Electric Vehicle Market Growth

Electric Vehicle Market Growth
Electric Vehicle Market Growth

Electric Vehicle Market Growth


Introduction


SINCE DELOITTE LAST presented a forecast for electric vehicle (EV) sales, in January 2019, the EV sales, in strides, and not just in terms of sales. Original equipment manufacturers (OEMS) have invested billions to deliver new electrified models, from R & D to factory redesign. Consumer attitudes have evolved. Government interventions have pushed forward and pulled back. But then COVID-19 completely disrupted global sales and manufacturing. In this context, a revised forecast based on updated data is needed.


By examining the current state of the Electric Vehicle market worldwide and noting the many factors fostering growth in various directions (Part 1 of this report), we have formed conclusions about how the market will take shape over the next decade. The significant growth of EVs leading up to 2030 will present major opportunities and challenges for traditional OEMs, new-entrant OEMs, captive finance companies and dealerships. In particular, traditional OEMs will find insights in this report that can help them re-prioritise their customers and strategies in a volatile competitive landscape.


Paramount to seizing opportunities and man aging risks is taking a new approach to market segmentation. We detail one such approach in Part 2 and apply it as a use case to one major market, the United Kingdom, to inform and inspire OEMs and other stakeholders globally. By letting today’s insights fuel the journey for the next ten years, we can accelerate beyond the obstacles the pandemic has brought and toward a future where EVS take centre stage.
In this report, we use the term electric vehicles (EVS) to refer to battery electric vehicles (BEVS), as well as plug-in hybrid electric vehicles (PHEVS). Unless specifically stated, our analysis has considered both forms of drivetrain.


  • BEVS are powered solely by batteries. They use an electric motor to turn the wheels and produce zero emissions.
  • PHEVS are capable of zero-emission driving, typically between 20 and 30 miles, and can run on petrol or diesel for longer trips. As the name suggests, they need to be plugged in to an electricity supply to maximise their zero-emission capability.


Part 1: Global progress and forecast
THE EV MARKET’S collective accomplishments over the past two years offer hope, despite the short-term impact of COVID-19: a pattern of continued growth, which is expected to be sustained throughout the 2020s. As BEV and PHEV sales surpassed two million vehicles in 2019 (see figure 1), EVs staked their claim on a 2.5 per cent share of all new car sales last year.
Looking back at BEVS in 2019, they accounted for 74 per cent of global EV sales: an increase of six percentage points since 2018. This rise was partly stimulated by new, stricter European emissions standards that persuaded manufacturers to favour the production and sale of zero-emission vehicles. Another factor is the advanced state of the BEV market in China, compared to the rest of the world.

Electric Vehicle Market Growth


Although BEVs are still the dominant EV technology in the United States and Europe, they command a smaller share of the market than in China.


Since the last time Deloitte reported on Electric Vehicle sales, significant regional disparities in growth have sur faced. For example, sales of EVS grew by 15 per cent in 2019 compared to 2018, driven by the growth of BEVS in Europe (+93 per cent), China (+17 per cent) and ‘other’ regions (+22 per cent). In con trast, the United States market for BEVS fell 2 per cent (see figure 1). Then, in the first half of 2020, COVID-19 slowed down the growth rate of EV sales, or sent it into decline, across various regions. The speed of recovery is expected to vary by region.

But generally speaking, the course seems clear for growth over the next decade, despite the potential lasting impact of COVID-19 on total car sales over the next three years. To under stand how things might continue, we need to understand what’s been taking place across the various regional markets over the past year.


Electric Vehicle in regional markets


EUROPE


Europe’s Electric Vehicle sector saw significantly more growth than other regions in 2019. The Nordics and the Netherlands continued to lead the way; Norway achieved 56 per cent market share, and two of the top ten best-selling cars in Holland were BEVS. The United Kingdom and some other countries reported triple-digit growth for the year. Favour able government policies and a change in consumer attitudes were the catalysts, driven primarily by growing concerns about climate change.

