On Thursday evening, at the end of Independence Day, I hit an enormous traffic jam on the Coast Road as I drove north from Netanya. After several kilometers of weary crawling, the cause of the delay was revealed: an electric car had become stuck in the left-hand lane after its battery had run out. That's the scenario every electric car driver fears, although theoretically it shouldn't happen. Electric vehicles (EV) warn when their batteries are becoming empty, and have a power reserve for emergencies. Moreover, anyone who buys an electric car should be aware of its range limit and plan their journeys accordingly.
In practice, however, the reality on Israel's roads is very different from what logic and theory would dictate. Not all electric car owners understand the mechanics of the vehicle, travel on preplanned routes, or take into account the locations of charging stations.
"Empty battery syndrome" is just one of many problems in the electric car market in Israel and globally. Despite growing demand, and the fact that there are now about 20,000 EVs on Israel's roads, the market is still at the learning stage, and is exacting a considerable price from customers.
Irrelevant pricing model
The rapid penetration of the EV fundamentally changes the rules of the game in the used car market. Most of the importers have not yet paid attention to the problem, and think it will affect the market only in several years' time. The impact could, however, come much faster than expected, for two main reasons. The first is that, because of the shortage of stocks of EVs, buying a used one is practically the only option for anyone who wants to have one immediately. Many traders say that EVs of every shape and size are snapped up within a short time of them coming on the market, and they even have long waiting lists.
The second reason, and perhaps the more important of the two, is that the secondhand market for EVs in Israel has no reliable and precise pricing model. Traders don’t supply reliable information about the value of vehicles sold to private customers, leasing companies, investors, or financial institutions.
The current model for determining the value of a used vehicle is based on decades of experience from sales of gasoline and diesel-fueled cars. This model, however, isn't appropriate for EVs, because the battery - the most expensive component of an EV - has a limited life, like the battery in a cellphone. Its efficiency, that is, what range it will give after a number of years of use, will vary from one used car to another, depending on how it has been charged (slowly or rapidly), how the car has been used, and so on.
Warranty doesn't cover battery degradation
The price of a new EV battery can be NIS 70,000-90,000 after tax, and it is therefore a very significant factor in determining the value of used EVs. In other words, anyone who buys a used EV has no way of knowing how much juice the battery has left, and how long it will be before he will have to pay for a replacement.
Most of the importers in Israel give a long warranty even for a used battery, usually eight years or 150,000-180,000 kilometers. The warranty does not, however, necessarily cover the battery's entire range loss, and that's an important question in buying used EVs, to which the price lists currently provide no answer.
In Israel and around the world it's hard to find an inspection technology that can estimate the state of a battery of a specific vehicle, and how much range capacity it actually has left. Many private customers who buy used EVs are therefore taking a financial gamble.
The lack of information about the state of lithium batteries represents an even more critical issue for the leasing companies. The valuation of the stock of used EVs of leasing companies is a significant part of the valuation of the company, and it often serves as collateral for raising hundreds of millions of shekels of debt. At present, the Israeli car leasing companies do not have large numbers of EVs, but when EVs start to account for a large proportion of their vehicle fleets - which will probably happen by 2023 - the need for a more reliable estimate of their scrap value will become critical. Until then, the secondhand EV market will continue to work on the trial and error method.
97% of charging stations are slow
Another problem of the Israeli EV market has to do with the deployment of charging stations around the country. Here, the well-known chicken and egg dilemma comes into play. As long as there aren't enough charging stations, EV sales will not reach their potential, but until there are enough EVs, it will not be worthwhile for private companies to invest in publicly available charging stations.
The dilemma is far from being solved. The rapid penetration of EVs in the past two years has made many countries accelerate support for installing public charging stations, but the whole market is at the learning stage, and, in Israel's case, in waiting mode.
Unlike the situation in many countries in Europe, and in South Korea, China, and lately in the US as well, where government support for construction of charging stations is substantial, in Israel, the total government budget for subsidizing construction of charging stations, as announced in 2020, is some NIS 16 million. That amount is meant to subsidize 75% of the cost of construction of rapid charging stations by private companies and local authorities around Israel.
In practice, as stated in a report by the Knesset research unit released at the end of 2021, "The target for construction of rapid and ultra-rapid charging stations by the end of 2020 was not reached even at the end of 2021, and the existing 27 stations represent less than a quarter of the target that was presented." Up to now, 126 rapid charging stations have been completed.
Because the government subsidy is small, the initiative for constructing charging stations passes to commercial companies, which need at least ten customers a day to return the considerable investment in constructing and operating the stations, plus rent, local taxes, and so forth. Most of the stations are therefore located in densely populated areas.
According to the Knesset research unit's figures, 61% of charging sockets for which information is available on their locations, are in the Tel Aviv and central area. Furthermore, 97% of the publicly available charging sockets in Israel are classed as slow, meaning that full charging takes several hours, and are therefore not useful for drivers travelling long distances.
There are at present two main standards for optimal deployment of a charging network: number of stations per vehicle, and distance between stations, which in the EU is set at 60 kilometers. At this stage, Israel is a long way behind on both counts.
Published by Globes, Israel business news - en.globes.co.il - on May 10, 2022.
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