As a long-time car guy, I notice what people drive. And what I notice right now is how many people are driving Teslas.
In a feat of business and engineering brilliance, Tesla’s electric vehicles have taken a noticeable share of the market from established companies like Ford, GM, Honda, Hyundai, Toyota and Volkswagen. But Teslas aren’t cheap. On the company’s Canadian website, list prices range from about $55,000 for a Model 3 to $100,000 for a Model S.
Tesla is a force in the vehicle industry, but what about EVs in general? A new report from Scotiabank Global Economics says EVs must get cheaper to achieve mass adoption by 2035, when the federal government will require all new passenger vehicles to produce zero emissions.
“Electric vehicles likely need to be a fraction of today’s prices to reach mass market by 2035,” the report says. “The average Canadian would need to see prices drop by over a third – and lower income Canadians by a half – assuming historic spending (and financing) trends hold.”
The Scotiabank report quotes Canadian Black Book data showing that the average price of all new vehicles in Canada is $66,000, and that a battery-electric vehicle averages close to $73,000. Acquisition costs are especially high when you consider financing costs via vehicle loans. The zero per cent financing days are largely over, with current vehicle loans around 6 to 8 per cent. Tesla’s website shows a financing rate around 7.5 per cent for a model 3.
Ownership costs for EVs have been shown to be lower than for vehicles with an internal combustion engine. But the cost of buying an EV is so steep that only about one-third of Canadians said they would consider one of these vehicles in a recent J.D. Power survey.
The Scotiabank study estimates that an affordable EV price for middle-income Canadians in 2035 would be just under two-thirds of today’s price level, or around $47,000 in today’s dollars. There are a few EVs in that price range today, but they tend to be smaller options that a family would find too small.
The answer to EV unaffordability could include more government incentives or subsidies and more imports of foreign-built vehicles, the study says. More sales could produce an economy of scale that lowers prices.
The popularity of Teslas tells us there’s an appetite for EVs among the affluent. The rest of the population awaits something more affordable.
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Rob’s personal finance reading list
Air Miles reboots its travel platform
In its first big update since being bought by Bank of Montreal, Air Miles introduces a new online platform for booking travel rewards. One notable feature is a cash-plus-miles redemption option.
With you like a subscription with your new SUV?
All about how some automakers are offering services like hands-free driving, navigation and entertainment on a subscription basis, which means yet another monthly fee in your life. Thumbs down.
Cruising through retirement
A retired Australian couple have booked 51 consecutive cruises. They say it’s cheaper than a retirement home, and they get to tour the world. No details on the health care issue.
Inflation is bad for your health
Grocery shoppers are prioritizing cost over nutrition as a result of persistent food inflation, and they’re worried about the long-term impact on health. In so many ways, inflation is a curse.
Guest comment
Reader comment: “An enormous thank you for your article on Wise. It appeared as I was in Europe, really having the enjoyment of my trip affected by problems with card access as well as usurious costs. Now I have digital Wise and it’s easy as being at home. Whether it’s buying a transit day pass from a machine or at the supermarket, I just flash my digital Wise card and all is done (for 15 cents). Wise completely obviates all the currency-related hassles of travelling. Even my banker thanked me for telling him about Wise.”
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Tools, Explainers, Guides and Charts
A tax primer on the various types of investment income.
The Money-Free Zone
A list of the 100 best books about movies. Three on the list that I’ve read and enjoyed are Adventures in the Screen Trade, by writer William Goldman; The Devil’s Candy, by journalist Julie Salamon; and Making Movies, by director Sidney Lumet.
On social media
A financial planner on making the decision whether to sell a stock.
ICYMI
What I’ve been writing about
- The carnage in dividend land is an epic buying opportunity, if you can wait
- TFSAs are a smash hit with Canadians, but some people are wrongly putting money in RRSPs
- Bonds are once again wrecking your investment returns
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
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Rob Carrick