Electric Vehicles: About To Take Over
Technology operates in some fairly predictable patterns. For those who are experienced at watching it, the signs are clear. There is a path that emerges which, once passed the hype cycle, follows what went before it.
Because of this, the ability to get caught off guard is reduced. One area that we see this taking place is with electric vehicles. You have the mainstream media lying to people, claiming that demand is waning. Actually, the data tells a completely different story.
If we focus upon legacy automotive companies, yes it is true their EVs are backing up. However, we are seeing others with sales jumping off the page. Overall, sales are up, with 1.2 million EVs sold in the United States during 2023. That is good for more than a 7% market share.
While that is not going to blow people away, the pattern is clear. We also couple that with what is happening in China and Europe, where they are in double digits and the shift is on. China, for example, came in at 13% for BEVs, a figure further enhanced by the fact it is the world's largest vehicle marker.
All the nonsense spewed by the naysayers is starting to unravel. One is that charging is not readily available. As we always say, nothing operates in vacuum. Tesla, the default charging standard, increase the size of its charging network by over 10% in just 3.5 months. Another 18 months of this and we will be in a much different world in that regard.
Then we have the price. Many complain about at the expense of EVs. The reality is the industry touted the total cost of ownership as its selling point. Now, we are near the time when sticker price is going to be the only metric that matters.
Near Parity
ICE vehicles keep getting more expensive. This is something that everyone knows. It is also a fact verified by the chart above. It was put out by Cox Automotive, one of the largest entities in the United States when it comes to vehicles. That company is involved in everything, to the point where they should be investigated for monopolistic and anti-trust practices. Nevertheless, they do have access to a ton of data and provide some useful information on the industry.
As we can see, the chart above shows how we are seeing the average selling price of an EV almost to parity with ICE. This is obviously an average so the gap could be different depending upon the class. However, this is United States pricing. The reason this is important is Tesla has more than half the market share and they do not have an economy vehicle. That means there is no competitor for something like the Toyota Corolla.
In other words, Tesla still is selling premium automobiles and still the gap is closing. Do not be surprised if the average price of an EV is below the cost of ICE in a year.
We can see how the cost of the EVs are below where they were in Jan 2019. In comparison, after being flat for the last year, ICE prices are still significantly higher 5 years ago. Just eyeballing, the average EV is $3,000 cheaper than in April of that year while an ICE is $13K more.
Wright's Law
One of the factors overlooked in this is Wright's Law. For those unaware, this was a "law" that states that for every doubling in lifetime manufacturing of a product, the cost drops 30%.
For ICE, with billions of cars made, this means little is to be gained from efficiencies in manufacturing. Those benefits were long enjoyed. This is compounded by the fact that governments are constantly adding more anti-pollution regulations, something that drives prices up.
EVs are not affected by this.
As for Wright's law, Tesla, by far the top manufacturer of EVs, is not even to 6 million vehicles. The entire industry could double its lifetime output by producing 10 million vehicles. Soon, that will be a 12 month output for the EV industry.
Lower End of the Market
Tesla and some other start ups all focus upon the top end of the market. The former is working its way down the scale but, as mentioned, still has not really hit the economy class.
What happens when this company starts to produce a vehicle that it is selling for $25K? How will legacy auto compete with that?
The answer is clear.
Legacy auto is suffering greatly. They made the decision to pull back simply because they could not afford to keep producing EVs are a loss. While total US sales were up about 1.7 million, inventory on dealership lots increased by 900K. This means that the total gain was roughly 800K for the year. That was off a low number.
Certainly, the headwinds for the industry were strong. Selling cars when interest rates are exploding is not easy. However, all had the same situation and yet the EVs were able to gain. This is what happens during a recession: disruptions gain market share.
The auto industry is certainly in a recession. It is not an easy time. This year might see a bit of a breather if rates come down.
That said, will people keep flocking to ICE vehicles? Many will simply because of availability. Nevertheless, the disruption is here. Some are expecting China to top 35% in EV sales next year. Europe is also seeing more adoption. Even the US will likely cross the 10% barrier.
I would not be surprised if the average selling price on an EV hit $45K by the end of next year. This would be a 10% drop from these levels, something that ICE is not going to do.
In 5 years, the debate between EV and ICE will look ridiculous.
Posted Using InLeo Alpha
ya this is nothing new. it was bound to happen once the monopoly was over and the cost to make it was averaging down. easier to mass produce now and cheaper O.O. maybe in 10 yeras time we probably see everyone with ev or hybrid cars . would be interesting if they could also have some way to power the ev thru solar this would be a huge break thru. i mean they probably already can but like at an affordable price for the car
It will be a game changer when EVs become available for economy class. I think many will prefer using it than legacy autos, since the latter isn't doing better in terms of innovation and development. With Tesla, I can imagine the charging network growing exponentially in the next few years.
An interesting (and under-reported) emerging sector is electric tractors. Cars (vehicles) are cool and all but tractors do so much more!
Agricultural equipment is overlooked in general when it comes to technology.
We hear a lot about autonomous vehicles regarding cars and trucks. What most miss is the ag industry is already using that in many of their products.
So yeah, ag is often ahead of the rest.
Take a peak at Monarch tractors if you are interested in the small scale agricultural equipment. It is really interesting how they are going about it with the automation.
In my country Pakistan we are seeing this trend of electrical vehicles showing up on our streets and people actually buying them.