Climate change rose to the top of many European governments agendas. The United Kingdom committed to a target of net zero emissions by 2050, and proposed a ban on the sale of all polluting vehicles by 2035. Germany plans to cut greenhouse gas emissions by 40 per cent by the end of 2020, by 55 per cent by the end of 2030 and up to 95 per cent by the end of 2050, compared to 1990 levels.


Despite the growth seen in 2019, mainstream adop tion of EVs has been, so far, hindered by the limited number of models available to the European market and consumer perceptions regarding insufficient charging infrastructure in some regions.


The outbreak of COVID-19 and national lockdown measures impacted total car sales in Europe, as showrooms closed their doors and manufacturers halted production, but Electric Vehicle sales have held up well in comparison their internal combustion engine (ICE) equivalents.


In the first four months of 2020, in the European Union (EU), demand for new pas senger cars contracted by 38.5 per cent, but in April 2020 the first full month with COVID-19 restric Electric Vehicle in place-registrations of new passenger cars in the EU posted year-on-year decline of 76.3 per cent, with some major markets reporting declines of over 95 per cent year-on-year. But EV sales in Western Europe only fell by 31 per cent in April, with some countries actually reporting modest year-on-year growth-albeit against a low base.


CHINA

China continues to dominate the Electric Vehicle market, accounting for half of all vehicle sales. Sales in the second half of 2019 turned out lower than previ ously expected after some subsidies available to Chinese consumers were halved. This considerably eroded the consumer demand for EVS, and total yearly sales dropped: PHEV sales fell by 9 per cent and BEV sales fell to a 17 per cent growth rate from 2018 to 2019. On a positive note, a slowdown in the sales of ICE vehicles in the region means that the EV market share in China actually increased.


China continues to dominate the Electric Vehicle market, accounting for half of all vehicle sales.
China’s slowdown in the second half of 2019 affected global Electric Vehicle sales figures, but neither the slashed subsidies nor the impact of COVID-19 should impact EV sales significantly in the long term Chinese authorities announced they would refrain from more subsidy cuts in 2020. Mean while, other incentives (for example, number-plate privileges in Tier 1 cities) remain, investment is being made in China’s charging infrastructure and there is a continued focus on encouraging Chinese manufacturers to produce and market EVS.


As a result of the COVID-19 pandemic and lockdown measures in place, China saw a 45 per cent decline in passenger car sales in Q1 2020. Electric Vehicle sales fell at a faster rate than the total market (by 56 per cent), as consumers stayed home and showrooms closed their doors. But the rate of recovery has been swift. By March 2020, Chinese factories had recovered to achieve a production rate of 75 per cent, with 86 per cent of employees returning to work. By April 2020, production had basically been restored to pre-pandemic levels.


Although sales have remained depressed in certain Chinese provinces, recovery has been accelerated by pent-up demand, favourable policies put in place by Chinese authorities and the ability to purchase cars online; total sales actually reflected year-on-year growth in April. This brings hope for a ‘V-shaped’ recovery in China, with many individual Electric Vehicle manufacturers already benefitting from the release of new models.

UNITED STATES


After an encouraging start to 2019, falling fuel prices in the United States (a market that already enjoys comparatively cheap private transportation) led to a disappointing second half of the year for Electric Vehicle sales. The United States EV market is almost singlehandedly being carried by the success of the Tesla Model3 alone responsible for almost half of all EV sales.
As in Europe and China, United States car sales fell sharply in the first three months of 2020 as the pan demic took a toll on demand; job losses increased and large swathes of the population were ordered to stay home. The recovery in Electric Vehicle sales is likely to be slower in the United States than in other major regions, as manufacturers delay the launch of new cars and consumers take advantage of low oil prices.


