ElectricCarMarketShareBlastedHigherInH22018Feb. 18, 2019 11:10...

ElectricCarMarketShareBlastedHigherInH22018

Feb. 18, 2019 11:10 AM

Summary

EV market share in key markets blasted higher in H2 2018.

Why are electric car sales now increasing market share exponentially?

Survey of Americans - "15% said they were probably going to own an electric vehicle in the next 5 years, and 34% said it would probably be in 10 years."

What can we expect for electric car sales in 2019?

This article first appeared on Trend Investing on February 11, 2019; therefore all data is as of that date.

For some background on the electric vehicles (EV) boom, investors can read my earlier article: The EV Boom Just Keeps Getting Bigger - Update End 2018

Electric car market share exploded higher in H2 2018
Many market participants may not yet realize what is happening with electric car market share, notably in China, North America, and Europe.

In the second half of 2018, electric car market share as a percentage of total car sales grew exponentially as shown in the graph below. Notably China led the way with the electric car market share surging to 8%.

EV market share rocketed higher in H2 2018



Source: Bloomberg

The above graph shows me the "S" curve exponential rise may have begun in H2 2018. I had been expecting this to be closer to 2022 when I forecast electric cars to be the same price as a comparable internal combustion engine (ICE) car. What I had forgotten to allow for is the decline in ICE cars as consumers hold off buying an ICE car and consider switching to an electric car.



Source: Tesla: Norway Stuns by Value Analyst

The Bloomberg forecast below, while very impressive numbers, forecasts the exponential growth phase to start after 2022-2025 when it is expected that electric cars will be purchase price equivalent with conventional internal combustion engine (ICE) cars. I had also been forecasting this as a reasonable scenario starting 2022.




The chart below shows that global electric car sales broke records every month from August 2018 to December 2018. Note that January and Q1 electric car sales are traditionally weaker, and build through the year.

Global electric car sales 2016, 2017, and 2018



Source: Inside EVs from Evsales.com

Why are electric car sales now increasing market share exponentially?
I propose a few reasons to understand the sudden exponential market share rise.

• Total global ICE car sales are forecast to have declined in 2018, whereas electric car sales grew ~72%. Clearly buyers are switching to electric cars, especially in China. Globally it appears that many potential car buyers are holding off purchasing an ICE car and considering an electric car, or holding off to buy an electric car as prices are expected to fall further each year, as well as longer-range models.
• China subsidies decreased 20% in 2019. Many Chinese buyers would have bought in late 2018 to avoid any possible price hikes in 2019.
• In the US, Model 3 production ramp was very large resulting in a massive increase in US electric car sales in 2018. For example, US electric car sales were close to 50,000 for December 2018, up 90% on December 2017. Tesla (TSLA) contributed 39,731 to the 50,000 sales, of which 25,050 were Model 3 sales, or about half of US electric car sales in December were Model 3.
• The global economy is experiencing a mild slowdown. Of course, this does not explain electric car sales up ~72% in 2018.

Tesla Model 3 massively boosted electric car sales in the US in 2018 and was the global best-selling e-car in 2018 selling 145,846 units, blowing away the competition.

Further reading

• China car sales hit reverse for first time since 1990s - "China car sales fell 13 percent in December, the sixth straight month of declines, bringing annual sales to 28.1 million, down 2.8 percent from a year earlier, China's Association of Automobile Manufacturers (CAAM) said."
• 34% of Americans Expect to Buy an Electric Vehicle in Next 10 Years - "A survey of American adult consumers regarding their interest in electric vehicles. The main findings were that 15% said they were probably going to own an electric vehicle (EV) in the next 5 years, and 34% said it would probably be in 10 years."

What can we expect for electric car sales in 2019?
We can expect a slower January and Q1 2019 as China subsidies fall 20% and seasonal factors apply. Looking beyond Q1 2019, my forecast is for China to end 2019 near 8% market share for all of 2019 (December 2019 will surely be well above 10% share), and global market share at ~3.5% or perhaps even 4% (2018 ended at ~2.1%). I would not be surprised to see Bloomberg increase its near-term forecasts given the surge in market share in H2 2018. I also expect battery electric vehicles (BEVs) (100% electric) to continue to increase further from their current 69% share of electric vehicle sales in 2018.


Forecasts for electric car market share 2019 to 2040

2019 2020 2022 2025 2030 2035 2040
My forecasts 3.5% 5% 10% 20% 35% 45% 55%
Bloomberg forecasts 3% 11% 28% 43% 55%
Jose (EV Sales) forecast ~4% ~7% ~12%
(2021)

By comparison:

A January 31, 2019, quote from Jose Pontes from Evsales.com:

(Jose's 2019 electric car sales forecast is) 3.5 million, and almost 4% share. And 7% in 2020? 12% in 2021? This would set the Big ICE Vehicle Crash two years from now.

BNEF recently forecast: "Electric vehicle sales up by 'only' 40%... down from the 70% growth rate in 2018."

The Bloomberg forecast of 3% global electric car market share by 2020 (see graph below) is now looking conservative and likely to be reached this year (2019), and closer to 5% by 2020. Of course, this depends on the 2019 growth rate - Will it be 40%, 70% or 100%?


Source: Bloomberg Research

Conclusion
With global ICE car sales in decline, and electric car sales increasing ~72% in 2018, it resulted in a very sharp increase in electric car market share, most notably in China, USA, and Europe in H2 2018. For example, China electric car market share jumped from 3.3% in December 2017 to an amazing 8% by December 2018.

H2 2018 has taught me that the electric car boom is growing faster than what we all anticipated, at least in H2 2018. The incredible success of Tesla Model 3 has also shown that as battery electric vehicles' (BEVs) prices fall, consumers will buy in record numbers. Recent results are supporting my 2016 forecast: "Electric Vehicles Will Be Affordable And Popular By 2020". I am still forecasting that by end 2022, electric cars will be cheaper to buy than comparable ICE cars.

Looking ahead to 2019, I expect we will see Chinese electric car market share exceed 10% at some point (on a monthly basis), despite a possible slowdown in Q1 due to the 20% decrease in subsidies. Global electric car sales will likely rise from 2.1% in 2018 to about 3.5% by end 2019 proving that H2 2018 was in fact the start of the demise of ICE and the rise of EVs.

As usual all comments welcome.

Disclaimer: The information in this article is general in nature and should not be relied upon as personal financial advice.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article