Over the past few years, the electric vehicle sector has been growing like a weed, frequently exceeding growth estimates. For instance, just two years ago, the International Energy Agency (IEA) projected that the EV industry would reach between 7% and 12% of global auto sales by 2030. Well, the industry crossed that milestone last year, with one out of ten vehicles sold being electric for the first time ever. Indeed, 7.8 million electric vehicles were sold globally in 2022, a 68% increase from 2021, the Wall Street Journal reported. The IEA has been forced to revise that estimate to one in three new vehicles sold in 2030 being electric.
Back in 2018, Edison Electric Institute (EEI) projected that the number of EVs on U.S. roads will hit 18.7 million in 2030; EEI now projects that number will be 26.4 million.
To be fair, there’s been no shortage of blue-sky forecasts either, with some EV enthusiasts predicting an apocalypse for the oil industry that will be dished out by the EV revolution.
That includes Stanford University economist Tony Seba who famously declared that EVs will obliterate the global oil industry by 2030 while Bloomberg News’ Akshat Rathi is on record claiming that ‘every F-150 Lightning destroys 50+ barrels of oil demand forever.’ The F-150 Lightning is Ford Motors’ (NYSE:F) electric equivalent of the marquee Ford-150 truck. Meanwhile, back in 2016, Bloomberg itself predicted EVs will trigger a global oil crisis.
The general trend has, however, skewed towards analysts underestimating the EV growth trajectory. But maybe that is not a good thing because it might be inspiring over-enthusiasm by EV manufacturers. A recent report by Cox Automotive dubbed“The 2023 Path to EV Adoption: Consumer and Dealer Perspectives,” came up with some encouraging findings for EV buffs but also some worrying ones for EV makers. Cox Automotive is the world’s largest automotive services and technology provider.
The good news: the share of consumers seriously considering buying an electric vehicle is at record highs, with 51% of consumers now considering buying either a new or used EV, up from 38% in 2021. Cox Automotive has forecast that 1 million new EVs will be sold in the U.S. in the current year, a record and more than twice the volume sold in 2021. Related: Exxon Expands Lithium Plans With New Arkansas Deal
The bad news (for EV manufacturers): the supply of electric vehicles is significantly outstripping sales, “Sales have been rising and are clearly going up with all the new entrants in the marketplace. But sales are not going up to the same extent that inventory is going up. As we approach the end of the second quarter of this year, average inventory for electric vehicles tops more than 92,000 units on the ground at dealer lots as we look at inventory versus this time 2022. That's a whopping 342% year over year increase. During the same period, maybe the day supply increased 166% the 90 day supply, though the pace of sales while up, is not rising as fast as inventory builds,” Jeremy Robb, senior director of economic and industry insight at Cox Automotive, told reporters at a briefing.
Legacy Automakers To Blame
The big takeaway here is that the EV sector might be getting overcrowded, and Tesla Inc. (NASDAQ:TSLA) is not the only one to blame here. According to Cox Automobile’s estimates, no less than 33 new EVs will be launched in 2023 alone, and more than 50 additional new or updated EVs will be launched in 2024.
Interestingly, legacy ICE vehicle makers have become some of the most aggressive in the EV race.
GM is one of the legacy automakers with the biggest clean energy investments, and nowhere is its presence felt more than in the EV sector. In 2022, GM delivered 39,096 all-electric vehicles in the U.S., up 57% year-over-year. While that figure accounts for just 1.7% of GM's total volume sold and cannot handle a candle to Tesla Inc’s (NASDAQ:TSLA) 1.3M EV sales, GM might turn the tables on Tesla a few years down the line. GM CEO Mary Barra has revealed that the company plans to produce ~400,000 electric vehicles from 2022 through the first half of 2024, and that the company will be capable of annual EV production of more than one million in North America in 2025. Indeed, GM could overtake Tesla in just two years: a 2022 "Car Wars" report has forecasts that GM and Ford each will have roughly 15% EV market share in 2025 while Tesla’s share will plummet from 70% to 11% with new products like the F-150 Lightning and Silverado EV electric pickups driving the spectacular growth. Tesla appears set to lose its dominant EV market share because both legacy automakers are expanding their portfolios and lineups at a very aggressive clip.
To power the EV explosion, GM has been pursuing a plethora of EV and battery projects. The company is already hard at work on its Ultium battery technology; a flexible battery architecture that offers greater energy density, lower projected costs and increased range. Further, GM is investing $650 million in a mining company, Lithium America, to develop a Nevada mine extracting lithium, a critical battery ingredient, with production expected to kick off in 2026. GM's investment will be used to develop the Thacker Pass project in Nevada, the largest known lithium resource in the U.S.
Meanwhile, GM’s new battery plant in Ohio began production in August 2022 while a second battery plant is slated to open in Tennessee. GM has already started selling some high-end electric vehicles using battery packs made in its Ohio factory and expects its EV sales to increase sharply as it adds more affordable models such as the electric Chevrolet Equinox, electric Chevrolet Silverado pickup truck and Blazer sport utility vehicles. Overall, GM plans to have nine EV models available in the United States by the end of the year compared to four car models by Tesla.
Legacy automakers like GM are able to expand their EV lineups that fast thanks to their considerable financial wherewithal and deep distribution networks that smaller startups lack.
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Hardly surprisingly, GM is now considered a top ESG play:
“GM has found a new life as an ESG play. We do have a sustainability fund that owns it in part because of their commitment to electrification. Mary Barra has been pretty vocal about that obviously, and it looks like it’s for real,” Christopher Marangi, Gamco’s value co-chief investment officer, told Bloomberg TV’s Surveillance in 2021.
By Alex Kimani for Oilprice.com
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