The State of the Electric Vehicle Market

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Fleur_Jaouault_New_Energy_SolarFleur Jouault30 November 2020

Electric vehicle (EV) technology is progressing rapidly and many governments globally are supporting the increased penetration of EVs and the building of charging infrastructure. This month, UK Prime Minister Boris Johnson announced that new cars and vans powered wholly by petrol and diesel will not be sold in the UK from 20301. The UK is one of 17 countries that have announced 100% zero-emission vehicle targets or the phase-out of internal combustion engine vehicles through to 2050. France was the first country to legislate a phase-out in 2019, with a 2040 timeframe2.

Government support is important as the rapid growth in the EV market has been found to be largely a function of the introduction of more stringent emissions regulations, access restrictions in cities, advancing EV technologies that lengthen range and reduce costs, and the expansion of the charging network3. The IEA notes that government policy is increasingly far reaching and across industry sectors:

“The vast majority of car markets offer some form of subsidy or tax reduction for the purchase of an individual or company electric car as well as support schemes for deploying charging infrastructure. Provisions in building codes to encourage charging facilities and the “EV-readiness” of buildings are becoming more common. So too are mandates to build charging infrastructure along road corridors and fuel stations.”4

Growth in the number of EVs in circulation has been significant, from about 17,000 electric cars on the road in 2010 to 7.2 million in 2019, 47% of which were in The People’s Republic of China5. Global EV market penetration is about 2.8% after the first quarter of 2020, up from 2.5% at the end of 20196. Regional statistics vary with the International Energy Agency determining that penetration in 2019 in China was at 4.9% and Europe overall at 3.5%7, although some individual European countries have very high penetration rates as is evident in the chart below.

Source: McKinsey Electric Vehicle Index

Annual growth in sales of EVs has historically been robust, although in 2019 and in the first part of 2020, it was significantly down on previous years. This is a result of: a contraction in the car market overall in 2019 and in 2020; reduced EV subsidies in the key markets of China and the US; and consumer expectations of significant progress in the availability of models and reduced costs which is placing consumers in the position of wondering whether it is better to wait for the “latest and greatest” model8. Despite the global slowing of EV sales, European sales of EVs have continued to exhibit strong growth, increasing 44% in 2019 and 25% in the first quarter of 20209.

The impact of the COVID-19 pandemic has disrupted markets globally and particularly new car sales. However, it is anticipated to impact sales of EVs to a lesser extent than the car market overall. The International Energy Agency estimates, based on car sales from January 2020 to April 2020, that the passenger car market will contract by 15% in 2020 relative to 2019, while passenger and light-duty EV sales will remain broadly at 2019 levels10.

Assisting the adoption of EVs is the expansion of charging infrastructure. In 2019, there were about 7.3 million chargers worldwide, of which 6.5 million were private, light-duty vehicle slow chargers in homes, multi-dwelling buildings and workplaces. Publicly accessible chargers accounted for 12% of all chargers in 2019 and this number had grown 60% over the number available in 2018. China leads the world in the rollout of publicly accessible chargers, particularly fast chargers suitable for dense urban areas with less opportunity for private, home charging11.

EV charging infrastructure is a key part of many countries’ future infrastructure spending plans, particularly COVID-19 recovery plans. For example, in the UK, a £1.3 billion fund has been established to promote EV charging infrastructure, including residential, on-street and throughout the motorway network. Grant funding will also be available for people buying zero or ultra-low emission vehicles12. Similarly, France and Germany have also announced significant spending packages which include EV charging infrastructure programs.

In response to this increasing focus on de-carbonising transport, car manufacturers launched 143 new electric vehicles, 108 battery electric vehicles and 38 plug-in hybrid electric vehicles, in 201913 and current plans would see approximately an additional 450 models on the market by 2022. German manufacturers have invested significantly in manufacturing capacity and with an expected production volume of 856,000 EVs could surpass Chinese production in 2020. This volume would take Germany from global production share of 18% in 2019 to 27% in 202014.

Among manufacturers, Tesla remains the market leader with 370,000 units sold globally in 2019 equivalent to a market share of about 16%, up from 12% in 2018, largely as a result of the launch of the Tesla Model 3 outside the US15.

The markets that are experiencing the most growth are also seeing the supply chains for EV manufacture moving into their markets. For example, Tesla began construction of its Shanghai plant in January 2019 and produced the first Chinese manufactured Tesla in December 201916. Tesla’s next production facility will be built in Germany by mid-202117. Similarly, Volkswagen has announced plans to set up EV plants in the US and China18 and Toyota in China19.

