Speaker 1: This is Tom Rowland's Reese and you're listening to Switched
Speaker 1: on the podcast brought to you by BNF. Today we're
Speaker 1: discussing BNF's Electric Vehicle Outlook, our annual flagship report, analyzing
Speaker 1: how electrification will impact road transport between now and twenty fifty.
Speaker 2: In the very near.
Speaker 1: Term, electric vehicle sales are set for yet another record
Speaker 1: breaking year. That's a big deal, especially since headlines have
Speaker 1: focused on how the US is slashing support for evs.
Speaker 1: But the EV story isn't just about the US. It's
Speaker 1: a global story and the number of countries getting into
Speaker 1: the EV game is growing. The biggest player is China,
Speaker 1: which continues to lead the EV adoption pack. Over fifty
Speaker 1: percent of new passenger vehicle cells in China this year
Speaker 1: are set to come with a plug. China is also
Speaker 1: a star when it comes to sales of range extender evs,
Speaker 1: which are now the fastest growing drivetrain in the world.
Speaker 1: Even outside of its own borders, China is making a splash.
Speaker 1: The market for electric vehicles was once considered top down,
Speaker 1: with developed economies moving first, but Chinese automakers have been
Speaker 1: targeting developing economies hard As a result. Thailand now has
Speaker 1: a higher passenger EV adoption rate than the US, and
Speaker 1: Brazil's adoption rate is higher than Japants. To learn more
Speaker 1: about this global EV story, I'm joined by bnif's head
Speaker 1: of Clean Transport, Colin Mcherica, to discuss the Electric Vehicle
Speaker 1: Outlook twenty twenty five, which bn EF clients can find
Speaker 1: at BNF go on the Bloomberg terminal or on BNF
Speaker 1: dot com. All right, let's get to talking about the
Speaker 1: Outlook for electric vehicles with Colin. Colin, thank you for
Speaker 1: joining the podcast today.
Speaker 3: Pleasure to be here. Nice to speak to you. Tom.
Speaker 1: We're here to talk about what we at BNF call EVO,
Speaker 1: which stands for our Electric Vehicle Outlook. You've been doing
Speaker 1: this for a really long time, so can you tell
Speaker 1: us a little bit about the history of it and
Speaker 1: what is new Because we do this again and again
Speaker 1: every year, presumably we don't need to just update our
Speaker 1: numbers every year. I'm assuming that we do new and
Speaker 1: cool things and that's what keeps us going because that's
Speaker 1: how it is at BNF. We always have to do
Speaker 1: something new.
Speaker 3: Yeah, definitely, So I've been doing this. I was sort
Speaker 3: of tallying it.
Speaker 4: This is actually the tenth year that I've run this report,
Speaker 4: and obviously a lot has changed since then, and I
Speaker 4: would say sometimes it feels now like everybody and their
Speaker 4: dog has a forecast for how this type of stuff
Speaker 4: is going to evolve. I think back in twenty fifteen sixteen,
Speaker 4: when we were doing the first one, there was kind
Speaker 4: of a few oil companies plus Opek, who are putting
Speaker 4: out long term outlooks, and their view was very down
Speaker 4: on anything to do with electrification and basically saying liquid
Speaker 4: fuels or what's going to power the world's mobility mix indefinitely,
Speaker 4: and none of them saw any significant role reviews, and
Speaker 4: we sort of thought, look, we've been looking at this
Speaker 4: battery cost curve stuff for a while.
Speaker 3: We think we're on the cusp of something about to change.
Speaker 4: So when we try and do things at BNF, we're
Speaker 4: always trying to do things with what's useful for our
Speaker 4: clients and as well try and inform a public debate
Speaker 4: as well. But at the first instance, be useful to
Speaker 4: our clients and provide data to that's helpful. And so
Speaker 4: whenever you get into long term stuff, you always have
Speaker 4: to be a bit careful because I have a sort
Speaker 4: of thesis that the further you go out in time,
Speaker 4: the fewer people that is operationally useful for. So if
Speaker 4: you go all the way out to twenty forty and
Speaker 4: spend a lot of time talking about twenty forty and fifty,
Speaker 4: you just kind of lose people some people along the way. Now,
Speaker 4: it's not to say there aren't useful and interesting things
Speaker 4: to talk about those long term parts, but you have
Speaker 4: to balance it with some near term things that are
Speaker 4: going on. So that's kind of what gets out. Your
Speaker 4: other question is about what do we do that's beyond
Speaker 4: just updating this outlook every year, because we have our
Speaker 4: models and we have our adoption outlook that follows two
Speaker 4: different scenarios and all this sort of stuff, and that
Speaker 4: gets updated with the latest data. But then we do
Speaker 4: try and say, okay, how can we keep making this
Speaker 4: better every year? And after ten years you just keep
Speaker 4: incrementally improving things, and sometimes that's new countries added. This year,
Speaker 4: we've done a bunch of things. We've added a new
Speaker 4: drive train, so there's something called range extended electric vehicles
Speaker 4: that are included in there, and we've done more on
Speaker 4: terrace and trade. How that's impacting things looked at some
Speaker 4: of the regional dynamics for things like flex fuel vehicles
Speaker 4: in Brazil or compressed natural gas vehicles in India, and
Speaker 4: and you have to do a lot of work on
Speaker 4: batteries and the supply chain, so there's a whole new
Speaker 4: forecast there for solid state batteries, looking at electrolyte chemistry
Speaker 4: as well as updating our anode and bathout chemistry forecasts.
Speaker 4: And then also looking at all the battery plants that
Speaker 4: are coming online over capacity issues that are sort of
Speaker 4: not just looming but actually here in that market. And
Speaker 4: then lastly the three other things we've done this year.
