INN quizzed the experts on how the electric vehicle industry fared in 2019, and what its future looks like in 2020 and beyond.
It was quite a year for electric vehicles (EVs), with 2019 closing out a decade of development — a rash of newcomers came on board, and old players seemingly finally got into the swing of things.
Given the importance of the EV narrative for battery metals and all the commodities associated with the EV supply chain, the Investing News Network (INN) reached out to analysts and experts in the space to ask for their thoughts on the year that was and the EV outlook to come.
Felipe Munoz, JATO’s global automotive analyst, Scott Shepard of Navigant Research and Christopher Robinson at Lux Research all shared their thoughts. Read on for their thoughts.
EV trends 2019: Top sector developments
Munoz told INN that on balance, 2019 was a good year for EVs, highlighting the increased attention the large, established automakers are giving the segment.
“It is very important for the industry and consumers to see volume EV models that are finally available in the dealerships. Of course, this is the case for Europe and the US, as China has already been working on mass market EVs for some years,” he said, adding that he thinks another big development was improvements in terms of range.
Shepard pointed to the expansion of EV tech into more auto segments as the big development of 2019 — namely trucks.
“This includes of course recurring announcements from Rivian on progress, the debut of the Tesla (NASDAQ:TSLA) Cybertruck and Ford (NYSE:F) and GM (NYSE:GM) both announcing plans for truck electrification,” he said.
For Robinson, the standout of the year was the growing number of partnerships between carmakers to tackle both EV and autonomous vehicle technology by increasing volume and lowering costs.
Robinson also touched on the big issue for the resource sector: supply security.
“GM captured headlines with its formation of a joint venture with LG Chem (OTC Pink:LGCLF,KRX:003550) to build a gigafactory in the US, but elsewhere BMW (OTC Pink:BYMOF,ETR:BMW) focused on securing supplies of lithium and cobalt, while VW also formed a joint venture, but with startup Northvolt, to make batteries.”
EV trends 2019: Uptake challenged by prices, choices
Subsidies have long been the backbone of EV uptake around the world, but as more consumers take the plunge, sweeteners have been pulled back due to cost as governments see their work as being done.
“China decreased subsidies for EVs substantially in June of 2019, leading to a drop in sales, which are below 2018 levels,” said Robinson. “However, this effect is expected to be more temporary, and automakers still have a mandate to produce a minimum number of new energy vehicles.”
Shepard also shared the same sentiments. “Now that the EV market is starting to hit the mass market, purchase incentives are pulling back — this is happening in a few key markets across the globe. It is going to be a growing pain for the market for some time.”
Munoz leaned into an argument that he has been making consistently, and that is widely regarded as the main barrier for EVs: price.
“The final price of these cars is still much higher than their ICE counterparts,” said Munoz, whose numbers show that EVs are 37 percent more expensive than ICE vehicles in Europe, 9 percent in the US and 37 percent in China.
“As long as the industry does not drop the prices, the EVs will continue to play a minor role. In addition, the governments and privates need to accelerate the electrification of roads (charging points) (and) infrastructure, as these cars are slowly arriving, but many drivers have difficulties charging their cars.”
Additionally, he added that EVs will continue to be held back by stunted choices for consumers.
“There are still very few choices in the market, especially in the SUV segment, which is the only driver of growth in many markets.”
EV trends 2019: The climate change narrative
It’s hard to talk about EVs and the renewable economy without touching on an issue that came to the fore in every quarter of 2019: climate change.
Robinson said that overall, it is hard to imagine that EVs would be where they are in terms of development and production if it wasn’t for the specter of climate change and environmental concerns.
“We wouldn’t have the scale of investments from large automakers in electrification if there wasn’t an understanding of the impact of emissions on the climate. Specifically, an understanding that governments are clearly moving toward restricting vehicle emissions and requiring zero emission vehicle sales is driving automakers to invest in the space.”
Shepard argued that it is hard to gauge what sort of impact climate change politics are having on the sector overall, but it is easy to track fleet sales.
“Many large corporates have goals for sustainability and a zero emissions supply chain — those goals are being pushed into the supply chain, forcing the shipping and logistics industry to turn towards EVs,” he said.
Munoz cautioned that while, yes, climate change concern is helping EV uptake, “consumers won’t abandon the ICE cars until they are more expensive than EVs. The climate change story has increased the awareness, but when it is about buying an EV, the price is still crucial.”
EV outlook 2020: China leads, but story is in Europe
The EV story is one that is dominated by China — the East Asian superpower has been pushing EV uptake as an environmental measure to tackle choking pollution in its major cities.
As a result, China dominates development, production and sales, with the next-largest jurisdiction for uptake being Europe at less than half China’s numbers, according to JATO statistics.
So keeping in mind that China’s the leader, analysts talked largely about second place.
