October 2023
Headlines in late October regarding a cooling market for battery electric vehicle (BEV) demand may lead some to think the shine has left this new technology and that our quest for reducing carbon emissions has hit a wall. I would not be so hasty to jump to such conclusions. If we look at the actual data surrounding the vehicles market, even if the rate of EV sales increases has slowed, there is a lot to celebrate with regards to the market’s transition to more efficient and lower emissions vehicles. Remember – there is no single solution to the future of the transportation sector, and it is very important to maximize all opportunities to reduce emissions while preserving access to affordable and reliable transportation.
Disheartening Headlines
For years, we have cautioned readers to look beyond the click bait nature of headlines. Yet, we understand that many do not have time to dive deeper than a cursory look at the news and even fewer will look behind the coverage at the actual data. No doubt, many have seen headlines such as these that have appeared in the Wall Street Journal during the month of October:
- October 24, 2023 – GM Scales Back EV Plans as Buyers Hesitate
- October 19, 2023 – Tesla Hits the Brakes on EVs, but Not AI
- October 26, 2023 – Ford Retrenches Further on EVs Amid Demand Uncertainty
If these headlines were all you read, they do not paint a very bright picture of the EV market. But as always, there is so much more happening than what we can learn from a headline, or even a complete news story. If we look at actual sales data, we see a consistent expansion in EV sales with the only exception being COVID affected 2020. The challenge that is leading to concern is that year-over-year percent growth rates have fluctuated and slowed. This should have been expected – as the number of units sold in any given year increased, achieving a high percent increase the following year becomes more challenging. For example, if I sell five apples today and 10 apples tomorrow, I record a 100% growth rate. But if I sell 100 apples today and 110 apples tomorrow, my unit sales increase continues at the same rate but as a percent my growth slowed to 1%. I have therefore disappointed those who were counting on continued 100% growth.
We have been inundated with aspirational forecasts, pledges and commitments that have inflated our definition of what success looks like.
Through the third quarter of this year, BEV sales have already eclipsed the total units sold through all of 2022. Think about that – in 12 months last year, Americans purchased 738,671 BEVs and through the first 9 months of this year they purchased 831,134 BEVs. For any other market, this would be celebrated as an accomplishment. But we have been conditioned to expect the extraordinary from the BEV market and anything short of unreasonable growth is viewed as a disappointment.
If sales over the past nine months were to continue to close the year, BEV sales would exceed 1.1 million units and represent an increase of 50% over 2022. That is extraordinary, but it falls short of the 70% and 84% growth rates of the prior two years. And because major manufacturers have stepped back from their lofty predictions, the headlines are screaming that the market is struggling.
Now, this is not to say that there is not a slowing in demand for these vehicles. But that is to be expected. The first movers have moved, the early adopters have adopted. Moving into the next phase of market acceptance and engagement is much more challenging and will only happen when prices come down further and infrastructure becomes more ubiquitous to satisfy the range concerns of those who remain on the fence. But with time, these conditions will be satisfied and a new category of vehicle buyer will seriously consider transitioning to a plug-in electric vehicle. Patience is required, but patience does not result in clicks on news stories.
Looking Beyond the Headlines
Meanwhile, for those concerned we are facing a climate crisis and that the only option for saving the planet is a rapid transition to BEVs, this could be a very pivotal moment of clarity. We have highlighted in these blogs for years that the transition of 300 million vehicles in the U.S. and 1.5 billion in the world will take decades and, if the goal is to reduce transportation-related carbon emissions, we need other tools to achieve our objectives. As we face what I have always believed was the inevitable slowing pace of BEV sales growth, we can take heart in a number of other very important market developments that are reducing the emissions from the transportation sector. Unfortunately, these achievements are being dwarfed by the media’s fascination with news about the EV market. Here are three elements we should be paying greater attention to and celebrating our achievements:
Fuel Efficiency – According to the U.S. Environmental Protection Agency’s Automotive Trends Report, vehicles sold in 2022 were on average 12% more efficient in terms of miles per gallon than those sold in 2012. Included in that number, cars were 24% more efficient and trucks were 21% more efficient. (The fleet average is lower because trucks have gained significant market share relative to cars, and that has lowered overall fleet efficiency gains.) In terms of carbon emissions, grams of CO2 per mile were down 12% for all vehicles and down 23% and 19% for cars and trucks respectively.
Hybrids – The pre-occupation with BEVs has cast a shadow over the tremendous growth and environmental value of hybrid electric vehicles. According to the 2022 Transportation Energy Institute study, Life Cycle Analysis Comparison – Electric and Internal Combustion Engine Vehicles, over the expected life of a small utility vehicle, a hybrid powertrain reduces greenhouse gas emissions by 29% compared with a similar ICE powered vehicle. Consequently, every hybrid sold is making a significant contribution to carbon reductions regardless of the carbon intensity of the electricity grid.
And hybrids have a very positive story, with sales through Q3 of 2023 already exceeding total hybrid units sold in 2022. Hybrids through Q3 represented 7.25% of all light duty vehicles sold in the U.S. And, as some of the major vehicle manufacturers have announced changes in their BEV forecasts, they have simultaneously announced an increase in hybrid production. This is a very positive story for consumers who might not be ready for a BEV but can acquire a hybrid, increase their fuel efficiency, reduce their emissions and not worry about infrastructure yet.
Lower Carbon Fuels – Once again, converting the entire fleet to new vehicles will take decades. The only way to reduce carbon emissions from the existing fleet is to introduce lower carbon fuels. Fortunately, progress is being made in this arena as well. Higher volumes of biofuels, including ethanol, biodiesel and renewable diesel, are being incorporated into the fuel pool each year. In addition, the carbon intensity of those fuels is dropping due to improved farming practices, biorefinery operations and carbon capture investments. Likewise, the petroleum industry is investing in lower carbon technologies throughout its production systems as well. The efforts of these sectors is combining to provide ever lower carbon intense fuels for existing vehicles.
Progress Exists if You are Willing to Look
Headlines are drafted to get your attention, but the reality is often quite different from what those headlines portray. It is really important to keep an eye on what really matters – efficiency, emissions and affordability. Remember, if consumers cannot afford the solution being promoted, the solution will fail. The transportation industry is pursuing a variety of strategies to reduce emissions and preserve affordable options for consumers. The media’s fixation, as well as that of some policymakers, on one solution above all others is misleading and undermines the potential benefits of innovation.
The BEV market growth has slowed, but that does not mean the EV market is dead. The slowdown was inevitable, but EVs continue to expand their share of the market and attract new buyers. But when we look behind the stories of gloom, we find other great stories of progress that should be celebrated. The future is bright for low emissions and affordable transportation solutions, assuming we are willing to look beyond the headlines and appreciate what is really happening out there.
