Published on December 31st, 2020 |
by Dr. Maximilian Holland
December 31st, 2020 by Dr. Maximilian Holland
Ever since Tesla’s original Roadster demonstrated that a plugin electric vehicle with over 240 miles of rated range was technically possible, even with the nascent technology that was deliverable way back in 2008, the ultimate transition of road transport from combustion to plugins has been largely inevitable.
Why are plugin electric vehicles inevitable?
This inevitability is not only because plugin electric vehicles (in which we count both full electrics and plugin hybrids) have better technical characteristics than old school combustion vehicles, and provide a more pleasant user experience, but ultimately because electric propulsion is much more efficient, and therefore has much lower energy costs to operate.
Even at this still relatively early stage of the technology, full electrics are already more reliable and less expensive to maintain than combustion vehicles. And soon enough, in most popular segments, full electrics will also be cheaper to buy than combustion vehicles (and ultimately, cheaper in all segments).
When powered by renewable electricity, as they increasingly are, PEVs can run completely clean, without costly negative externalities of combustion vehicles, like air pollution deaths, environmental toxicity, and climate heating. Vehicles that derive their propulsion solely from combustion, cannot avoid the negative externalities of emissions and pollution. Even attempting to add complex technology, to reduce combustion vehicle emissions, quickly makes them economically uncompetitive compared to battery electric vehicles.
Furthermore, the energy dependencies (and energy costs) of PEVs can be largely or entirely local, rather than energy being imported from (and substantial finances exported to) a small number of mostly cartelized oil producing regions. Associated with desire to control these oil resources has seen a lot of messy politics, and all too often, violent conflicts. For all these reasons and more, moving to PEVs for road transport is inevitable. And, already nascent, an ever growing portion of shipping and aircraft transport will move to electrification also.
Inevitable, okay, but what is the timeframe?
PEVs may now be widely understood to be inevitable by both the auto industry, and a large and quickly growing portion of auto consumers, but the actual timing of the transition is still hotly debated. How long will it take for plugin electric vehicles to outsell combustion vehicles in the marketplace? Many analysts, especially those whose clients are the incumbents, have claimed that PEVs will only rise to 50% of global new vehicle sales by around 2040. Even purported progressive organizations like BNEF predicted as recently as May 2020 that PEV sales won’t overtake combustion sales globally before 2037.
Even in fast moving Europe, BNEF predicted that 2020 would see just ~3.5% plugin share (i.e. no growth from 2019). Added to that, Europe was predicted to reach 20% PEV share only in 2027, and 50% only by 2033.
We here at CleanTechnica forecast much faster adoption of PEVs. Europe in 2019 had already achieved 3.6% plugin market share by our calculation. Once Europe’s January 2020 results of 6.6% share were visible, our resident EV market guru Jose Pontes asked whether Europe might touch as high as 10% share by the end of 2020. Back in May, I suggested that even a deliberately conservative view should predict Europe achieving at least 7.5% share or higher in 2020 (making BNEF’s 3.5% forecast incomprehensible).
My (now outdated) conservative forecast in May:
Now at the end of the year, 2020’s actual results, both in Europe and in China (and thus by global sum) have been much greater than all predictions. Even greater than the predictions of our team here at CleanTechnica.
Europe already passed 10% year-to-date PEV market share at the end of November 2020, having added 166,000 sales in that month. That brought the year’s subtotal to almost 1.1 million PEVs already. We will publish our usual full EV market reports later in January, but we can already estimate that Europe likely added another 200,000 or more PEV sales in December, and will have achieved full year PEV share of 11% or above. That’s a remarkable uptick from the ~3.6% PEV share of 2019. Europe’s 2020 PEV sales total will tally to around 1.3 million vehicles. Huge growth over 2019’s sales of 564,000 PEVs.
Meanwhile China has finally returned to strong plugin growth in recent months, having just added 198,000 PEV sales in the month of November alone, and reaching almost 6% year-to-date PEV share. To put that volume in perspective, that’s almost 60% of the US’s estimated full year 2020 PEV sales (totalling roughly ~345,000), in just the month of November.
