2017 was the year electric cars came of age, according to Macquarie Bank.
And who can argue, given the trend in the chart below.
From Macquarie, it shows the global share of battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs) as a proportion of total vehicle sales last year.
As Macquarie explains, while still small in the scheme of things, the growth rates last year were phenomenal.
“It is only a slight exaggeration to say 2017 was the year electric vehicles (EVs) became mainstream,” Macquarie says.
“Our analysis of official sales data from China, the US, Europe, Japan and Canada shows they accounted for 1.7% of new car sales in those markets, up from 1.1% in 2016.”
In numeric terms, Macquarie said sales of EVs rose to 1.1 million vehicles, up from 740,000 in 2016, representing an increase of 51%.
“BEVs, which are powered only by the battery, grew at a faster rate of 61%, to 734,000 vehicles, while PHEVs, which also have an internal combustion engine (ICE), gained 36% to 386,000,” Macquarie says.
“Towards the end of the year, monthly market share was over 2%, though this figure needs to be taken cautiously due to seasonality on the back of incentive schemes expiring at calendar year-end and data issues related to Chinese revisions of year-to-date data.”
This next chart — also from Macquarie — shows the annual growth rates in electric vehicle sales over the last four years.
It’s clear which direction sales are heading, driven predominantly from soaring growth in China, says Macquarie.
Sales [in China] of BEVs and PHEVs were 579,000, up 72% year-on-year, while sales outside China were a smaller 540,000, and saw a weaker gain of 34%,” the bank says.
“The market share in China of EVs was 2.3%, up from 1.4%, while in the rest of the world it was 1.4%, up from 1.1%.”
Given the trend of the past few years, the question investors are now asking themselves is whether it can continue, seeing sales of EVs become an even greater market force.
To Macquarie, like 2017, much will depend on China.
“In China, we feel confident in saying growth will slow,” it says, adding the “bearish case on Chinese EV sales this year is that subsidies are being reduced”.
“While the government is maintaining EVs’ purchase tax exemption, the sales subsidies is likely to be cut in line with this report because central government subsidies are due to be cut in 2018.
“Our China Autos analyst Janet Lewis also notes some other reasons while sales growth could disappoint — an incentive for the carmakers to push back sales into 2019 to be eligible for the new New Energy Vehicles (NEVs) credit system, some front-loading of demand in 2018 and just the difficulty in sales growth spreading from early adopters to the mass market.”
Based on those factors, Macquarie says growth in Chinese EV sales is likely to slow to 25% this year.
Outside of China, the other major factor Macquarie will be watching is the success of Tesla’s Model 3, a new lower-cost model which is reported to have more than 400,000 pre-orders.
“This is now in production, with deliveries to some customers made before year-end, but the ramp-up is behind schedule,” it says, adding “an original target of 5,000 a week by year-end was put back to Q1 2018 and again to end Q2, with Tesla saying that production had reached 1,000 a week by the end of 2017”.
Despite the uncertainties that exit in these markets, Macquarie says that global sales of EVs are still likely to increase at a “somewhat less breakneck pace of 30-40%” per annum in 2018.
It says growth of this magnitude will still see global share of EV sales lift to nearly 2.0%, leaving it on track to hit over 5% by 2022.
“The risks in the medium-term seem firmly to the upside,” Macquarie says.
“For commodity demand this will continue to support EV metals such as cobalt and lithium.”
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