Speaker 4: Each year we do three what we call thematic highlights,
Speaker 4: so those are sort of special standalone chapters that look
Speaker 4: at a growing or topical issue around emobility around the world.
Speaker 4: So this year's were the commercialization of solid state batteries,
Speaker 4: the rising cost of ev charging, and a special deep
Speaker 4: dive on Brazil looking at alternative ways that Brazil's ethanol
Speaker 4: could be used in a scenario where electrification displaces a
Speaker 4: lot of ethanol use in road transport.
Speaker 1: It sounds like you've gone above and beyond, because before
Speaker 1: you got even to talk about those thematic highlights. I
Speaker 1: was thinking, Wow, this is already a really complex year,
Speaker 1: particularly with all the tariffs coming in and maybe changing
Speaker 1: the picture, as you say, especially if we're trying to
Speaker 1: make sure we talk about things that are relevant for
Speaker 1: the next few years. I mean, was it more of
Speaker 1: a headache doing EVO this year than in previous years.
Speaker 4: So one of the things I've found after a decade,
Speaker 4: it's ten years now working for me work on auto,
Speaker 4: automotive related topics and transport related topics, and twenty years
Speaker 4: now working in clean energy overall.
Speaker 3: I started in May two.
Speaker 4: Thousand and five, and particularly on the auto stuff, I've
Speaker 4: just kind of realized it's something every year, it's always
Speaker 4: something different, but there's always something that kind of is
Speaker 4: a big spanner in the works for what you might
Speaker 4: think of as this business as usual that never seems
Speaker 4: to go back to usual in the auto sector. And
Speaker 4: so for a while that was COVID and okay, look,
Speaker 4: how do you how many cars are people going to buy?
Speaker 4: What if people aren't moving around as much, what does
Speaker 4: it do to energy demand? And keep in mind that
Speaker 4: we're not just looking at how many cars get sold,
Speaker 4: We're looking at this work is what informs all of
Speaker 4: our things around the road, fuel demand outlook and how
Speaker 4: much gasoline and diesel are going to be consumed and
Speaker 4: all these other things as well. So we're definitely not
Speaker 4: just looking at cars and trucks sold. We're looking at movement,
Speaker 4: and we're actually at the basis level starting with literally
Speaker 4: how much do people and goods move around the world,
Speaker 4: So that's in freight ten kilometers and trillions of passenger
Speaker 4: kilometers traveled, and how is the mix of that changing.
Speaker 4: So with those sort of big, really big picture things
Speaker 4: in mind, and the auto industry is about a two
Speaker 4: and a half trillion dollar annual revenue industry, they're kind
Speaker 4: of affected by everything. So one year it's COVID, the
Speaker 4: next year it's a semiconductor shortage, the year after that
Speaker 4: it's tariffs and trade drama. There's kind of always something,
Speaker 4: and to be honest, that's sort of what keeps it interesting.
Speaker 4: You could sort of look at that and sigh and say, oh,
Speaker 4: why can't we have a normal year, But another way
Speaker 4: to look at it would be like, wow, we get
Speaker 4: to work on some of these topics where the biggest
Speaker 4: things in the world are relevant and are directly impactful,
Speaker 4: and I think automotive is a pretty fascinating lens to
Speaker 4: look at the world through because it does tie in
Speaker 4: technology developments, it tried ties in economics and trade, It
Speaker 4: ties in politics, It ties in job creation and manufacturing
Speaker 4: and industrial policy, and kind of each one of these
Speaker 4: things is sort of getting flexed in a different way
Speaker 4: in every year, So it makes it hard, it makes
Speaker 4: it interesting. It also means that every time we finish
Speaker 4: publishing it, there's already things that have changed, and there's
Speaker 4: things that we wish we could have had time to include.
Speaker 3: But that's just sort of part of the game.
Speaker 4: And that's part of doing it as an annual thing
Speaker 4: and not trying to constantly release this over and over
Speaker 4: throughout the year, but rather sick once a year we're
Speaker 4: going to step back and try and tie it all together.
Speaker 4: The rest of the year we're publicishing much more near term,
Speaker 4: detailed work, and this is the once a year where
Speaker 4: we sort of step back and try and figure out
Speaker 4: how it all fits together.
Speaker 1: It's really interesting. You know, what I'm hearing is kind
Speaker 1: of this electric vehicle outlook. It is literally a forecast
Speaker 1: of the electric vehicle sector. But to what you're saying
Speaker 1: is it's like a lens through which you have to
Speaker 1: look at everything going on in the world. It kind
Speaker 1: of makes sense. I mean we've talked about this before.
Speaker 1: I remember I found this chart on what used to
Speaker 1: be called Twitter, and it was a map of the
Speaker 1: world showing every country's top import really like, so it
Speaker 1: was a map showing what was the nature of global trade.
Speaker 1: And the most imported physical goods were either cars or oil,
Speaker 1: and you know you're looking electric vehicles, which is disrupting
Speaker 1: both of those industries. So in a sense, it's not
Speaker 1: surprising that it's like you say that it touches on
Speaker 1: everything that matters to your report. We were chatting before
Speaker 1: we started recording. You know, you've been doing the rounds
Speaker 1: promoting this report, and I think you said it was
Speaker 1: a list of eleven key takeaways that you'd come up with.
Speaker 1: I didn't know if it was a word, was takeaways.
Speaker 1: I think you had a better word, But could you
Speaker 1: talk us through you know, I think we have time
Speaker 1: to talk through all eleven and you know, our clients
Speaker 1: can access our reports, and I think we're putting out
Speaker 1: a webinar, But what were some of the more important ones?
Speaker 4: Yeah, for sure, and so yeah, when we finished the report,
Speaker 4: the report has hundreds of figures, it's a couple hundred pages.