The November result in China brings the country’s annual subtotal to 1.043 Million. China has likely added another 240,000 PEV sales in December, reaching at least ~1.29 million, thus about the exact same full year total as Europe. In the context of China’s larger overall auto market, this will amount to around 6.5% PEV share in China for 2020, (from 5.5% in 2019).
Europe and China’s 2.6 million combined 2020 tally is supplemented by the world’s other significant PEV sales regions, North America (US and Canada), East Asia (South Korea and Japan) and a few others. Global annual plugin sales should total just over 3.1 million in 2020. This is up 41% from 2.2 million sales in 2019. As a reminder for non-maths-geeks, 41% growth per year equates to doubling every two years. And that’s volume growth rate in a pandemic year.
Due to the pandemic, overall global auto sales are down in 2020, with current estimates at around ~80 million. This means that the year’s ~3.1 million PEV sales will represent a share of right around 3.9% or almost one in 25 autos. That’s remarkable growth from last year’s 2.5% share.
What, if anything, does all of this suggest for PEVs in 2021?
Europe’s largest single national auto market, Germany (alone the world’s 4th largest) was perhaps the most exciting PEV transition story of 2020. Germany’s 2020 full year sales tally will amount to around 380,000 plugins (not far off a third of Europe’s total), and represent right around 13% of the country’s auto market (massive growth from 2019’s 3.0% result).
Not only was the full year result in Germany outstanding for such a large market, but the last quarter of the year has accelerated over the horizon. October saw 17.5% plugin share. Then November saw 20.5% share. December will likely see around 23-25% plugin share (keep an eye out for my regular Germany report in the next week or so).
The conjunction of the pandemic and Europe’s tighter new emissions rules that started in 2020 have thrown old patterns out of the window in Europe’s PEV market. The past is no longer a reliable guide to the future. However, we can still see some leaves in the bottom of the teacup for 2021. Let’s stick with Germany to get a sense of what will happen in Europe’s biggest national market.
Historically, Germany’s PEV market share result in January is always at least at the level of Q4 of the previous year. This would suggest that January 2021 in Germany will already achieve around 20% PEV share. Then this share will remain roughly steady or modestly growing until August when it will start to grow faster. The amount of acceleration between the first half of the year and the months of August-September usually sets the tone for the growth rate of the full year.
It’s very likely that by the end of 2021 Germany will see December’s monthly share reaching deep into 30% range, perhaps closer to 40%. Germany’s full year result will likely be close to 25% share for plugins, or one in every four cars sold.
Further out, to get a sense of the pace of change in the next couple of years in Germany, we can remind ourselves of Norway’s pattern. Norway went from 20% PEV share to 50% share in just three and a half years, and that was when EVs were less compelling and more expensive than the offerings available now, and in the coming few years. We will look at this in more detail at the end of the article.
Germany is the heavyweight market in Europe, a good bit larger than runners up France and the UK. However, these two have also been on a huge growth trajectory in 2020. Both reached above 15% PEV share in November, both will likely continue closely behind Germany in plugin share in 2021. All in, Europe will very likely see a result well above 15% in 2021 and perhaps as high as 20%.
The world’s largest auto market, China, which will maintain the current PEV regulations landscape largely unchanged over the next two years, will be pushing close to 10% over the full year of 2021. The final months of the year may get close to 15%. Outlandish? Recall that in November 2020 China already saw 8.6%, and December 2020 may see almost 10%.
In the US, with the incoming administration’s stated focus on climate goals, 2021 should see a useful bump in plugin demand (helped by refreshed incentives). Local automakers won’t be able to immediately turn on the plugin supply taps though, and global automakers will likely still prioritize European deliveries.
Tesla may get some decent additional volume out of the Texas Gigafactory before the end of 2021. I’ve somewhat lost track of the EV plans of GM and Ford (forgive me). The Ford Mustang Mach-E seems like a compelling vehicle and should be popular, depending on how many Ford produce. Volkswagen in the US will start producing and selling the VW ID.4 in 2021. Certainly there will be 2021 growth over the roughly 340,000 plugins sold in 2020, but it’s hard to say how much.
