Many technologies get 15-25% cheaper when the number of units produced doubles. It is usually one of the most robust predictors and drives RE & EV growth.
@skorusARK uses this to illustrate @Tesla's profits will rise.
I mostly agree but with some caveats.
ark-invest.com/research/wrigh…
@skorusARK uses this to illustrate @Tesla's profits will rise.
I mostly agree but with some caveats.
ark-invest.com/research/wrigh…
Sam calls this "Wright's law".
In most scientific literature I've read they are called "experience curves" or "learning curves". This is what I and e.g. the @IEA, @BloombergNEF and @MLiebreich usually call them.
But there is merit in changing the term to Wright's law.
In most scientific literature I've read they are called "experience curves" or "learning curves". This is what I and e.g. the @IEA, @BloombergNEF and @MLiebreich usually call them.
But there is merit in changing the term to Wright's law.
This MIT study makes clear that Wright's law (and it's less precise but famous and easy cousin Moore's law) are among the best predictors for price reductions in technology. journals.plos.org/plosone/articl…
The advantage of the term Wright's law over learning/experience curves is that it's more specific: it just says "a doubling of cummulative production leads to a price reduction of X%".
It excludes economic learning theory hotly (and mostly wrongly imho) debating why this is true
It excludes economic learning theory hotly (and mostly wrongly imho) debating why this is true
However, it's too simple to say EVs are a new product and thus @Tesla's overall costs will fall by X% for every doubling of production.
Economists are right some learning must be going on and not all learning is equal.
Economists are right some learning must be going on and not all learning is equal.
You see, when we talk about really new technologies like the Ford Model T with it's assembly line or solar cells, you can lump all the tech together as experiencing full blown learning.
But when you talk about installing solar systems there's a lot of old tech involved too. That's why the cells show faster learning than the installation.
So I advocate (BIPV) where the PV panel *is* the roof: you avoid double installation that is not becoming cheaper.
So I advocate (BIPV) where the PV panel *is* the roof: you avoid double installation that is not becoming cheaper.
About @Tesla: the battery and (to a lesser extend) the drivetrain are new tech. This means cummulative output will quickly experience doublings that bring the price down.
But most of the car is Model T tech. Here the effect of Wright's law is negligable.
But most of the car is Model T tech. Here the effect of Wright's law is negligable.
Also, @Tesla doesn't function in a vacuum. Others can copy what they are doing.
So I think the right way to look at it (and the way I model it) is as follows:
Divide the electric car in 3 large chunks: drivetrain; battery; and "other".
Determine learning for the first two.
So I think the right way to look at it (and the way I model it) is as follows:
Divide the electric car in 3 large chunks: drivetrain; battery; and "other".
Determine learning for the first two.
Another improvement I make to the Arke model is that I use separate curves for materials.
E.g. when your calculations tell you, your battery becomes cheaper than your materials, you are doing something wrong.
On the other hand: we see e.g. less (expensive) cobalt in batteries.
E.g. when your calculations tell you, your battery becomes cheaper than your materials, you are doing something wrong.
On the other hand: we see e.g. less (expensive) cobalt in batteries.
This sounds complex but the result is simple:
The battery and drivetrain of EVs (not just Tesla) will become cheaper fast. Combined with the fact that electric cars are easier to design this results in EVs ultimately (2023-2030 depending on type) getting a lower purchase price.
The battery and drivetrain of EVs (not just Tesla) will become cheaper fast. Combined with the fact that electric cars are easier to design this results in EVs ultimately (2023-2030 depending on type) getting a lower purchase price.
Combined with the 4x lower energy demand and absence of motor maintenance this means fossil cars become economically unviable in most situations. Of this I am sure (and have been for 15 years now).
What this means for Tesla is less clear to me. It is clear their battery and drivetrain tech is ahead of the competition by a few years. With Model 3 production ramping up and 6B in cash, talk of bankruptcy seems fanciful.
But massive investments of regular players like @VolkswagenSA could change that in the coming 2-7 years.
My feeling is that Tesla will become a smallish but profitable premium brand with regular automakers providing the bulk of car production.
My feeling is that Tesla will become a smallish but profitable premium brand with regular automakers providing the bulk of car production.
I have high expectations of their truck division. As I've outlined many times before, trucks will show a much larger cost advantage compared to cars but the sector needs to apply the newest batteries (and a kick in the ...).
Finally my highest hopes (not yet predictions) are for city transportations.
If ever household on the planet would get a car, this would be a nightmare scenario for the natural environment but also for cities.
We need to bike and share small electric vehicles for most trips.
If ever household on the planet would get a car, this would be a nightmare scenario for the natural environment but also for cities.
We need to bike and share small electric vehicles for most trips.
Summary:
Wrights law works: new tech gets X% cheaper for every doubling of production.
EVs (Tesla's and others) will make fossil cars and trucks economically uncompetitive.
We need to think more about sharing smaller electric vehicles.
Wrights law works: new tech gets X% cheaper for every doubling of production.
EVs (Tesla's and others) will make fossil cars and trucks economically uncompetitive.
We need to think more about sharing smaller electric vehicles.