Speaker 4: There's all sorts of stuff in there, and each one
Speaker 4: of our client we serve a lot of different client
Speaker 4: types and different sectors and different roles, so each one,
Speaker 4: each person gets a slightly different an organization gets a
Speaker 4: slightly different area. It has a slightly different area that
Speaker 4: they're going to be the most interested in. So I
Speaker 4: would say there's lots in there and people can go
Speaker 4: and read it. We try and draw out a few
Speaker 4: just that are make good presentation slides and things, and
Speaker 4: so some of them I guess, just kind of starting
Speaker 4: from the top, is this is going to be another
Speaker 4: record breaking year for EV sales. So we're pretty confident
Speaker 4: on that. About one in four vehicles sold in the
Speaker 4: world this year will be a plug in either battery
Speaker 4: electric or plug in hybrid.
Speaker 3: So that's up from about twenty percent last year.
Speaker 4: If we look at the fleet, about four percent, so
Speaker 4: one in every twenty five five cars on the road
Speaker 4: in the world was electric.
Speaker 1: And was this what you were expecting going into the analysis,
Speaker 1: because I know you say it'll be a record Yeah,
Speaker 1: I feel like you know, like a lot of BNF
Speaker 1: sectors where we're looking at things that are emerging. That's
Speaker 1: what we've said every year, but I know there's been
Speaker 1: a few headwinds. So were you genuinely surprised at this
Speaker 1: finding or were you kind of expecting it?
Speaker 3: I was expecting that.
Speaker 4: I mean, if you work on electric vehicles, especially, you
Speaker 4: hear every year about all the reasons why it's going
Speaker 4: to fail, and then it goes up between twenty and
Speaker 4: sixty percent a year.
Speaker 3: That's been pretty consistent.
Speaker 4: I think what's probably different this year, and that we
Speaker 4: do talk a lot about in the report this year,
Speaker 4: is that the US market is set to slow down
Speaker 4: pretty dramatically, and whatever happens in the US has an
Speaker 4: outsized impact on the headlines that you read, because a
Speaker 4: lot of the new sources or groups covering things our
Speaker 4: English speaking and the US is obviously a pretty dominant
Speaker 4: force in a lot of areas. So if you were
Speaker 4: to follow the US headlines, it's quite dark. And we
Speaker 4: have dramatically reduced our US ev adoption forecast because of
Speaker 4: things like the Trump administration rolling back cafe and taking
Speaker 4: dismantling arts of the Inflation Reduction Act. And so certainly
Speaker 4: that is a very real dynamic, and that is a
Speaker 4: I don't want to downplay that. If we're going to
Speaker 4: get large scale electrification in the US, we need the
Speaker 4: US market to go electric as well. We're not we
Speaker 4: don't take a position on whether that should happen, but
Speaker 4: just by the very nature of the size of the US,
Speaker 4: it's an important part of the global vehicle mix. So
Speaker 4: just to give a sense of that, last year in
Speaker 4: our outlook, we had about forty eight percent by twenty
Speaker 4: thirty of vehicle sales in the US coming.
Speaker 3: With a plug.
Speaker 4: That was again based on really tight fuel economy regulations
Speaker 4: under Biden. We had all the money being pumped in
Speaker 4: by the Inflation Reduction Act, the support for evs from
Speaker 4: tax credits, all these things sort are coming together, plus
Speaker 4: California ZEV mandate and the states that follow it. This
Speaker 4: year we've dramatically reduced that because many of those have
Speaker 4: been rolled back. So now we have it going to
Speaker 4: twenty seven percent of sales by twenty thirty having a plug.
Speaker 3: So that's both battery electrics, employment HIGHBRI and so what
Speaker 3: was the number forty eight twenty seven?
Speaker 4: Yeah, so pretty sharp, pretty sure drug, and to be honest,
Speaker 4: there's actually some downside, further downside risk to that because
Speaker 4: the outlook assumes that California does retain its waiver and
Speaker 4: the Trump administration has gone after that and as of
Speaker 4: now remove that, which is a decision that will get
Speaker 4: tied up in the courts and is being tied up
Speaker 4: in the courts. And to be honest, this was all
Speaker 4: just happening as we were publishing, So our position was
Speaker 4: let's keep it in there. But it means that to
Speaker 4: that twenty seven percent by twenty thirty, there's still a
Speaker 4: fair bit of downside risk because if California loses that
Speaker 4: ability to set its standards and that holds up in court,
Speaker 4: then we would see that for cast go down even further.
Speaker 2: Did you ki Anamba?
Speaker 4: We haven't yet, but that's kind of the next thing
Speaker 4: up is to figure out how much further that goes
Speaker 4: down in that case. But just to kind of give
Speaker 4: a sense of scale, the US is not a huge
Speaker 4: part of the overall TV market today. The biggest market
Speaker 4: course is China, and one of the interesting findings, sometimes
Speaker 4: one of the most interesting charts. So it came right
Speaker 4: at the end and I was thinking, actually China EV
Speaker 4: sales this year are going to get pretty close to
Speaker 4: US total vehicle sales. So well, let's make a chart
Speaker 4: of that, and basically, towards the end of this year,
Speaker 4: we think China's EV sales.
Speaker 3: Will surpass US total vehicle sales. That's pretty remarkable.
Speaker 4: So you see this chart where a few years ago
Speaker 4: there's just a few hundred thousand evs a year sold
Speaker 4: in China, and then now by the end of twenty
Speaker 4: twenty five, there will be more evs sold in China
Speaker 4: than total cars sold in the US.
Speaker 3: And the Chinese market is still growing quickly. The European
Speaker 3: market is also growing quite a bit right now.