Electric Vehicle REST OF THE WORLD


The world outside Europe, China and the United States is lagging behind in terms of Electric Vehicle sales, for various reasons: a lack of government commit ment to EVS, insufficient or unsuitable charging infrastructure, unavailability of EVs and cultural differences regarding mobility models.
For example, Japan is a major global car market, but new car sales are dominated by domestic OEMs that have not yet developed the same range of EVS as their European and Chinese competitors. Meanwhile, India, like many markets, is dominated by mass- and low-cost mobility models: an area that OEMs haven’t been able to penetrate so far, because of EVS comparative higher price.


The world outside Europe, China and the United States is lagging behind in terms of electric vehicles sales.


2030 sales forecast


With one eye firmly on progress so far, Deloitte has analysed the most recent indicators to develop an up-to-date prediction of the Electric Vehicle market for the next ten years. We know that BEVS already outperform PHEVS globally, and predict that by 2030, BEVS will likely account for 81 per cent (25.3 million) of all new EVs sold. By contrast, PHEV sales are expected to reach 5.8 million by 2030. A recovery from COVID-19 will see ICE vehicles return to growth, up to 2025 (81.7 million), then experience a decline in market penetration thereafter.


Our global Electric Vehicle forecast is for a compound annual growth rate of 29 per cent achieved over the next ten years: Total EV sales growing from 2.5 million in 2020 to 11.2 million in 2025, then reaching 31.1 million by 2030. EVS would secure approximately 32 per cent of the total market share for new car sales (see figure 2).


Annual car sales are unlikely to reach pre-COVID-19 levels until 2024. However, the pace of recovery is forecasted to be a result of al slowdown in ICE sales; EVS will continue to have a positive trajectory during the COVID-19 recovery period and may well end up capturing a dispro portionate share of the market in the short term.


Deloitte expects that by 2030 China will hold 49 per cent of the global Electric Vehicle market, Europe will account for 27 per cent, and the United States will hold 14 per cent.


The share of new car sales taken up by EVs will vary considerably across markets (see figure 3). We forecast China to achieve a domestic market share of around 48 per cent by 2030-almost double that of the United States (27 per cent), and Europe should achieve 42 per cent. But this doesn’t tell the whole story.


Growth in Northern and Western Europe is expected to outstrip that in Southern and Eastern Europe as wealthier countries (such as the United Kingdom, Germany, France, the Netherlands, Nordic countries) likely invest more in infrastructure and offer greater cash and tax incentives to accelerate initial growth.

Electric Vehicle GROWTH BEYOND 2030

Beyond 2030, we expect the rate of growth in Electric Vehicle sales to slow. Some markets will be unable to support the transition to EVs in the same way that wealthier nations will over the next decade. Consider that, beyond 2030, one of the key factors in sustaining growth will be the implementation of suitable charging infrastructure.

Electric Vehicle Market Growth

Electric Vehicle Market Growth


This requires multi-billion-dollar capital investments-achievable in some markets through a combination of public and private investment, but unlikely to be achieved uniformly around the world. In countries that cannot invest in charging infrastructure, we expect the market for ICE vehicles to remain for some time.


Four factors driving growth


Despite the pressure exerted on the market by the COVID-19 pandemic, the long-term outlook for EVS is strong. The significant shift in expected volume of BEVs and PHEVS by 2030 is based on four factors: consumer sentiment, policy and regulation, OEM strategy and the role of corporate companies. All four of these factors saw major changes in direction over the last year, prior to the emergence of COVID-19, and have since been shaped further by the pandemic.


FACTOR-1


CHANGING CONSUMER SENTIMENT


Consumer demand will fuel the growth of EVs but, at the moment, there are several reasons consumers haven’t swapped their ICE vehicles for equivalent EVs. However, as the barriers to adoption are rapidly removed, EVS are increasingly becoming a realistic and viable option. Figure 4 shows how consumer concerns regarding BEVS have changed, and in many instances diminished, since 2018.

Electric Vehicle Market Growth

From 2018 to 2020, there were some noticeable changes in consumer attitudes toward EVS. Concerns over the cost/price premium have diminished in every country apart from China (+two percentage points), which has seen cuts in EV subsidies.
Driving range has remained the number one concern in Germany, and became number one in. France, but there are now fewer consumers citing it as a concern in those two markets. Elsewhere, the lack of charging infrastructure has become the top priority for consumers, reflecting the possibility that they are starting to see EVS as a realistic option and are considering the practicalities of ownership.