“The EV market is now consistently led by China, but the story in 2019 is Europe,” said Shepard. “Last year it was North America; the common denominator here is the deployment of the Tesla Model 3 — in 2018 it was deployed to North America, in 2019 it was deployed to Europe.
“Hence sales growth in Europe this year is significant, while North America is not. The Model 3 is next on course for China. A sales growth bump here is not going to be as significant because the market is already so big, but it should still have a marked impact,” he said.
Another big factor having an effect on Europe’s level of uptake is VW’s “dieselgate” controversy, said Shepard.
“(Dieselgate) has led to the implementation of standards in Europe that are more difficult for automakers to comply with via diesel. Hence the market for hybrids has also been growing substantially,” he said.
Robinson noted that China’s market cooled off in 2019 due to the reduction of subsidies. “(However,) it still should be the largest market for EVs globally in both 2019 and 2020. … Europe and North America have seen roughly the same numbers of EVs sold, but with stricter emissions laws we expect Europe to pull ahead from North America in terms of volumes of vehicles sold.”
Munoz also said that Europe is likely to secure its position as the second largest market for EVs going forward.
EV outlook 2020: Government incentives needed
As mentioned above, China has reduced its incentives for EVs, so INN asked whether government actions like banning sales of ICE vehicles going forward are having any noticeable impact on uptake.
Robinson said that for now, the impact on EV uptake is being done by incentives.
“Banning internal combustion engines completely remains mostly a political play at this point, although banning their operation in cities is a real threat. If consumers no longer feel confident they can use their vehicle on any roads, that could push more consumers into EVs.”
Munoz said that incentives are doing all the work for now, but for bans to work, more incentives are needed. He added that bans could just push consumers into alternative mobility options rather than to get an EV.
“It is not only a thing of attacking the diesel/petrol, but also about helping consumers to get an EV. We have to remember that public transport and mobility solutions are now better than in the past, so any ban could also boost the use of these solutions (car sharing, Uber (NYSE:UBER), etc.).”
Shepard said that policies banning ICE vehicles are limited to city-level jurisdiction, so it is hard to measure on a country level, but there are still good examples of policy at work.
“Municipalities are increasingly pushing EVs and have a lot of power to do so. London is a great example as they have put policy mechanisms in place to phase out the fleet of ICE-powered taxis and ride-hail vehicles in the early 2020s.”
EV outlook 2020: Bottlenecks and supply constraints
Finally, INN asked about concerns from carmakers and the market at large about the availability of resources vital for producing EVs — an issue that’s highlighted by concerns way upstream.
Shepard said that there are constraints all the way through the supply chain — for now.
“Ultimately, this is a growing pain. There is a lot of interest in EVs, and it seems that most of the established industry is not on the same page that eventually the EV is going to squeeze out all other competitor platforms — so there is a rush to secure supply.
“Given that one area of concern, which has been one for quite some time, is the sourcing of cobalt. It is very difficult to assess whether this concern specifically impacts EV uptake. It certainly doesn’t help; my hunch would be that if it does, its impact is extremely limited,” he said.
Robinson said that supply concerns are across the automaker market, and are not limited to certain brands.
“(Supply constraints) are generally due to higher-than-expected demand from customers.
“Many cell suppliers don’t have enough excess capacity to quickly fill large additional orders, leading to delays from car manufacturers … concern about materials availability has pushed some automakers to secure raw materials for batteries as well, but Lux does not expect this to be a significant bottleneck in the next few years.”
EV outlook 2020: Expectations being met
When asked whether the EV market is living up to lofty goals and expectations, the three analysts interviewed by INN said yes.
“It is rapidly bringing solutions to problems that existed not a long time ago,” said Munoz. “Despite the challenges … carmakers are strongly committed to their development, and any consumer around the world knows about them and many of them want to own one. This is positive because the industry is evolving and based on the latest launches, the technology is positively featuring more solutions.”
However, Robinson and Shepard said that the question relies on whose expectations you are measuring.
“Market growth has been encouraging and steady — Tesla dominates, but established automakers are gradually catching up,” said Shepard.
Robinson said that, while there are differing expectations, “I would argue (EVs) are indeed holding up to realistic expectations many had a decade ago.
“The automotive industry moves slowly, and building infrastructure to support mass adoption of EVs requires investment, but battery costs have fallen dramatically, resulting in a slew of EVs which offer 200 plus miles of range with reasonable price tags. As sales approach two million units per year, I would argue the story of plug-in vehicles thus far has been one of success.”
EV outlook 2020: Humming into the future
Going forward, analysts across the board are predicting that EVs — whether they are hybrids, plug-in hybrids or pure electric — will continue to chew into the ICE market headed into the next decade, with EV sales predicted to overtake ICE sales by 2030.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.