Speaker 4: Because there's tightening vehicle CO two regulations. They've backed off
Speaker 4: that a bit and averaged out the CO two regulations,
Speaker 4: so they don't tighten just in twenty twenty five, but
Speaker 4: averaged out from twenty twenty five to twenty twenty seven.
Speaker 4: But so it wasn't a very long winded way of saying,
Speaker 4: it wasn't a real surprise. It was sort of what
Speaker 4: we were expecting that it was going to be a
Speaker 4: record year. But certainly there is a lot of regional
Speaker 4: variation in that.
Speaker 1: So It's really interesting what you're saying about the difference
Speaker 1: between the US and a lot of other markets, and
Speaker 1: it does make me wander two things, and I say
Speaker 1: this as someone who's currently living in the US, is
Speaker 1: is the US missing the boat on the future of
Speaker 1: the automotive sector and any aspirations of becoming a vehicle exporter?
Speaker 1: So first, I what does this mean for the future
Speaker 1: of the US automotive sector?
Speaker 2: And then the other thing I.
Speaker 1: Wonder is, and this is maybe more of a slow
Speaker 1: burn how quickly this begins to dig in, But is
Speaker 1: the US going to be uniquely exposed to oil prices
Speaker 1: in the future because everyone else has more of an
Speaker 1: electric fleet and has less dependency. I don't know if
Speaker 1: this is something you know you have thoughts on.
Speaker 3: Yeah, definitely.
Speaker 4: In terms of the second question actually around whether the
Speaker 4: US is more uniquely exposed to that, the US already
Speaker 4: is more uniquely exposed to that because the efficiency of
Speaker 4: the vehicle fleet is significantly lower than other parts of
Speaker 4: the world and the alternatives are very limited. Right, So
Speaker 4: in cert some countries, if the cost of driving goes up,
Speaker 4: there's a realistic option for some people to shift to
Speaker 4: public transit. Their driving distances aren't as high, and their
Speaker 4: efficiency is better, whereas in the US there's very little
Speaker 4: to do other than just pay it and maybe complaint
Speaker 4: when gasoline prices go up, and understandably so in some cases.
Speaker 3: So I would say that it is already uniquely.
Speaker 4: Exposed when oil prices go up and gasoline prices follow.
Speaker 4: But yes, to sort of zoom out a bit from there, yes,
Speaker 4: there is a real risk that the US, particularly the
Speaker 4: US automakers get left behind in this transition because they
Speaker 4: are sort of protected right now.
Speaker 3: So right now in the US, there's one hundred percent
Speaker 3: tariff on Chinese EV's or Chinese made EV's.
Speaker 4: Even if they're an EV made by a Western automaker
Speaker 4: in China, which I think is important because you were
Speaker 4: starting to see more and more automakers make their vehicles
Speaker 4: in China and then ship them to international markets, so that.
Speaker 3: Means they're not exposed to the full level of competition
Speaker 3: that you're starting to see elsewhere.
Speaker 4: And anytime you have a market that is not exposed
Speaker 4: to the full global competition, then it is possible that
Speaker 4: it sort of evolves down a different evolutionary path. I
Speaker 4: think one of the things that was interesting in digging
Speaker 4: through this year's EV numbers in different countries is that
Speaker 4: the single biggest determinant you could probably look at for
Speaker 4: which countries or regions are going fast on EV adoption
Speaker 4: which ones are going slower, is the ones that are
Speaker 4: open to Chinese automakers are going very fast. Indeed, so
Speaker 4: markets like Brazil or Thailand, or Vietnam, Turkey, Mexico, even
Speaker 4: the UK. The UK doesn't have the same important tariffs
Speaker 4: that the S THEU has on Chinese and the UKs
Speaker 4: that has the highest level of EV adoption amongst major
Speaker 4: economies outside of China, and all these other ones in
Speaker 4: Southeast Asia or Latin America and other places are growing
Speaker 4: quite quickly and are now have significantly higher rates of
Speaker 4: EV adoption than established, wealthier markets, which kind of inverts
Speaker 4: this idea that many people have had for a long
Speaker 4: time that electrification starts purely at the top and slowly
Speaker 4: works its way down top of the market works its
Speaker 4: way down. Instead, what we're seeing is much more sort
Speaker 4: of bottom up electrification happening and in many cases now
Speaker 4: happening in emerging economies significantly faster than developed markets or
Speaker 4: more economically developed markets, particularly those that have large incumbent
Speaker 4: auto manufacturing bases, like Japan, the US, or Germany. So
Speaker 4: there's some really interesting regional dynamics there. I think the
Speaker 4: US is a bit at risk of sort of missing
Speaker 4: this global trend and therefore struggling with some competitiveness as
Speaker 4: a result. It's worth keeping in mind though, that while
Speaker 4: Tesla's sales are faltering, is still a major producer and
Speaker 4: has been very innovative up to date and is an
Speaker 4: American company. So certainly, I don't think it's a foregone
Speaker 4: conclusion that the US and the US automakers are going
Speaker 4: to fall further behind on this, but certainly the policies
Speaker 4: that are in place right now are pushing things in
Speaker 4: that direction.