Globally, we should expect plugin sales to easily exceed 4 million in 2021, from 3.1 million in 2020 (and 2.2 million in 2019). The market share result in 2021 will depend on the how much the overall automarket rebounds from the pandemic. If overall 2021 global auto volume ends up somewhere in between 2020 (~80 million) and 2019 (~90 million), the 4 million or more likely PEV sales will amount to global share of 4.7% or more, so almost one in 20 vehicles sold.
Potential battery supply hold ups?
Is battery supply a potential brake on the speed of the PEV transition? One of the most promising PEV developments in 2020 has been the rise of lithium-iron-phosphate batteries (LFP, as well as LFMP variants) for use in passenger vehicles.
Tesla, BYD and others are now using these LFP batteries, long established in buses and commercial vehicles, as one of the viable technology pathways for their electric passenger vehicles. LFP batteries bypass any potential nickel and cobalt supply chain constraints that industry insiders like Elon Musk periodically mention as potential concerns.
As for the mineral supply of lithium itself, there are increasingly viable and cost competitive alternative battery chemistries such as sodium-ion which can potentially play a useful role for some use-cases, including for example, buses, some types of commercial vehicles, and stationary storage. In the event of lithium bottlenecks, these alternative chemistries can potentially take up some battery niches, and free up lithium-dependent batteries for passenger vehicles. More of these kinds of developments are in the pipeline, highlighting the fundamental diversity of useful approaches to electrochemical storage.
In the unlikely event that battery mineral supply does persistently constrain PEV production volumes, beyond just short term temporary blips, this doesn’t entail that savvy consumers will “give up” on the purchase of a PEV, and instead buy a combustion vehicle. They will more likely forego a combustion vehicle purchase and simply wait longer for a PEV.
Manufacturers meanwhile could make potentially limited battery supply work harder by offering vehicles with a still decent electric range of say 100 miles (160 km), and supplement the modest battery with a range-extender engine for occasional longer trips. This was first pioneered by vehicles like the BMW i3 REX.
Although such a scenario would no doubt be a temporary work-around on the way to ultimately 100% pure battery electric vehicles, it illustrates that there are ways of still moving forwards in the PEV transition even if substantial supply chain hurdles present themselves in the short or medium term. In the long term, there are plenty of minerals supply pathways to convert all road transport to PEVs.
Looking further out at the transition timeline
Europe and China both have large auto markets and large auto industries. As the electric transition gains traction in these markets, this in turn plays a large influence on global auto patterns.
We saw above that, strongly pulled up in volume by Germany’s acceleration, as well as the other large markets of France and UK, Europe is quickly heading past 20% plugin share over the next year or two. Against a background of 2019 seeing 3.6% PEV share in Europe, and now 11% one year later, and likely close to 20% in the coming year, then how far away is 50% share in Europe?
I can’t see a realistic scenario where Europe has not reached 50% PEV share of new vehicle sales by the end of 2025. This will come about as a result of not only a growth in the absolute volume of PEV sales, but also a very significant hiatus in the purchase of combustion vehicles as they are increasingly recognized as becoming passé and a waste of money. If the plunge in combustion sales is significant enough, Europe may see 50% as soon as the end of 2023, certainly in single month results, and perhaps even the annualized cumulative result.
China is still officially targeting 20% PEV share in 2025, but this now seems very likely to be blown past by reality, given that November 2020 already just saw 8.6%. I expect that China will want to keep its transition close to that of Europe and at most a year or two behind.
I would therefore forecast that China will hit at least 50% PEV by at the very latest the end of 2027. More likely, just as I see Europe potentially reaching 50% by the end of 2023, I can also see China potentially reaching 50% as soon as 2025.
Europe and China together count for around 50% of global auto volume. The US and all other regions will also quickly accelerate PEV adoption in the coming years. Added to the global 25% (50% of half the global volume) contributed by China and Europe, by 2025 the US will surely add at least another 5% (at least ~25% market share of ~20% of global volume). All other regions will add at least an additional 5%. So that would put global PEV share passing at least 35% by 2025.
Those are my current best estimates based on what we know today, but things could be and probably will be pulled forwards or slightly delayed in the next couple of years. Either way, CleanTechnica will be tracking and reporting on the transition as it occurs on the ground.
What do you think the speed of the transition will look like? What are your predictions for 2021 and beyond, in the large regional markets, and globally? Please jump in to the comments section and share your thoughts.
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