Musk realized the economics and decided (best underpants plan ever) to start at the enthusiast-luxury end with the sports car.
But, his crucial point was that for people already in the luxury market, he'd be able to quickly drop the enthusiast requirement. The cost of batteries that compete with a fuel tank on range does not scale with the rest of the car. Tesla now competes on a side-by-side basis, price considered. They are only in the higher price segments still, but have definitely reached the tall part of the curve with the 3s. He also predicted that the luxury threshold^ above which an EV competitive, would gradually fall.
So, so far he's been right (tsla as an investment... separate discussion. The other stuff ...charging stations, used car markets, etc.. those are are effects, not causes.
I do think the last leg of the price game will be tricky though. Subsidies don't make sense anymore. The innovation has been stimulated already. The volume is going up and keeping up subsidies will be expensive. People will also eventually kick up a fuss about subsidizing some yuppie lawyers nice new car. Cleaning these up is a process because they're a mess. Manufacturer subsidies, buyer subsidies. Lower car tax, which is now a carbon tax.
The biggest subsidy is probably fuel. 40l of petrol (about 500km) costs €50-€55. Half of that is tax. VAT & excise. EVs are exempt by default. These are serious, budget busting taxes. My guess is that EVs will eventually need to pay these, one way or another. They still need roads and such.
Long road until you can pick up a 7 years old Tesla for €5k, but we seem to be on it. The destination will be inevitable long before we reach it.
Georgia (USA) had a very lucrative EV tax incentive: US$5000 on a purchase or lease. The city of Atlanta is perfect for such vehicles: commute under 50 miles, desire to mitigate smog, temperature conducive to good battery performance. Result was a lot of people (myself included) leased a Nissan Leaf for 2 years at practically no cost[1]. This jumpstarted the EV market, persuaded installation of a LOT of chargers, and persuaded many people that EVs are a desirable option (if a bit more expensive up-front).
Eventually demand for the tax credit got so high, and revenue from gasoline taxes dropped enough, that the state dropped the incentive - going the other way even, charging a straight-up $200 annual tax on EVs for road use. The market for EVs evaporated (understandable, because no more free-for-2-years cars). The ripple effects from the artificial demand being abruptly cut off will affect the EV industry for long: people found them desirable, but expect them cheap.
I expect the EV market will eventually happen. They're very nice cars, and starting every day "topped off" is very convenient. Battery technology has progressed well, with enough money & interest to see it thru to seriously competing with petrol.
[1] - The net cost was $zero + upgrades, but it did require considerable cash flow to pull off: you had to lease a $36,000 car and get your credits at tax time - possibly years later. Atlanta has a good confluence of incomes, high-tech interests, and weather facilitating this.
Agreed. Subsidies should continue, but I would couple them with a carbon tax in a few years, when there are many more EV options on the market, the prices have been lowered, and there are EV chargers everywhere.
Then introduce a large carbon tax and launch a "dump your ICE car for an EV" program for lower income people where they can get an half the car subsidized but the EV can't cost more than $20,000. Use the large carbon tax to fund these subsidies. To increase the effectiveness of the program say that by 2030 ICE cars will be banned in cities and no new sales of ICE cars will be allowed.
The biggest aid to subsidies is "chicken-and-egg" issues: nobody wants to buy an EV if there's nowhere (other than home) to charge it, and nobody wants to install public chargers if there's nobody driving EVs. Atlanta has cleared that hurdle: lots of chargers were installed, reaching critical mass where the worst of those worries are mitigated and both sides willing to take the step to bring more cars & chargers into the system.
Subsidies are justifiable as long as there is a need to counter-balance existing subsidization of the gasoline car ecosystem. In other words, a subsidy that one should be able to do without in a vacuum is still needed in an environment where extraction, transport, refining, etc. of fossil fuel is all more or less subsidized.
The USA massively subsidizes gasoline spending. First of all you have externalities of pollution, and the health related expense for that. Next you have a $trillion/yr in military spending dedicated to providing a secure oil supply.
Musk realized the economics and decided (best underpants plan ever) to start at the enthusiast-luxury end with the sports car.
But, his crucial point was that for people already in the luxury market, he'd be able to quickly drop the enthusiast requirement. The cost of batteries that compete with a fuel tank on range does not scale with the rest of the car. Tesla now competes on a side-by-side basis, price considered. They are only in the higher price segments still, but have definitely reached the tall part of the curve with the 3s. He also predicted that the luxury threshold^ above which an EV competitive, would gradually fall.
So, so far he's been right (tsla as an investment... separate discussion. The other stuff ...charging stations, used car markets, etc.. those are are effects, not causes.
I do think the last leg of the price game will be tricky though. Subsidies don't make sense anymore. The innovation has been stimulated already. The volume is going up and keeping up subsidies will be expensive. People will also eventually kick up a fuss about subsidizing some yuppie lawyers nice new car. Cleaning these up is a process because they're a mess. Manufacturer subsidies, buyer subsidies. Lower car tax, which is now a carbon tax.
The biggest subsidy is probably fuel. 40l of petrol (about 500km) costs €50-€55. Half of that is tax. VAT & excise. EVs are exempt by default. These are serious, budget busting taxes. My guess is that EVs will eventually need to pay these, one way or another. They still need roads and such.
Long road until you can pick up a 7 years old Tesla for €5k, but we seem to be on it. The destination will be inevitable long before we reach it.
^The price category.