Speaker 1: Right And you know, in a way, maybe my question
Speaker 1: was predicated on the idea that the profit in the
Speaker 1: future of this industry is going to be in the
Speaker 1: manufacturing of the vehicles, whereas it might be in other
Speaker 1: things like the design. You know, I know that if
Speaker 1: we think of internal combustion engines, they are complex, and
Speaker 1: there's real expertise in certain countries that enables those countries
Speaker 1: to be major players in those areas. And I'm assuming
Speaker 1: that's where there's quite a bit of margin. If the
Speaker 1: majority of the value is shifting towards the battery, maybe
Speaker 1: at some point becomes low margin. It might be that
Speaker 1: the actual profit is not necessarily in the making of
Speaker 1: the vehicle, but in other factors, like you know, I'm
Speaker 1: just thinking of the difference between you know, where is
Speaker 1: the money made from iPhones? Is it made in the
Speaker 1: manufacturing of them, or is it Apple, a US based
Speaker 1: company is making all of that money. Is that something
Speaker 1: you could see happening and is that maybe the sliver
Speaker 1: of hope for some countries that might feel they are
Speaker 1: losing out on manufacturing, right.
Speaker 3: It's a tricky question.
Speaker 4: I mean, what I would say is that automakers over
Speaker 4: the last one hundred years have changed the way they
Speaker 4: operate a lot, particularly around vertical integration. So if you
Speaker 4: go back to the first mass manufacturing of cars, say forward,
Speaker 4: in the assembly line, there's a lot of vertical integration
Speaker 4: at that point because there isn't really a supply chain.
Speaker 4: So if you don't have enough rubber, you're setting up
Speaker 4: plantations in Brazil kind of thing. And then over the
Speaker 4: last fifty years, in particular, the trend has been automakers
Speaker 4: divesting more and more of the process of making parts.
Speaker 4: So you have these Tier one suppliers and below them
Speaker 4: tier two suppliers who are making components, and then the
Speaker 4: automakers are more and more assembling vehicles. And so they
Speaker 4: are incredibly complex supply chain management organizations that are really
Speaker 4: good at that. They're really good at managing all those
Speaker 4: delivery of all those supply chains, integration of all that,
Speaker 4: assembling the vehicle, marketing the vehicle, getting them out places
Speaker 4: in the right time. They're very good at that. But
Speaker 4: they have sort of farmed out a lot of the
Speaker 4: actual component making of different bits of the car. What's
Speaker 4: really interesting right now that you're seeing is kind of
Speaker 4: a trend in the other direction. So Tesla was already
Speaker 4: doing this a bit, but BYD is the one that's
Speaker 4: taken us the furthest So BYD is their view is
Speaker 4: sort of, whatever we can make in house, we should,
Speaker 4: and so that's making the batteries. Of course, they've been
Speaker 4: in the battery making business for a long time. They're
Speaker 4: making semiconductors. In some cases, they're actually buying and building
Speaker 4: their own car carrying ships that.
Speaker 3: Are delivering these cars around the world.
Speaker 2: Wow.
Speaker 4: Kind of as vertically integrated as you can go all
Speaker 4: the way down to the ocean going vessels that are
Speaker 4: there delivering to make.
Speaker 2: Their own roads as well special yeah roids.
Speaker 4: Yeah, And so that I think is kind of the
Speaker 4: interesting trend is like, Okay, does that signify something else
Speaker 4: we're going to see from other automakers.
Speaker 3: Is it a significant competitive advantage over time?
Speaker 4: Right now it looks like it is at the sort
Speaker 4: of awn of this electrical age, but it'll be very
Speaker 4: interesting to see how others react. We have seen some
Speaker 4: moves from some of the others to get into cell
Speaker 4: manufacturing or it potentially even take stakes in minds of
Speaker 4: critical raw materials. This is kind of like a moment
Speaker 4: where something that was settled for a while that you
Speaker 4: should farm out as much as you can and buy
Speaker 4: from suppliers where you can is now sort of up
Speaker 4: in the air. And I think BID is really sort
Speaker 4: of pushing the limits here and growing incredibly quickly as
Speaker 4: a result around the world. And so that's something certainly
Speaker 4: we're watching quite closely this year.
Speaker 1: So that, I mean, that's so fascinating. So Gy, going
Speaker 1: all the way back to the start of this conversation,
Speaker 1: you've kind of got these eleven key takeaways. The first
Speaker 1: one was that we expect sales to increase this year,
Speaker 1: and we've unpacked a lot from talking about that, so
Speaker 1: we definitely unless we have a podcast for each one
Speaker 1: of these eleven pieces, we've probably got time to talk
Speaker 1: about one, maybe two. We'll see how we do. But yeah,
Speaker 1: what's another of the big takeaways?
Speaker 3: Another one is around range extended electric vehicles. So I
Speaker 3: hinted at this.
Speaker 4: These are vehicles where you have an onboard engine, but
Speaker 4: it's essentially running as a generator, running in a very
Speaker 4: constant cycle and purely being used to charge the battery.
Speaker 4: The battery is always powering the wheels, the engine is
Speaker 4: never powering the wheels, so there's.
Speaker 3: A very inant unplug in hybrids.
Speaker 4: But again the differences is that it's always the battery
Speaker 4: powering the car, and so we did a deep dive
Speaker 4: on that this year and there it's quite an interesting
Speaker 4: story because it's growing extremely quickly in China.
Speaker 3: It's the fastest growing drive train.
Speaker 4: They almost look a bit more like pure electrics than
Speaker 4: they do plug in hybrids because about seventy percent of
Speaker 4: all kilometers traveled on these erevs or range extended vs
Speaker 4: is in electric mode and some of them have quite
Speaker 4: long ranges. So the average range we found of the
Speaker 4: ones being sold today is one hundred and seventy kilometers
Speaker 4: of all electric range, battery pack size of around thirty
Speaker 4: eight kilo hours, So just a.
Speaker 3: Really interesting dynamic there.
Speaker 4: And in China, those are primarily going into larger SUVs
Speaker 4: that have been a.
Speaker 3: Bit difficult to fully electrify costs competitively.
