Electric Vehicle Outlook 2019
December 19, 2018
December 19, 2018
Over the last year, electric vehicles (EVs) have made significant progress. Looking ahead, increasing consumer choice with more EV models. Forming strategic partnerships with EV infrastructure experts, and improving cost efficiencies could mean a breakthrough year for the EV industry. But first, let’s cast our eyes on what’s happened over the last year.
The Story So Far
EV penetration in developed economies is mixed. Namely, the UK and central European countries have found it difficult to find the right recipe for EV adoption. For example, In Germany, EV market share has increased by around 1.5% in the space of the last four years. At this pace, for EVs to be a significant player in the total vehicle fleet will take a considerable amount of time. To show the progress made in specific countries from 2014-18, Mckinsey has developed an Electric Vehicle Index.
Nordic countries are leading the way. Sweden, Finland, and Iceland are showing definite signs of progress. In particular, Norway has over 30 percent of their vehicle fleet, and every second new vehicle being electric. Their success is a result of a pro-active EV policy agenda. The conversation of EVs began in the 1990s, where EVs were exempt from import taxes. Significantly, in 2001 Norway decided to remove all of the 25 percent purchase tax from new EVs. Since then, the country has developed a comprehensive EV policy package. Therefore, it is no surprise that Norway is the market leader.
Similarly, China has emerged as a global leader in a relatively short space of time. There are 3 million EVs on the road today, of which around 2 million reside in China. Despite hostility towards foreign manufacturers, the ‘Made in China 2025’ plan provides generous subsidies to local producers. Furthermore, as vehicle ownership becomes increasingly possible, further growth is expected.
In the United States and Canada, the introduction of the Tesla Model 3 has led EV growth in the region.
United States market share reached over two percent for the first time in July this year, up ninety percent on the previous year. While EV sales have increased across the country, over the past few years, over half of all sales come from California. And in 2018, about six percent of new vehicles sales are electric. Some states have adopted California’s EV policy plan, however, yet to see any fruitful returns.
Equally, Canada has seen a stronger upside in sales. In Q3 2018, up 166 percent on the previous year. At this trajectory, year-end figures will be higher than the prior four years combined. The introduction of new EV models, and in particular the Tesla Model 3 can help explain some growth. Similarly, a correlation exists in the provinces of Ontario, British Columbia, and Quebec where EV financial incentives are available. Earlier this year, Ontario canceled their financial incentive program, it will be interesting to see how this affects sales in the final quarter of 2018 and beyond.
A New Wave of Strategic Partnerships
Forming partnerships has been a crucial component of growth. Helping EVs become more competitive, but also to create an EV friendly environment for consumers.
In preparation for mass production of EVs, many OEMs have announced partnerships with Li-ion battery manufacturers. For example, earlier this year, Nissan and Renault partnered with the largest battery producer in the World, CATL. These types of partnerships are becoming more and more common, as OEMs seek further insight into specialisms which have previously been out-of-scope. Partnering with battery producers should provide automakers with insights into the main challenges faced in battery production. Furthermore, close collaboration will enable OEMs to integrate new battery chemistries into vehicle designs more effectively.
Similarly, the availability of charging is essential to consumers. Ease-of-access to home/work charging facilities is one faction. Public stations is another. Electrify America backed by the Volkswagen group is one of the most significant initiatives to expand infrastructure in the United States. Recent announcements include partnering with Audi and Amazon to make it more convenient for users to set-up a home charging unit. Currently, when you buy an EV, it may not be clear how to purchase and install a home charging unit. Therefore, providing users with a viable option will help ease any future anxieties.
Interestingly, in the UK, Tesco has announced a deal with Volkswagen to provide customers with a standard 7kW charging bay for free. The partnership plans to install 2,5000 bays at 600 stores by 2020. It is likely similar initiatives will emerge to entice the further use of EVs.
EV incentives are critical. Evidence has shown that in Norway or California where EV adoption is the strongest, generous incentive programs have played a significant part. EVs still suffer from a high-cost barrier. One way to reduce cost is by forging new partnerships. However, cutting costs will take time, and therefore as a stop gap, the government can help encourage EV adoption through a selection of incentive programs.
Equally, it is encouraging to see that global carmakers are backing EVs. For example, Volkswagen is committed to producing 50 million EVs in the coming years. Moreover, General Motors has called for an EV national policy. Meaning that at least 7% of vehicles sold in 2021 are EVs, which increases two percent each year. Therefore, by 2025 EVs would make up 15% of the total vehicle fleet.
Currently, EV model choice is limited to a handful of carmakers, and with that only a select number of vehicle sizes. Improving consumer choice will be vital to entice consumers away from conventional vehicles. While no one thing will help EV adoption improve, a combined effect is required to make progress. Overall, we can expect 2019 to be another strong year for electric vehicles.