Electric cars were the stars of the Detroit Auto Show this year and they have been garnering a lot of attention from the media generally amid increasingly urgent talk about climate change and how the world is failing in the fight against it. Every self-respecting automaker has at least one EV in the pipeline. The biggest ones have several. And all of these new EVs are scheduled to hit the market in the next few years. A pileup may be coming.
The pileup could be "of epic proportions" as AlixPartners warned in a study cited in a recent analysis of the EV topic by CNBC's Paul Eisenstein. By the end of this year alone, Eisenstein says, analysts expect almost a dozen new EVs to make their appearance in showrooms across the United States. Some of these will be direct competitors of Tesla, which currently boasts an impressive 83 percent of the U.S. battery electric car market.
The "threat for Tesla" angle in EV reporting is a popular one and indeed a 83-percent market share is an unsustainable one in any industry. But with Tesla's brand loyalty, concerns about the company's future sales may be premature. What is not premature is a worry about that pileup AlixPartners warned about.
The world's biggest carmakers are pouring billions into electric vehicles motivated by government incentives and strategies envisaging the phasing out of ICE vehicles in some markets. From the pro-EV perspective, the time is just right to launch as many electric cars as one can design and manufacture. All the big carmakers have developed EV manufacturing platforms and are preparing to put them to good use. Millions of EVs are coming to the market. There is just one problem with that: actual sales statistics. Related: Oil Rallies As Saudis Cut Exports To The U.S.
China is the world's largest EV market, for example, with the total number of electric cars on Chinese roads last year reaching 2.61 million, which was up by 70 percent or more than a million cars from a year earlier. And yet, these 2.61 million EVs, according to Eisenstein, constitute just 4 percent of the total Chinese car market. Beijing has ordered local carmakers to boost their EV sales to 10 percent of their total sales this year and 12 percent in 2020, which means more competition for international rivals.
The United States, where sales of electric cars jumped by 81 percent last year, has just 1 million EVs on its roads. EV sales last year totaled around 360,000. This, however, compares with total car sales of over 17.2 million cars for the year. Putting the new EV sales figure in context shines a different light on the EV industry and this light becomes brighter when you factor in the federal tax incentives for EV manufacturers, which range between US$2,500 and US$7,500 per vehicle but are phased pout gradually once this manufacturer hits sales of 200,000 EVs.
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So, despite the enthusiasm about electric cars they still continue to be a tiny portion of total car sales in the world's biggest car market. Can this enthusiasm somehow drive increased EV adoption? Not on its own. In a Forbes article discussing trends in EVs in the U.S. this year, Energy Innovation policy analyst Amanda Myers noted a lot of people don't want to switch to EVs because they are prohibitively expensive. Yet with battery costs falling-and they have been falling steadily and considerably over the past decade-electric cars are bound to become more affordable, spurring more purchases. Longer ranges-another key concern for buyers-will help boost adoption, too.
The question for all these manufacturers that are spending billions on EV R&D and production is whether this boost in adoption will be large enough to justify their investments.
The AlixPartners study estimated that "by 2023 a whopping $255 billion in R&D and capital expenditures (will be) spent globally on electric vehicles, and that some 207 electric models are set to hit the market by 2022." It went on to warn that "many of them destined to be unprofitable due to currently-high systems costs, low volumes and intense competition." One could only hope carmakers have factored in these risks in their EV strategies.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The issue of EV market share is not one of demand, it's one of production, the lacking infrastructure and insufficient range vehicles offered by most. Tesla alone cannot produce 17 million EVs, at least for another decade or two, and the rest of the car companies there have been extremely negative towards EVs up to quite recently. The same has been the case for legacy European car makers most of whom have just dabbled in the EV space to keep some market share and experience. It's no wonder that there aren't more of the vehicles on the roads.
With the introduction of the Model 3s and it's 400k pre-orders as well as the subsequent mass production achievements in 2018 and emissions cheating scandals, things are changing. It's now becoming a question of long term survival for the legacy car companies the reason being that demand for proper EVs is actually quite major even with the remaining technology limitations like charging speed and lower range than ICEVs and higher acquisition price point. So pileup or no pileup, there's likely plenty of space for the longer range EVs to sell in, their actual target competition market is in large part ICEVs, not 100% other longer range EVs. Although low range EVs will likely suffer with the introduction of the longer range models depending on the price point.
In 2019/2020, we can also observe how Tesla fare without subsidies in the USA. That will likely be the time that EVs breach the "they only sell because of subsidies" mantra. A few years after Tesla accomplish this, so will others in the industry.
And despite huge government promotional subsidies, the United Sates has only 1 million EVs on its roads. Moreover, only 360, 000 EVs were sold in the US in 2018 out of of total sales of some 17.2 million cars, a mere 2%.This compares with 2.61 million EVs on the roads in China.
Total global EVs are estimated at 4 million out of a global fleet of internal combustion engines (ICEs) of 1.5 billion or 0.27%.
The penetration of EVs into the global oil market will continue to be slow hampered by cost and infrastructure. Even if 350 million EVs were to be on the roads by 2030 which is an impossibility, they will only be able to reduce global oil demand by 12%.
There will never be a post-oil era in global transport throughout the 21st century and far beyond. Oil will continue to reign supreme all through.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
It takes years to develop vehicles. All of these electric-oriented models were developed to cope with the CAFE changes years ago. Not because Tesla is so successful (which they are not despite the lap-dog press and the army of self-congratulating fanboys). Most low end consumers don't actually care what they drive. They go the dealer AND GET SOLD a car. The EVs are there so that big auto can sell them to people who are not discriminating enough to make informed choices. Period.
I don't think that will happen as im buying a new vehicle and will be buying strictly gas.
Going EV is a bit radical, but what other very promising, cleaner-energy solutions are on the horizon?
Seem some of the postes purposely ignore there are major markets as China, England, Norway, Sweden, and provinces/states as British Columbia, California who have already set plans to phasing out fossil fuels.