Speaker 4: So one of the things we sort of flag is
Speaker 4: that we were tracking a lot of automakers who were
Speaker 4: planning on launching these over the next few years outside
Speaker 4: of China. Can dive forward Stilantis, others, and it'll be
Speaker 4: really interesting to see if that is a potential way
Speaker 4: to electrify, particularly the full sized pickup truck market in
Speaker 4: the US. And I think if there's something that might
Speaker 4: sort of open up the US market a bit more,
Speaker 4: it could be a solution like that where you still
Speaker 4: have all the performance and longer range, but you can
Speaker 4: probably do seventy eighty then ninety percent of total driving
Speaker 4: in fully electric mode. So that's that's kind of one
Speaker 4: that we that we flagged as well, and that I
Speaker 4: think you'll hear more on in the next few years.
Speaker 1: And so, I mean I'm a little unfamiliar with the concept.
Speaker 1: So's you know, I don't know if this is the
Speaker 1: right technical words. It's essentially like a battery electric vehicle
Speaker 1: that has a generator inside it as well, that's right.
Speaker 1: And how heavy is the generator, like, say, compared to
Speaker 1: an internal combustion engine vehicle.
Speaker 4: Yeah, it's a lot smaller than all the apparatus you
Speaker 4: need for an engine because you think about the way
Speaker 4: an engine works, and in traditional vehicles you need to
Speaker 4: be able to directly drive the wheels from that. So
Speaker 4: it has to be able to operate in all sorts
Speaker 4: of different conditions. If you have a little I don't
Speaker 4: know if you've ever seen just a gasoline generator, it's
Speaker 4: not quite like that, but it's not too far off
Speaker 4: that a little portable one. And so it's just a
Speaker 4: much simpler engine, much smaller, much less integration with all
Speaker 4: the rest of the vehicle.
Speaker 3: So we had this thesis for.
Speaker 4: A long time that look, plug and hybrids never really
Speaker 4: take over because they can never be cheaper than a
Speaker 4: combustion vehicle because they still have an internal combustion engine
Speaker 4: platform on board. I think erevs challenged that a bit,
Speaker 4: because if your main costs are a small generator essentially
Speaker 4: and a small fuel tank for that, it's not that
Speaker 4: much money, and it's certainly not the full cost of
Speaker 4: two totally distinct architectures. These vehicles are built as evs first,
Speaker 4: and then you're sort of adding something afterwards, which is
Speaker 4: kind of the opposite of what we had with some
Speaker 4: of the first evs that came out, which were actually
Speaker 4: built as combustion vehicles first, and then you sort of
Speaker 4: add made them electric, but on the same kind of
Speaker 4: platform or chassis, which is things like the Volkswagen Egle.
Speaker 4: So I think it's a really interesting technological solution, and
Speaker 4: we're seeing it rise really quickly in places in rural areas,
Speaker 4: in places where people don't have home charging options or
Speaker 4: where there's just not as much charging infrastructure. So yeah,
Speaker 4: I want to watch.
Speaker 1: What I find really fascinating about this is because everything
Speaker 1: you've said to me makes sense of the merits of
Speaker 1: these vehicles over plug in hybrids, And maybe it's not
Speaker 1: an apples to apples comparison, because in a way, a
Speaker 1: plug in hybrid is like an internal combustion engine vehicle
Speaker 1: with a little battery to help make it more efficient,
Speaker 1: whereas this is like an electric car with little generator
Speaker 1: to make it more long range. Still, the question that's
Speaker 1: ringing in my ears, as you've explained all to this,
Speaker 1: is why hasn't this become a thing sooner? Because generators
Speaker 1: are not new technologies. Was there anything that has changed
Speaker 1: that has enabled this?
Speaker 4: So the short answer is it has happened before. So
Speaker 4: the Chevy Vault is essentially a version of this that
Speaker 4: was launched in twenty eight ten.
Speaker 3: But I think what's.
Speaker 4: Different now is sort of the For one, when that
Speaker 4: vehicle was launched, the battery prices were really high.
Speaker 3: And the supply chain didn't really exist to build that easily.
Speaker 4: Now batteries are cheap and the supply chain is very
Speaker 4: very well developed in China. And then also you have
Speaker 4: a bunch of startups. So one of the groups that's
Speaker 4: pushing it quite hard is a group called Li Auto,
Speaker 4: which is one of the fast growing Chinese EV startups.
Speaker 4: But who really want to make this work like they're
Speaker 4: sort of in with both feet, They're not hedged, and
Speaker 4: I think that that makes a difference as well. You
Speaker 4: need somebody who's like all in on the technology pushing
Speaker 4: as hard as they can, and it's either we're going
Speaker 4: to make this work or we're going to go bankrupt.
Speaker 3: That's a powerful motivator.
Speaker 4: Couple that with some cheaper battery costs, and I think
Speaker 4: that's part part of the reason why you're seeing it now.
Speaker 4: I think there's also some recognition that, again, in these
Speaker 4: places where you've got really high levels of ev adoption,
Speaker 4: a big chunk of the market.
Speaker 3: Does just go full battery electric.
Speaker 4: And then what you're trying to figure out here is
Speaker 4: is there a solution that helps for some of the
Speaker 4: other ones that are that are harder to reach, And again,
Speaker 4: I think erevs are a potential way.
Speaker 3: To do that.
Speaker 4: We'll have to see how they actually get used and
Speaker 4: performance an uptake in other markets first, because I don't
Speaker 4: want to oversell it as some sort of heroic technological
Speaker 4: solution that's going to rescue things. But it's certainly, like
Speaker 4: I said, one, we're keeping an eye on.
Speaker 1: No I mean, and just to sort of almost like
Speaker 1: zoom out a bit and not talk about this specific technology.