Over the next few years, we expect some barriers to be completely removed. EVs driving range is already comparable to that of ICE vehicles; price has already reached parity, if you consider subsidies in various markets and total cost of ownership; and the number of models available is increasing. As Electric Vehicle sales continue to grow and consumers see more of them on the roads, or travel in EVs owned by family or friends, we expect personal experiences to trump concerns. The expected proliferation of commercial EVs (such as vans, trucks, lorries) should also play a part in reassurance, as will the rise of mass-transit options (such as electric buses).


Measures that governments take in their COVID-19 recovery plans could also affect consumer senti ment. As part of a $ 146 billion economic recovery plan, Germany has designated $ 2.8 billion to EV charging infrastructure and announced new legislation that will oblige all fuel stations to have an Electric Vehicle charging point.


This is significant progress in a country where driving range and lack of charging infrastructure are the two biggest barriers for consumers. China has made similar commitments, announcing an additional $ 378 million investment in charging infrastructure as part of a COVID-19 recovery plan.


FACTOR 2


Electric Vehicle POLICY AND LEGISLATION


Government intervention continues to play an important role in driving Electric Vehicle sales, as shown. by the successes in Norway, fluctuating sales in the Netherlands and changing fortunes of the Chinese EV market. Not only are there economic benefits for states that support a transition to electric, but the positive environmental impact has made the widespread adoption of EVs a necessary step toward achieving climate-change goals, such as those of the 2015 Paris Agree ment. Several policies and regulations are helping encourage the growth of EV adoption:
Fuel economy and emission targets


These differ across markets and are under constant review and consultation by governments. Recent Deloitte analysis shows that with the phasing – in of new European CO2 emission targets, which will be fully implemented in 2021 and bring punitive fines, half of car manufacturers are facing related penalty payments. They’ll owe a total of $ 0.5 billion in 2020 and $ 3.7 billion in 2021, which could cost the industry approximately $ 39 billion, based on recent emission levels. Such government intervention is shaping OEM strategy: to avoid fines and reputational fallout, OEMs are seeking ways to reduce emissions through increased electrification.


Electric Vehicle City access restrictions


City governments have led the way on imposing bans, or punitive taxes, on users of older com bustion engines, addressing increasing concerns about toxic air pollution. pollution. In 2019 more cities followed the path already taken in Madrid, Mexico City, Rome and Seattle: Am sterdam, Brussels and Barcelona all took action to reduce the number of ICE vehicles on the road. Several United Kingdom cities also brought forward plans for bans and zero-/low-emission zones. Throughout 2020 we expect this trend to continue as cities worldwide grapple with air pollution and confront their relationships with combustion engines-and private cars in general.


Electric Vehicle Financial incentives


Many governments have offered compelling financial incentives to make the electric switch, such as providing cash subsidies to consumers buying low-emission vehicles, reducing taxes on EVs and increasing or maintaining taxes on ICE vehicles. But as EVS reach price parity with ICE vehicles, some governments have explored rolling back such incentives; this can have a dramatic and immediate effect on Electric Vehicle sales, as seen by the recent fluctuations in sales in China and the Netherlands.


Instead, in light of COVID-19, the need to stimulate total new car purchases has prompted a range of new financial incentives introduced across major markets, some of which clearly favour EVS.


For example, in Germany the government has temporarily lowered VAT from 19 per cent to 16 per cent on low-emission vehicles and doubled existing subsidies to almost $ 7,000 on EVS costing less than $ 45,000.35 In France, private consumers who buy electric cars (that cost up to $ 50,000) now receive an almost $ 8,000 incentive, up from around $ 7,000; those looking to get rid of their old cars now receive double the previous value offered by a scrappage scheme, which was designed to get less-efficient models off the road.


