base Model 3 in the mid-$50Ks depending on incentives, everything is going according to plan for Tesla – other than Musk’s dead-end preoccupation with building a self-driving car.
And the U.S. is only one piece of the puzzle: in Norway, Teslas are now more common than in Southern California (I took a ride in a Model S taxi yesterday). Tends to refute the talking point electric cars aren’t practical in cold weather, doesn’t it?
After auto manufacturers and oil companies used patent encumbrance to block large-format lithium-ion batteries in the 2000s, Musk soldered 6,600 cellphone batteries together and built the Roadster – the fastest, longest-range EV in history.
All to say – when some diss Elon Musk’s determination/vision/talent, it’s a great way for them to show they have no idea what they’re talking about.
Publicly-funded R&D? Not sure why Californians would want their government to spend tax dollars on making luxury characteristics (smooth and quiet ride, greener-than-thou status) more affordable. Btw, the Green Revolution was started with private foundation money. Governments kicked in later once success had been demonstrated.
And DARPA funded the Internet that was begun at public universities. There are examples of successful wide ranging R&D from both public and private sources.
I agree with the sentiment that development needs to focus on a basic model that can reach a wider consumer base. But remember that the first autos were built to be as luxurious as the horse carriages that they were replacing, not the utility wagons that everyone else used.
Elon isn’t getting any public funding. What are you talking about? The reason for buying a Tesla is because its just a lot better car. Buy one and see what I mean.
Too many companies – especially Tesla – see the EV revolution as the time to incorporate auto pilot hardware and software into every new design. This inflates the cost to consumers and will blow-up the cost of insurance. Just give me a car that feels like the car I have now, and with a dashboard that doesn’t look like a video screen (though I do like the back-up camera and warning pings). Move the cost down while keeping driving range up, please.
Two opportunities exist to improve such analysis significantly:
1) Use the new-car-buying population, not the population as a whole, as the basis of comparison. New-car buyers are different, and market context is important.
2) Use more direct evidence more frequently. For example, the presentations at the following two links show that, yes, EV consumers can have relatively higher incomes, but most have moderate incomes that aren’t as different of new-car buyers as you might think. Indeed, the percentage of EV rebate recipients in California with incomes less than $150,000 per year is roughly the same as that percentage for the new-car buying population as a whole. And California EV rebate recipients are already less frequently white than indicators for new-car buyers overall.
Further, other indicators of impact indicate that EVs are replacing older, more polluting vehicles at high rates and being used as primary vehicles, not toys that don’t get used and therefore don’t do any good.
Yes, there is indeed a way to go, but “niche product for rich people” is not accurate and showing a picture of one of the oldest and most niche sports-car EVs with a caption about groceries is irresponsible when over 40 models are now available to choose from, including a minivan, several large sedans, and crossover SUVs.
https://cleanvehiclerebate.org/eng/content/presentation-%E2%80%9Ccvrp-data-and-analysis-update%E2%80%9D
https://cleanvehiclerebate.org/eng/content/electric-vehicle-rebates-exploring-indicators-impact-four-states
The points you make about electric vehicles would be equally applicable to the adoption of electricity itself starting around 1880. At that time electricity was part of the luxury goods market, the cost per kwh may have approached a dollar (in the UK), in addition the consumer needed to pay for wiring etc. and sometimes the cost of infrastructure. Over a thirty to fifty year period cost fell and it became a mass market product. We are still in the early adoption phase. To move on, we maybe need to re-imagine the automobile, in the UK the electric car most people need is a lockable golf buggy weighing, say less than 500 kg (maybe they don’t want it), what is offered is something expensive weighing 1,500 kg. Maybe the next step is the electrical equivalent of the Model T Ford. Ford once said that if he had asked his customers what they wanted, they would have said a faster horse, some creative thinking is needed.
Supporting that statement is a review of past technology adoption rates I posted here: https://mcubedecon.com/tag/technology-subsidies/. In most cases almost all of these technologies were considered “luxury” goods until market penetration approached 10%. EVs still have a ways to go.