Speaker 1: What I'm kind of taking from this is batteries are
Speaker 1: getting cheap enough that you're now seeing companies able to
Speaker 1: explore new possibilities and new innovations. I know that like
Speaker 1: one of the things that's always been a conversation around
Speaker 1: this area, at least with people who like being contrarian
Speaker 1: or reading sci fi, is that, you know, our thinking
Speaker 1: on electric vehicles is so conservative because we're thinking in
Speaker 1: terms of the cars that we know, except with a
Speaker 1: battery in them instead. You know there could be different paradigms,
Speaker 1: but that maybe haven't yet been explored. So I suppose
Speaker 1: my takeaway from this is maybe batteries are getting to
Speaker 1: that point where they're cheap enough that is now enabling
Speaker 1: new innovation, new startup companies to try new things based
Speaker 1: on this premise of cheap batteries without having to be
Speaker 1: a vertically integrated battery manufacturer themselves.
Speaker 4: Yeah, and I think I think in an era where
Speaker 4: we're just getting started in electrification, you had to bet
Speaker 4: on by far the most the safest, most likely to
Speaker 4: succeed option, right, And in a world where we sort
Speaker 4: of say okay, batteries and electrification are really spreading quickly.
Speaker 4: And again, if you're sitting in the US, maybe this
Speaker 4: whole conversation sounds a bit crazy because you've seen all
Speaker 4: the rollbacks that are happening there, but be really clear,
Speaker 4: the rest of the world, particularly Europe, China and a
Speaker 4: lot of these emerging markets are going electric quite quickly.
Speaker 3: That is happening.
Speaker 4: It does sort of show that, well, yeah, there may
Speaker 4: be a little bit more room for experimentation right now.
Speaker 4: So I'll give you another example of a technology that
Speaker 4: was sort of seen as dead but is now coming
Speaker 4: back is battery swapping. So, for heavy trucks in China,
Speaker 4: almost half of electric heavy truck sales, which are rising
Speaker 4: quite quickly, About fifteen percent of heavy, medium and heavy
Speaker 4: truck sales in China are now electric, but half of
Speaker 4: those have a swappable battery and they're used in port
Speaker 4: operations or on large mining sites or industrial sites. And
Speaker 4: again that was something that was tried a little bit
Speaker 4: almost twenty years ago now and failed. But now there's
Speaker 4: just a sort of acceptance that electrification is going to
Speaker 4: play a big role, and there will probably be different
Speaker 4: flavors of electrification that are used to solve different specific problems.
Speaker 4: And it may well be that in some sort of
Speaker 4: port drayage application or in some sort of mining site
Speaker 4: that yeah, you can just swap batteries in and out
Speaker 4: and that works well there or similarly, we've seen that
Speaker 4: take off quite rapidly for two wheelers. So a battery
Speaker 4: that you can physically just lift up and go to
Speaker 4: a swap station and swap in and out a battery
Speaker 4: that you've signed up to a subscription for with that provider,
Speaker 4: and there's a lot of them dotted around the city,
Speaker 4: and then it's significantly faster than refueling with petrol because
Speaker 4: you're just walking in and literally swapping one.
Speaker 3: Battery out and then driving off.
Speaker 4: So again, I think we are getting to this point
Speaker 4: where electrification is and cheap batteries, good quality batteries are
Speaker 4: sort of a baseline technology, and then there's a lot
Speaker 4: of experimentation, new business models and new products you can
Speaker 4: build from that, And I think this kind of gets
Speaker 4: at something core is like each year when we sort
Speaker 4: of ask ourselves, like do we still believe that this
Speaker 4: trend is strong and is robust? The core thing that
Speaker 4: we're looking at is our batteries still getting better and cheaper,
Speaker 4: And the data is very clear on this. Batteries are
Speaker 4: still getting better and cheaper. There's a huge amount of
Speaker 4: innovation both in emerging chemistries and also just the existing ones.
Speaker 4: So we do a big deep dive on solid state batteries,
Speaker 4: on sodium ion batteries, and those are going to play
Speaker 4: a role in the future at some point. But even
Speaker 4: just within regular with the myon batteries prices drop twenty
Speaker 4: percent last year, there's more and more of them that
Speaker 4: can do really fast charging, in some cases up to
Speaker 4: a megawatch charging, which is getting pretty close to the
Speaker 4: point where evs are can be refueled at the same
Speaker 4: speed as a gasoline car. Now, the infrastructure is not
Speaker 4: there to do it, and not all the vehicles can
Speaker 4: do it, and that sort of thing, but the bottom
Speaker 4: line is that technology is still getting better and cheaper,
Speaker 4: and that's what sort of makes us confident that the
Speaker 4: trend continues, even if it has some steps forward and
Speaker 4: back and some regional variations. So I think that's a
Speaker 4: quite important takeaway and is a big part of the
Speaker 4: sort of technoeconomic modeling that we do to build these outlooks.
Speaker 4: We're not just sort of saying what do we think happens.
Speaker 4: We are running it through some fairly sophisticated models on
Speaker 4: how much does it cost to make a car, and
Speaker 4: then what does that mean for addressable market in each
Speaker 4: given market.
Speaker 1: And you know, just reflecting on everything you're saying. You know,
Speaker 1: I said before, it's like cheap batteries have enabled people
Speaker 1: to try new things. It's also like, from what I'm
Speaker 1: picking up, maybe whereas before, if you were selling electric
Speaker 1: cars or other kinds of vehicles, your differentiation was that
Speaker 1: your vehicle is electric. That is what it's USP is.
Speaker 1: But now what we're seeing is vehicle manufacturers are competing
Speaker 1: against other vehicles that are electric and it's not being
Speaker 1: electric is no longer a USP in the same way then,
Speaker 1: so we're seeing other usps that are built on the
Speaker 1: premise of being electric, but it's like it's electric.