Under both schemes, a consumer replacing an older car for a new Electric Vehicle could be eligible for up to $ 13.500. Meanwhile, in China, EV subsidies and tax break policies set to expire in 2020 were extended to 2022 in a direct response to the economic impact of COVID-19. In the long term, the viability of financial incentives will need to be reconsidered as the economic recovery from the pandemic becomes clearer and governments try to manage other concerns, such as potential lost fuel-tax revenues.

Electric Vehicle Market Growth

FACTOR 3 – OEM VEHICLE STRATEGY


In the past year, some prominent OEMs have announced strategic commitments to EVS (see figure 5). New models have been announced, production targets increased and sales targets moved forward and multiplied.


In the short term, COVID-19 may hinder some OEMs in their reach for these targets, as they conserve cash and divert investments elsewhere in the business. But in the long term, we expect these targets to continue as priorities for OEMs. The impact of the investment and targets shown in figure 5 will represent a seismic market shift over the next decade, in terms of availability and affordability of models.


Availability of models


Recent company announcements have made it clear that there will be substantially more Electric Vehicle models commercially available over the next decade than previously thought. According to statistics cited by the European Federation for Transport and Envi ronment, Europe should expect 33 new models in 2020, 22 in 2021, 30 in 2022 and 33 in 2023. This means that BEV models available in the EU will surpass 100 in 2022 and reach 172 in 2025. In the United States, IHS Markit predicts there will be 130 available models by 2026, offered by 43 brands.

Affordability of models


Achieving price parity with, or even savings over, ICE vehicles will play a big role in speeding up Electric Vehicle adoption, especially as model ranges and marketing priorities adapt to manufacturer emission targets. A key takeaway from monthly sales figures in 2019 is just how sensitive consumers are to the relative total cost of ownership when it comes to EVS versus ICE vehicles.


This includes upfront costs (as seen in the Chinese Electric Vehicle sales drop when subsidies were cut) and short-term costs, like fuel (as seen in the United States, where EV sales dipped right along with fuel prices). Based on recent company an nouncements, over the next decade we expect to see EVS-particularly BEVS-become available at the low-cost end of the market, but the roll-out of EVS across all parts of the market is likely to be uneven.


Even with more OEMs offering affordable Electric Vehicle models, consumers are still unwilling to pay a premium for an EV instead of its ICE equiv alent. However, we expect the existing price premium associated with EVS to be consigned to history sooner rather than later.


In some cases, the total cost of owning a BEV or PHEV for private buyers is already less than for the ICE equivalent, and the annual cost of ownership is also balancing out. Meanwhile, for businesses and customers that use company car schemes, favourable tax schemes have already created an environment where EVS can offer savings.


FACTOR 4 – THE ROLE OF CORPORATE COMPANIES


We are seeing an increasingly important role for corporates to support the transition to EVS, using the three factors highlighted above to their advantage. Sales of new cars to businesses represents a significant proportion of all cars sold. For instance, Deloitte previously predicted that corporates would account for 63 per cent of total new car sales across Western Europe by 2021.


In the past year, purpose has continued rising to the top of the corporate agenda, with an increasing number of companies seeking to differentiate themselves by acting as a force for positive change. Because travel is a major avenue for businesses to alleviate emissions, more and more companies are considering how they can support a shift to EVS.


Traditional company car schemes are ripe for reinvention: By exploring broader mobility options , businesses are finding value not just in emissions reduction, but in cost savings and improved employee satisfaction. Government tax schemes that target company cars put the emphasis firmly on businesses to lead the way in the shift to EVs.


In light of COVID-19, investment in fleets has stalled dramatically as corporates reduce their expenditure and prioritise other investments. Before a comprehensive transition to EVs can take place, business confidence needs to be restored and funds made available again. Cor porates also need to consider how fundamental changes to how and where work is done will affect the structure of their mobility schemes.


We expect the existing price premium associated with EVS to be consigned to history sooner rather than later.

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