Consumers/ users have no clue what the future choices/ possibilities. Experts dont either. Most people make projections based in history despite ‘past performance is no guarantee etc’. There is still too much ‘juice’ left in internal combustion engine technology, and on a joule/ km energy usage including ‘externalities’ [pollution etc] fossil-based transportation will be better than EVs for many years. The losses in conversion of electricity to chemical storage then to electrical again then to mechanical/ traction exceed the losses in conversion from chemical [gasoline] to thermo-mechanical to traction. EVs are NOT A SLAM DUNK. I am not a climate change skeptic but do not accept the party line without questioning.
Cost equation is not just about operational efficiency. If that was the case we would have immediately switched from steam turbines to combined cycle and we would stopped building coal plants two decades ago. It’s the quadruple factor–efficiency (that you mentioned), fuel cost, operating costs, and capital costs. EVs score better on the middle two elements and are catching up on the fourth. Plus there’s one other element – risk & volatility. Retail electricity rates are relatively stable. For risk, I haven’t seen much assessment.
The aggregate pollution of an EV may be greater than an ICE but an ICE pollutes during usage far more than an EV. The air we breath would be much cleaner if the cars driving by were all EVs. This means the externalized health costs (asthma, cardio-pulmonary issues, pre-term birth, IQ deficiency) are far lower in an all-electric car world.
My friends have pointed out that my EV is using dirty fuels on the grid to charge up the car. To get around this problem Ive been thinking about a small solar system of 1.5 to 2 kw to give me about 10,000 miles range in town driving each year. I want this to be off the grid to insure I can have purely solar power for the car as well as being prepared to drive the EV even if there is a long grid outage. I have yet to find a suitable system that can operate off the grid indefinitely. The Power Wall is not designed to operate off the grid for extended periods but it should be. If I could power my EV with about $3000 investment I would do so immediately. Of all the systems on the internet to power the EV from your own solar panels only work well if connected to the grid. This is not of any value if the grid is down. Also when on the grid you have to follow all the rules of your provider. Some of these rules are not in the interest of us customers. Charging off the grid gets around these rules and losers the cost of the system.
So everyone who has worked on CARB’s low carbon fuel standard metrics is wrong, and you’re right: https://www.arb.ca.gov/fuels/lcfs/fuelpathways/pathwaytable.htm
You say the “EV Revolution Will Not be Cheap,” which is true. What’s also true is that the lack of an EV revolution (ie continued reliance on fossil fuels) will be much more expensive. Fossil fuel cars don’t pay for their externalities.
For the ‘high income’ people the EV is a toy, a 2nd or 3rd car, or HOV lane access ‘permit’. Range will increase only with better or more batteries, ie cost.
I live in the SF Bay Area, see many Tesla EVs. But just like the fellow who bought a $100+k Porsche many years ago complained about the price of gas, I see Tesla owners hogging the few free charging stations in the area. Fast charging is fine, but simple physics-chemistry etc tells you that that will be higher cost of better thermal management [keeping battery cool while charging] or/ and shortened battery life.
I recently got my first HEV. The E part is disappointing – 2.2 hours of charging, for 16miles [on level ground, with no headwind]!! If i paid at public charging that is about $2.5-3 per charge. Does not make economic sense in $$, but also in wait time.
Why did I buy it: same out-the-door cost as a gas-only car, and was only one in inventory with the combination of color, interior trim, etc. that my partner wanted.
EVs will remain a niche category for some time – until cheaper/ better batteries. Or until the laws of science change. Guess which will come first.
You bought the wrong EV. I charge at home on my model 3 and in 5 hours get about 200 miles range. On the road the super charging stations get that range in 30 min of charging. I don’t need to use any charging stations in my town, Austin. I always charge at home. The model 3 Tesla is not that much more expensive than ICE cars and it should last a lot longer and use a lot less gas. Im hoping for a life of 500 k miles on the long range battery, 75 kWh with 300 miles range.
My wife and I bought a Tesla Model 3 because at our age if we are to ever own an EV we are going to have to do it not. We’re a bit over 70 years old. After owning the tesla for a few months all I can say is wow. Its light years ahead of other EVs and other cars for that matter. Its a truly amazing space ship, smooth, quiet, powerful (dual motor) and long range battery and super charging stations eliminates range anxiety. Its super quiet and you really cannot tell the difference in wind noise at 50 mph and 100 mph. There is very little wind noise. Everyone needs to go ahead and make the transition to powerful new EVs as soon as they can afford it. And don’t get a wimpy little EV. The ICE makers want you to do that. Get an EV that runs circles around every ICE car out there.