Only a few short years ago, many experts believed the primary concern of consumers regarding electric vehicles was their range. Car buyers, adjusted to a world of petrol-based cars and an abundance of refill stations, were worried about being marooned by their electric vehicles due to their finite range and far smaller number of charging stations.
Q3 2021 hedge fund letters, conferences and more
The top electric vehicle manufacturers according to quantity of units sold:
- Tesla Inc. (NASDAQ:TSLA)
- General Motors (NASDAQ:GM)
- Nissan Motor Co. Ltd. (OTCMKTS:NSANY)
Consumer Sentiment
The global uptake of electric vehicles has seen a sharp increase in the past five years; this increase shall be analysed with the backdrop of changing consumer sentiment in three primary economies.
The primary cause of consumer hesitancy towards electric vehicles, that is shared by all these economies, is the huge upfront cost associated with them when compared to internal combustion cars. However, this scepticism is beginning to die down around the globe due to the advent of ‘Made in China’ electric vehicles. This landmark event has enabled brands to sell electric cars for up to 30% less due to the cost-cutting benefits of outsourcing.
US
As of 2020, nearly 2 million electric vehicles were recorded as being registered in the United States - a three fold increase over the number four years prior (according to the International Energy Agency). ‘All electric’ (or ‘battery electric’) vehicles are the fastest growing sub-category of this type of car: the number of these registered vehicles alone increased from 300,000 in 2016 to 1.1 million in 2020.
Despite its size, the US only reflects a mere 17% of the global stock of electric vehicles. Additionally, the growth rate of US sales has slowed slightly in the past few years in line with the waning popularity of hybrids and the gradual elimination of federal tax credits on popular models. Sales of ‘all electric’ vehicles in the US were down 3.2% in 2020, though the COVID-19 pandemic affected all vehicle sales, so making comparisons is difficult.
Europe
Europe has experienced the fastest development in the sale of electric vehicles; it has experienced a compound annual growth rate of 60% since 2016, nearly four times greater than the US’s. In Norway, 75% of cars sold were electric - the same was also true for over half of the cars sold in Iceland too. In ten other European countries, electric cars made up between 10%-30% of overall new car sales.
Australia
Sales of electric cars billowed in 2021, with more being sold in the first half of this year than the whole of 2020. Electric vehicles comprised a 1.57% market share of all car sales, nearly double the 0.78% share of 2020. Despite this growth, Australia still appears to be lagging behind in terms of the penetration of electric vehicles.
Presently, there are an estimated 13 manufacturers that sell a total of 23 electric vehicles in Australia. This pales in comparison to the 130 options available to car buyers in the UK (an economy in which electric vehicles have an 8.2% market share), and represents an area for growth in Australia.
While EV uptake has been slow compared to the rest of the world, Australia is seeing a rapid adoption of EVs, solar and EV infrastructure in a country where the diesel dual-cab ute is king, says CarExpert.com.au co-founder Paul Maric.
“Australians are funny. They love buying the latest of technology for their homes and lives, but when it comes to cars, they struggle to stray from the traditional narrative. And in Australia, that traditional narrative has always been dual-cab utes and big V8 sedans. But the tide is turning and Elon Musk’s Tesla is driving the charge in Australia with the Model 3 slowly becoming one of the best selling cars - let alone the best selling EV,” Maric said.
Government Incentives
The incentives a government offers act as huge motors to this shift in consumer sentiment. Many governments have put many incentives in place in order to accelerate both the production and adoption of electric vehicles worldwide. An examination of some of the policies in these three big economies can be found below.
US
The US government incentives have taken the form of purchasable rebates, tax credits and rebates. In 2011, President Obama set a goal for the US to be the first country with 1 million electric cars on its roads by 2015. In this vein, $2.4 billion was allocated in federal grants in order to bolster the production of electric vehicles and batteries.
Over half of these funds were allotted to US-based manufacturers of the batteries required for electric cars. $500 million was assigned to similarly-based manufacturers of the other components required for electric cars, and $400 million were used to exhibit and analyse the infrastructure required for these vehicles, such as: charging stations and electric rails.
These incentives in the US have encouraged brands like Tesla to grow their sales tenfold in the past five years alone; it observed the sale of over 80,000 vehicles in 2016 alone. By 2021, it is expected to have produced over 1 million vehicles.
Europe
The primary effort in this region is the Green Car Initiative (GCI). The Directorate-General for Mobility and Transport, the director responsible for transport within the EU, is in strong support of an ‘electromobility’ project pertaining to electric vehicles and all of their corresponding infrastructure. It’s budget is up to 50 million Euros as included under the GCI.
Directives 2009/33/EC and 2006/32/EC, of the European Parliament and of the Council of 23 April 2009 and 5 April 2006 respectively, include measures to aid in the promotion of efficient vehicles. These specific directives relate to the use of clean and energy-efficient vehicles on roads, and the efficiency of energy services. Tax incentives have been provided by 15 of the 27 EU member states for electric vehicles for some time now.
These measures appear to have been largely successful: electric vehicles have slowly pierced the European market. There has been a steady increase in the number of such vehicles annually since 2010: from about 700 units to 550,000. Such vehicles represent 2% of all new car registrations and account for 3.5% of newly registered passenger vehicles.
Australia
In Australia, vehicles that are fuel efficient are subject to less Luxury Car Tax; in 2021, the threshold for such vehicles was just under $70,000 for fuel efficient vehicles, and nearly $80,000 for full electric vehicles (BEVs). The country’s government also carried out a review of the petrol and diesel standards of the industry in 2021.
The Australian Federal Government has committed itself to spending nearly $75 million on the infrastructure relating to electric vehicles (i.e. charging stations) in 2021. On top of this, it is also providing $15 million to help with the construction of a charging network spanning the nation; it will be built by Evie Networks and should connect Melbourne, Brisbane, Sydney and several other of the country’s major cities.
This country has experienced a pronounced shift in correlation with these incentives (whether as a natural course of consumer trends or a direct consequence of their instigation is muddled). In the past five years, the uptake of electric vehicles in Australia has doubled or trebled each year.
Maric says that incentives are key to driving EV uptake, especially in Australia where traditional transport is dyed in the wool.
“Australia is unique in the sense that there’s huge driving distances between big cities - Melbourne to Perth for example is a 37 hour drive, but looks fairly close on the map. The long distance road trip is synonymous with Aussie culture and it’s one thing that EVs struggle with,” Maric said.
“But, with government incentives in place and investment in charging infrastructure, that formula changes. This applies both to Australia and anywhere else in the world. Build it and they will come. It’s part of the reason we’re seeing such huge uptake of EVs in Australia. The only downside is that each state has its own form of incentives or disincentives for EV purchases. A more unified approach will help in the long term, but a start is a start,” Maric continued.
Concluding Remarks
On balance, it is evident that consumer sentiment towards electric vehicles has changed dramatically over the past decade. The United States, Europe and Australia have all witnessed marked uptick in both the adoption and production of vehicles in this time period, certainly in line with the extensive government incentives these economies have put in place to encourage this effect.
With that being said, it is difficult to attribute the success all to these policies. Outside of automobiles there has also been a global shift towards cleaning up the world and embracing a more ecologically and environmentally-friendly lifestyle. This movement certainly played a big role in the increased popularity of electric vehicles.
What is most likely to make the biggest change is a combination of this awareness with a drop in the price of such vehicles. At the moment, the biggest obstacle to people opting to use such cars is the price, but with the efforts of Tesla to make electric cars more affordable (combined with government incentives across several major economies making electric vehicles relatively cheaper en masse), this hurdle is likely to be removed in the near future.
Updated on
