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Electric Car Sales Forecasts Crank Higher; Europe Unconvinced

Electric Car Sales Forecasts Crank Higher; Europe Unconvinced

“today’s electric car sales remain a great deal weaker than the industry had hoped”

I’m drowning in forecasts telling me electric cars, currently too expensive and plagued by range anxiety, will rule the world soon.

The price of batteries will be slashed and range extended to the point when they can compete with internal combustion engine (ICE) power, soon. Recharging will take no longer than refuelling a conventional car, soon.

By 2025 around a quarter of sales will be pure electric. By 2040 you will win a prize if you spot an ICE car on the road.

Given the recent performance of forecasters in the world of politics perhaps we should be wary of these oracles and concentrate on real world evidence.

In Europe where the electric car revolution should flourish, the hard evidence isn’t very impressive. Here, where the price of a gallon of gasoline is more than twice that in America, (in the U.K. there are two taxes on gasoline, but your receipt of purchase won’t mention either) the incentive to buy electric should give sales a head start, but that isn’t happening. Volkswagen’s dieselgate scandal should also be helping electric car sales as potential buyers seek alternatives to this increasingly tainted technology, which still accounts for close to 50% of all European new car sales.

But the real world isn’t paying attention, yet.

Despite subsidies
According to European news letter Britain-based Automotive Industry Data (AID), pure electric car sales in Western Europe – that includes all the big markets like Germany, Britain, France and Italy – dropped for the 5th time in the past six months in October, when they fell 15.7% to 6,882. The year to date 10-month total is 74,014, up 5.5%.

This is despite big government subsidies in general and a new 4,000 euro ($4,246) handout in Europe’s biggest market, Germany.

“Despite generous ongoing purchase and user incentives, a steady rise in electric car choice, a gradual uplift in real-life driving range and continuing electric car infrastructure improvements, consumer’s appetite for today’s electric cars remains a great deal weaker than the industry had hoped,” AID said in its latest issue.

Meanwhile the electric car forecasts thud into my inbox predicting an acceleration in sales, soon.

IHS Markit says electric vehicles could make up to 15 to 35% of total new vehicle sales in 2040.

Berenberg Bank expects 5.7% of new cars sales will be electric by 2020.

By 2030, every 3rd car sold in the E.U. could be electric, says PWC Autofacts.

Germany’s vehicle manufacturers association, the VDA, expects electric car sales of between 15 to 25% in 2025.

Chicago based investment researcher Morningstar says electric vehicles will account for 10% of sales by 2025 compared with less than 1% last year, boosted by improvements in battery technology. By 2030 this could reach 25%, 50% by 2035 and 75% by 2040.

Lithium boost
This boom in electric car sales will be a boost for lithium producer Albemarle, auto-parts supplier BorgWarner and automakers BMW and General Motors, which are Morningstar’s top investment picks in the field. Lithium producer SQM and Tesla Motors should also be winners, but Morningstar says these latter companies have high “Morningstar Uncertainty” ratings.

“We expect EVs will reach cost parity with ICEs by 2025 due to advancements in battery technology. This should lead to adoption above minimums needed to clear fuel efficiency standards as mass market demand emerges,” Morningstar said in a report.

“Battery costs have declined significantly over the past decade from over $1,500/kWh in 2006 to approximately $400/kWh battery manufacturer in 2015. We expect battery costs will fall further, to $200/kWh by 2020 and $125/kWh by 2025, driven by increasing battery density,” Morningstar said.

This will raise average range from about 100 miles in 2015 to 200 miles by 2025.

Hybrid sales will perform even better, with 15% of sales in 2025 from 3% last year. Hybrids combine a gasoline or diesel engine with an electric motor. Some offer no battery-only range at all, others a limited amount of perhaps a mile like the original Toyota Prius, and plug-in hybrids which can offer battery-only range of close to 30 miles like the Mitsubishi Outlander.

Last month investment banker Morgan Stanley revised its estimate for electric car sales up to between 10 and 15% of the global market by 2025, what it said were more than three times the current average of expectations.

Ominous
There was though an ominous aspect to Morgan Stanley’s prediction.

“Although many questions over EVs remain, we believe it is the sharply rising cost of regulatory compliance on existing internal combustion engines (ICE) that is pushing (manufacturers) to change their strategy towards EVs, as much as improvements in battery technology,” Morgan Stanley said in a report.

In other words, if buyers refuse to see the merits of electric cars they will be forced to because governments will make ICE vehicles more expensive.

Germany’s VDA said car buyers will embrace electric vehicles much sooner than the conventional wisdom believed because the charging infrastructure will improve as well as costs coming down.

Meanwhile, the experts are on patrol, trying to identify the moment when car buyers’ electric car doubts suddenly turn to passionate belief. Or at least government “persuasion” forces an arranged marriage.

AID puts it this way.

“Much of the western world’s mass media, on the issue of electric cars, is full of praise, but as yet car buyers in both Europe and the U.S. are clearly not listening, for the time being at least,” AID said.

  

  

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