Similarly, battery manufacturers are developing manufacturing capacity in the fast growth markets. The EV passenger car battery market grew 17% in 2019, with most new capacity going into central Europe. At 117 GWh in 2019, the passenger EV battery market is expected to expand to 1,000 GWh by 2025. Chinese manufacturer CATL has the largest market share at 28%, with absolute capacity growth of 39%. Its next factory is expected to be located in Germany. South Korean manufacturers look set to expand production in the US, with SK Innovation planning to invest €5 billion in a US factory and LG Chem investing US$2.3 billion in a joint venture with General Motors in the US20.

The progress in EVs, in terms of cost and range expansion, is also evident in the position of plug-in hybrids. Long seen as a bridge to battery electric vehicles, the evolution of EVs has been so rapid that it appears that plug-in hybrids will not grow as a proportion of the overall market. “Although a higher driving range is one of the major advantages of plug-in hybrids, the electric range of battery EVs has been constantly increasing: it rose by 55 percent from 2017 to 2020 and is now around 400km”21.

 Australia and EVs

In global terms Australia has a very low penetration of EVs, comprising only 0.6% of new car sales in 2019.

Source: State of Electric Vehicles, August 2020, Electric Vehicle Council Australia

 

Australian consumers are however only able to access 28 models of electric vehicle from 11 car manufacturers. Of these 28 models, 12 are battery EVs and 16 are plug-in hybrids. Compared to the 130 EV models currently available to UK consumers, this dearth of supply begins to explain the low penetration in Australia.

Adding to the limited range of models imported into Australia is the limited public charging infrastructure. In 2020 there are 1,950 standard charging stations (less than 50kW) at 1,200 locations and 350 fast and ultra-charging stations (50kW and over) at over 150 locations and these numbers represent a 16% and 42%, respectively, growth rate in charging station numbers over what was available in July 2019.

The Australian Electric Vehicle Council has surveyed global car manufacturers to understand the reasons for the low levels of EVs brought to Australia. A range of manufacturers advise that the EV industry is relatively nascent and with limited production the manufacturers allocate supply to markets that are best positioned to achieve sales and the key factors in their assessment of markets are:

  • Government electric vehicle policy;
  • Market readiness; and
  • Charging infrastructure.

Unfortunately Australia ranks relatively poorly in comparison to other markets on these bases. Markets such as Europe, China, the US, New Zealand and Canada have favourable fuel efficiency standards, consumer incentives and electric vehicle sales targets, all of which underpin vehicle sales for manufacturers.

Most manufacturers agree that the number of EVs available to Australian consumers will increase but the pace of that increase may depend on government policy. Currently Australia has no emissions reduction targets, fuel efficiency standards or average original equipment manufacturer (OEM) fleet emissions regulations. While market forces are important in determining the course of new technology, as Robyn Denholm, the Australian chairwoman of Tesla, Inc. noted:

“During technology transformations, government does have a role .. whether it’s on the emissions side and creating certainty about reduction in emissions that need to happen from a vehicle transportation perspective, whether it’s on the charging infrastructure side … having policy certainty over a horizon [and] making it attractive to industry to get behind it [will ensure] the rest of it will happen.”22

The Australian federal government foreshadowed the release of an EV policy in mid-2020 but it has not yet emerged. The development of an EV strategy was one of the recommendations of the Federal parliament’s Senate Report from the Select Committee on Electric Vehicles released in January 201923.

Australian state governments have begun to appreciate the potential loss of tax revenue from fuel excises as motorists transition to EVs and have begun to formulate EV taxes based on kilometres travelled. Studies show that these taxes will act as a disincentive to the take up of EVs24. Currently, South Australia, Victoria and New South Wales are developing proposed EV tax regimes with lobby groups appealing for, at a minimum, a consistent national approach25.

Despite the low level of EV adoption in Australia, it is well-positioned to play a key role in the growth of EVs and particularly in the growth in demand for EV batteries, which are the highest value component in an EV. Bloomberg estimates the global automotive lithium-ion battery market is projected to reach US$95.3 billion by 2030, growing at 11% per year26. Mining operations in Australia currently produce nine of the ten minerals used to make most lithium-ion anodes and cathodes and Australia also has commercial reserves of graphite, another element used in EV batteries27. Accordingly, Australia has a significant opportunity to provide the key elements for EV expansion and also potential to develop value-adding manufacturing processes for the EV supply chain. However, the rapidity of change in mobility technology suggests rapid and deft policy action is required.

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