Challenge one: Cost
EVs currently have a higher initial cost than their combustion counterparts, and that is a barrier for many people, both financially as well as in perceived risk (one has to drive a minimum number of kilometers in order to justify the higher investment). Few buyers are able to conduct a total cost of ownership (TCO) exercise which would reveal that on average EVs have already plunged through the fossil TCO line. This represents typically a high-income country perspective, and we acknowledge that this description is not valid in regions such as Latin America or Sub-Saharan Africa.
In the long term, it is expected that governments will need to replace lost revenue from fossil fuel duty. Governments may be tempted to introduce alternative taxation such as kilometers driven, which would reduce the advantages of EVs. However, rather than slowing down the transition to EVs, regulators would be well advised to identify entirely separate new sources of revenue that recognize both the neutral externalities of EVs and the considerable system-wide and multiplier benefits of vehicle-to-grid (V2G) and vehicle-to-everything (V2X) technologies.
Naturally, tax revenue required for road and infrastructure maintenance and to combat particulate matter from tyre wear is likely to be accepted as equitable by all stakeholders.
Owing to their relative novelty, prospective buyers have concerns about the resale value of EVs. A liquid second-hand car market not only allows for much cheaper second-hand cars, but it also allows for a good estimation of the residual value of new cars (and their batteries), thus reducing the risk of buying a new car and the price of leasing. The example of the second-hand EV market in Norway shows significantly lower depreciation of EVs compared to combustion vehicles.
A key facilitator of this second-hand market will be the accurate evaluation of the remaining life of batteries. This is not only a function of the number of kilometers driven but also of the charging profiles, battery temperature and drive cycle throughout the car’s life.