July 22, 2019
There is a sharp difference between what we want to see and what we actually see, especially when we are looking into the future (or the mirror). So many have a vision of the future that is dominated by electrified powertrains and autonomous vehicles operating in a service-for-hire market, but that is so different from what is happening today that it seems almost like a fantasy. Of course, there are opportunities to move towards elements of that vision, but it will require a healthy dose of reality to set expectations and timelines that are sustainable. But even before steps can be made in a certain direction, it is critical to understand what is going on around us now. So, in this piece we will analyze vehicle sales data through June 2019 and see what stories can be told about today.
The relationship between a vision of the future and reality reminds me of Def Leppard in 1983, when Joe Elliot was lamenting his inability to be with the woman of his dreams who he had access to only through a “Photograph” (remember that iconic sleeveless shirt with the Union Jack?):
I see your face every time I dream
On every page, every magazine
So wild and free so far from me
You’re all I want, my fantasy
Turning fantasy into reality is never easy, but it is complicated even further when key assumptions are manipulated to make the road ahead seem smoother than it is. (The use of the word “just” is a key indicator that the speaker is dismissing or does not understand the challenges associated with a given task.) I opened this piece saying that expectations and timelines have to be “sustainable.” This requires some explanation:
Merriam-Webster’s primary definition of “sustainable” is “capable of being sustained,” whereas “sustained” means “maintained at length without interruption or weakening.” They have also included a secondary definition that is reflective of its common use in society – “of, relating to, or being a method of harvesting or using a resource so that the resource is not depleted or permanently damaged.”
When we think about the future of transportation, we have to look at both definitions. A sustainable system (using the secondary definition) must also satisfy the primary definition of “capable of being sustained” or the system will crumble upon itself. So, as the market transitions to whatever transportation system it ultimately adopts, that transition must be done in such a way that the institutions responsible for the evolution (and here I am primarily referring to consumers, who will make the ultimate decision) benefit economically, functionally and emotionally.
So with that backdrop, where are we starting from?
You got some kinda hold on me
You’re all wrapped up in mystery
So wild so free and far from me
You’re all I want, my fantasy
A Photo of 2019
First, total LDV sales are down about 1.8% compared to same time in 2018. This has led some to express fear that the market might be cooling off and the U.S. might fall below 17 million new units sold this year for the first time since 2014. What implications this might have on the overall market and the transition to a more efficient fleet are topics of interest. But for now, let’s look at what American consumers are buying and how that might be contributing to the evolution of the market.
As a general overview, gasoline-powered vehicles continue to dominate the market with more than 92% of sales, although this was down slightly from 2018. And the cross-over utility vehicle (CUV) market further expanded its controlling share of the pie primarily at the expense of the car market.
The winning powertrains in terms of percent growth over last year are electric vehicles (EVs), hybrids and diesel-powered vehicles. Sales for all were up compared to last year, whereas gasoline and plug-in hybrids recorded drops in sales. Below are some observations from the data:
Despite the backlash against diesel in Europe and the announcement by some manufacturers of their decision to leave the LDV diesel market in the US, LDV diesel sales were up 6.5%. This market is dominated by light trucks (including vans and SUVs), which occupy the top 17 spots before a car enters the rankings. The Ford F150 and Ram1500 lead the pack in the top two spots and combined for 56.5% of all LDV diesel sales. The BMW X5 and the Jeep Grand Cherokee were the only SUVs in the top 20 of diesel vehicles sold and the BMW 3 Series was the only car to break into the top 20.
- EV Market
The market grew 96.4% to 127,458 units in the first six months. The Tesla Model 3 dominated growth over last year with a 285% improvement. Sales of that vehicle totaled 87,337 and accounted for 68.5% of all EV sales. Following in distant second and third places were the Model X and the Chevrolet Bolt, each of which sold less than 8,300 units and combined for 13% of the EV market.
The hybrid vehicle market reversed a recent trend of declining sales to post an 18% improvement, beating the first half of 2018 by more than 30,000 units. Driving this market were the Ford Fusion, Toyota Rav4 and Toyota Prius, which combined for 46% of the hybrid market. The overall growth in sales also can be largely attributed to the strong performance of the Fusion, Honda Insight and Honda Accord, all of which significantly outperformed early 2018.
- Plug In Hybrid Electric Vehicles (PHEV)
The PHEV market was down more than 27% during the first six months of the year, representing a loss of nearly 16,000 units. The drop was led by the Prius and Volt, which combined for a loss of nearly 10,000 units – although these two models were still numbers one and five in volume, respectively. The number of PHEV models sold in 2019 was not vastly different from in 2018, but only four of 26 models recorded an increase in sales.
A Photo of the Future?
Last year, the Transportation Energy Institute published a report analyzing 15 years of vehicles sales and fuel price data to better understand what factors influence consumer buying decisions. (Check out this report: “Driving Vehicle Sales.”) We found that the influence of vehicle class is very important – it reflects what the consumer needs and wants.
Dominating the landscape at the time we studied that data and, even more so today, is the CUV. In 2017, it represented 35% of all LDVs sold. During the first half of 2019, that market share grew to 39% with more than 100 different models sold. This vehicle class hit a sweet spot with consumers and it has taken over the market.
With regards to powertrains, a similar strategy needs to be in place. Certain powertrains are more suited for certain classes of vehicles. For example, diesel engines are most often found in pickup trucks (91.3% of all diesel LDVs sold were pickups in the first six months of 2019). The performance characteristics associated with a diesel engine are very closely related to the work capabilities sought by those consumers who purchase pickups. The results have been impressive. While diesel engines comprised only 3.3% of LDV sales in the first half of 2019, they accounted for 17.4% of all pickup sales. The match seems to work.
To date, EVs are predominantly cars. The power required to move smaller vehicles matches best with the current capabilities of electric powertrains. But the declining market demand for passenger cars serves as a counter weight to the growing popularity of EVs. To support accelerated market penetration for EVs, it would make sense to include them in CUVs – but first technology must advance to a point that electrified powertrains will make performance and economic sense to be included in these popular models.
Putting it in a Frame
When it comes down to it, a vision of the future is all well and good, but it is not enough. The market must evolve in such a way that consumers embrace the change and become champions of it – otherwise, the evolution will not be sustainable.
I gotta have you
Photograph I don’t want your
Photograph I don’t need your
Photograph all I’ve got is a photograph
You’ve gone straight to my head
When I was younger, I played around with black and white photography and learned that you have to be patient – developing the photograph you want takes time. It also will take time for a new vehicle technology to influence the numerous factors that lead to a consumer purchase decision and become a prevailing characteristic of the light duty vehicle fleet.
If we set and hold onto expectations for market transition that are faster than what is feasible, our photograph will be ruined and our dedication to affecting positive change could be compromised. We could find ourselves like our mates in Def Leppard and, as we fail to achieve our stated objectives on our infeasible timeline, might begin to subject ourselves to our own ridicule:
Oh, look what you’ve done to this rock ‘n’ roll clown
Oh oh, look what you’ve done