The Economics of Development for Electric Vehicles

One of the primary characteristics of the auto industry since its early days has been a drive to profitably increase production.

One of the primary characteristics of the auto industry since its early days has been a drive to profitably increase production. Let’s face it: Henry Ford didn’t develop the moving assembly line for durable goods products (he’d actually been preceded in this notion by the disassembly lines that were being used in the meat-packing industry) because he figured it would be a nice touch for his horseless carriages. Making more and more and more—effectively and efficiently—has been a primary impetus, which has resulted in rather remarkable affordability.

Low volumes tend to make things somewhat unattainable. Arguably, if you took the raw materials that were used to build a Rolls-Royce, say, and compared them with the raw materials to build a Ford Taurus, in that early condition the difference between the two would not be as profound as it is after the sheet metal for the Phantom has been hand formed and the interior trim hand stitched.

Low volumes = high prices.

So consider a developing technology, like electric vehicles. Again, because the volumes are low compared to cars with internal combustion engines, they tend to be more expensive (well, there is the whole aspect of lots of electronics and sensors and whatnot that are not typically used in more mainstream products, but that’s another argument for another time).


Ways must be developed in order to cost-effectively produce these products—cost-effectively such that they can be acquired by more people, which would drive up the volume, which would, ideally, drive down the prices.

Consider a related aspect of the electric vehicle infrastructure: the charging stations.

While the overall number of electric cars is low, the number of charging stations is lower. (Think of the local gas pump at the corner station—and that’s gas pumps, as there tends to be multiples at any given station.) While you fill one car, that pump serves a large number on any given day. So the number of gas pumps is a fraction of the number of cars.

So considering the relative small number of electric cars, there is a very small number of charging stations.

Which bring us back to the small number resulting in a large cost. Unless the cost of infrastructure for electric vehicles can be manageable, there will be fewer electric vehicles to manage.

One way this has been addressed is through the use of a material change. A Spanish producer of charging stations, Ingeteam, worked with its supplier for the housings for the chargers, Policam, and both worked with materials supplier Bayer MaterialScience. And through this collaborative effort they came up with a way to reduce the cost of the chargers, which Ingeteam produces for both public and at-home installation.

What they did was to deploy a different material for the housings. According to Alp Sarici, a marketing expert for polyurethanes at Bayer MaterialScience, “Unlike other plastic solutions, the polyurethane housings”—they’re using Baydur 110 rigid polyurethane foam—“can. . . be produced profitably in small numbers, not least because the molds are relatively inexpensive.” Given that tooling tends to be a huge cost driver, this low-cost solution ameliorates that problem.

Material improvements. Process improvements. Price reductions.

This is how things will develop going forward in the electric vehicle ecosystem.