January 29, 2020
As we begin a new decade, I will predict that the transportation market at the end of 2029 will look remarkably different from the one we just left at the end of 2019. Many of the pieces that will shape the next 10 years are beginning to fall into place and there is tremendous enthusiasm throughout the market. Whether you are excited about the prospects for electrification or autonomous vehicles, or if you are looking even further towards hydrogen or even e-fuels, there is a lot to be excited about. Even if you are more traditional and see continued opportunities for internal combustion engines and lower-carbon liquid fuels – there are reasons to be excited. At this time, let’s take a look at what transpired in the light duty vehicle market this past year and see what it can tell us about the future.
As we embark on 2020, one of the events that is very exciting for me personally is the stadium tour featuring Motely Crue, Def Leppard and Poison. For those of us who grew up during the hey-day of hair bands, it does not get much better than this. But there is one big hair band missing from the lineup – Cinderella. And one of their less popular songs, but one of my favorites, seems appropriate for this edition of The Commute: The More Things Change:
The more things change
The more they stay the same
Everyone’s your brother till you turn the other way
The more things change
The more they stay the same
All we need’s a miracle to take us all away from the pain
Now, I am not referring to the inference of betrayal and pain found in this song, but when we look at the data from 2019, despite all of the enthusiasm and announcements portending to a different future, the light duty market looks remarkably similar to the one we experienced in prior years. Below is end of the year sales data reported by WardsIntelligence – for the most part, I will let the data speak for itself.
Liquid Continues to Dominate
The share of vehicles powered by liquid fuels (gasoline, diesel and hybrids) combine to represent 98.0% of all light duty vehicles sold in 2019. This is down slightly from prior years – in 2015 they combined for 99.3% of vehicles sold – but it is still a pretty unassailable market position.
Gasoline Is Still King
Although the number of gasoline-powered vehicles slipped below 16 million units sold for the first time since 2014, the nearly 15.8 million units sold still represented 92.4% of all light duty vehicles sold. This market share has been slipping since 2016 and is down a full 2% since then, but the overwhelming volume of gasoline vehicles sold ensures their presence in the market will continue for decades to come.
Diesel Maintains Hold on Its Niche
Despite the global backlash against diesel-powered vehicles, light duty vehicles powered by diesel fuel engines have not given way in the United States and have maintained consistent sales volume and market share the past three years. This is largely due to the purpose-built vehicles for which diesel remains a popular powertrain – pick-up trucks. The four best selling diesel-equipped vehicles are classified as large pick-ups and represented 76.2% of diesel sales. The popularity of diesel engines in trucks is further supported by looking at the model count: there were a total of 21 diesel engine-equipped light duty vehicle models sold in 2019, 11 of which were classified as light trucks and 10 of which were classified as cars. Yet light trucks dominated in terms of sales volume. The top selling diesel-powered car was 20th among all diesel vehicles and recorded only 709 units sold.
Hybrids Picked Up Some Steam
Sales of hybrid electric vehicles (HEVs or hybrids) have fluctuated quite a bit over the years. Yet in 2019, there was an 18.5% increase in sales over 2018. However, hybrids have not yet matched the nearly 500,0000 units sold in 2013. Interestingly, in 2013 there were 45 hybrid models sold in the U.S., compared with only 35 in 2019. It would appear that the automobile manufactures have become more efficient in driving sales of hybrids through fewer models.
Thirteen individual models represented 90% of hybrid sales in 2019, and of those, six were classified as light trucks. Car models still dominated with nearly 60% of sales, but the best selling hybrid in 2019 was a crossover, generating nearly 24% of hybrid sales alone.
Plug-In Hybrids Yield
The market for plug-in hybrids (PHEVs), those vehicles that operate on pure battery power for 20 to 40 miles and then shift to an internal combustion engine and which have been heralded by some as the ideal transition technology to fully electrified powertrains, suffered a significant drop in sales in 2019 losing nearly 40,000 units sold. This was despite the industry generating sales from 32 models in 2019 compared with just 29 in 2018.
There are many theories seeking to explain this development, but I think the most compelling is the emergence of competitive battery electric vehicles that were able to convince PHEV customers to make the full transition.
BEVs Take Share from PHEVs
The market for battery electric vehicles (BEVs) continued to expand in 2019, mostly at the expense of the plug-in hybrids. Combined, these two powertrains represented 1.9% of all vehicles sold – the same market share recorded in 2018. But, BEVs grew from 1.2% to 1.4% while PHEVs lost an equivalent share of the market. The BEV market stole this share despite offering only 18 separate models vs. 32 unique PHEV vehicles.
The driving force behind the BEV market was the Tesla Model 3, which independently accounted for 63.5% of industry sales. When the other two Tesla models are factored in, the manufacturer represented 77.7% of all BEVs sold. (Note: Wards Intelligence sales data for December is an estimate because Tesla does not report sales in the same manner as other OEMs. Actual sales volume and market share may shift slightly as Wards validates data.)
End of the year sales data indicates that not much has materially changed in the past 12 months, but to assume this was true would be to ignore the reality of the market. A shift is beginning to occur, even if it is not apparent in the sales data. According to some reports, OEMs plan to introduce as many as 500 BEV models through 2023. How many units of these models they plan to produce and what percentage of their sales they will represent remains to be determined, but the sheer volume of models entering the market is an indication that the market is changing.
Cinderella may not be part of the stadium tour this year, and while thus far the market relates to the song “The More Things Change,” I would not count on this being true forever. And if we ignore the trends and signs, we might find ourselves in the future wondering what happened.
Which brings up the major hit song from our big hair brethren (and yes, I recognize the irony of this statement given my own folic challenges):
Don’t know what you got till it’s gone
Don’t know what it is I did so wrong
Now I know what I go
It’s just this song
And it ain’t easy to get back
Takes so long