Speaker 3: And yeah, and I mean China.
Speaker 4: Fifty percent of vehicles sales now in China come with
Speaker 4: the plug, right, So within that there's companies And one
Speaker 4: of the more sort of comical oversimplifications I hear is like, oh,
Speaker 4: that's just government policy, They're forcing people to do that.
Speaker 3: That's definitely not the case.
Speaker 4: Like the government targets in China are that we're for
Speaker 4: twenty percent of sales to be new energy vehicles so plugins.
Speaker 2: So that's two and a half times over that Taiget.
Speaker 4: Yeah. Yeah, so organic consumer demand has clearly taken off
Speaker 4: and is just running away with it. That's where all
Speaker 4: the cool tech is. And you have groups with a
Speaker 4: lot of brand cachet that are developing cars. So once
Speaker 4: you get to fifty percent, you have all this competitive dynamics,
Speaker 4: different groups competing in different segments, launching vehicles as quickly
Speaker 4: as they can, so there's development time for a new
Speaker 4: vehicle has been compressed down to sort of eighteen months
Speaker 4: instead of three or four years or five years even,
Speaker 4: and just really really cutthroat rapid competition. I will say
Speaker 4: within China, the level of competition is so intense that
Speaker 4: a lot of groups are not profitable, so there may
Speaker 4: be some sort of reset that needs to happen there
Speaker 4: as well. But certainly it gets at this point that
Speaker 4: you have this sort of platform technology that's available now
Speaker 4: and people are building and innovating from there, and once
Speaker 4: the dust settles, there's a few successful companies that will
Speaker 4: come out of that and our world real national champions,
Speaker 4: and certainly there's a few of those already in the
Speaker 4: form of view ID and CTL, but I think there'd
Speaker 4: be a few more names. People start to see that
Speaker 4: emerge from that intense competition as well on the global stage.
Speaker 2: So fascinating and really exciting.
Speaker 1: And yeah, for those of listeners who like me, are
Speaker 1: based in the US where it feels like a little
Speaker 1: bit of a you know what the word is, the
Speaker 1: rainy weather for the electric vehicle market, it's really actually
Speaker 1: quite refreshing to hear this global perspective, and it's not
Speaker 1: just about the numbers. There's actually really exciting stuff going on.
Speaker 1: And yeah, as you say, that might create challenges, but
Speaker 1: kind of going back to the very top where we're
Speaker 1: talking about, you've been doing this outlook year after year,
Speaker 1: I'm guessing it keeps it very interesting for you as
Speaker 1: the person leading this analysis.
Speaker 3: It definitely does, and you do learn things from it, right,
Speaker 3: I mean there.
Speaker 4: Is something about saying, look, we've been doing this for
Speaker 4: a decade. We will still be doing this another decade
Speaker 4: from now. There's sort of an accountability that comes with
Speaker 4: that too. I feel like it's quite easy to run
Speaker 4: around and say, oh, it's all going to change and
Speaker 4: here's my dramatic forecast, and get a lot of headlines.
Speaker 4: But then two years later, three years later, ten years later,
Speaker 4: did that hold up? Did it carry any water. Did
Speaker 4: it make any sense? Certainly when we started doing this
Speaker 4: a few years later, there were all these groups saying
Speaker 4: one hundred percent of car sales are going to be
Speaker 4: electric by twenty twenty five or twenty thirty, and generate
Speaker 4: lots of headlines from that, and then they're never revisited
Speaker 4: it and never followed up. And though those groups were
Speaker 4: just sort of comically wrong, they didn't understand the market
Speaker 4: that they were dealing with. So I think there is
Speaker 4: some responsibility and some accountability that.
Speaker 3: Comes from doing it for a long time.
Speaker 4: And also I should just say here, I'm very fortunate
Speaker 4: to work with an incredible team of people at Bloomberg
Speaker 4: an EF. There's literally dozens of analysts who contribute to
Speaker 4: this report, looking at everything from the supply of lithium
Speaker 4: to the cost of public charging in Germany, or the
Speaker 4: road fuel demand impacts or two wheelers in Vietnam. So
Speaker 4: we're really able to draw on a global team of
Speaker 4: really sharp people with really extremely precise domain expertise, and
Speaker 4: that's what sort of gives it wings and makes it
Speaker 4: useful for our clients. I think you can sit and
Speaker 4: draw curves and say, look, here's an s curve disruption
Speaker 4: is coming. That may or may not be true, but
Speaker 4: it's often not especially operationally useful for people. So the
Speaker 4: goal that we're starting from is, let's provide things that
Speaker 4: are operationally useful as well as digging into what the
Speaker 4: big trend is. And I think again, in the ten
Speaker 4: years of doing it, it's been a fruitful thing. And
Speaker 4: it's also been a real pleasure to work with some
Speaker 4: of the same people for ten years every year on
Speaker 4: it and be able to tap into their expertise and
Speaker 4: see their fingerprints on these improvements that we've made over
Speaker 4: the years. To the modeling, or to the depth of coverage,
Speaker 4: to the country coverage or the segments and all those
Speaker 4: sorts of things.
Speaker 1: Well, that's a really nice note to finish on. And
Speaker 1: you know, they always say you should leave people wanting more.
Speaker 1: So Colin said, there was eleven main findings.
Speaker 2: Was it main findings? You said, what was the way?
Speaker 4: Yeah, I said, eleven key findings. I think we got
Speaker 4: through We convincingly got through three. And there's all sorts
Speaker 4: of other ones around oil impacts, about cost of charging,
Speaker 4: about what's going on with electric big rigs and trucks,
Speaker 4: about solid state batteries and overcapacity, and also about a
Speaker 4: little bit about net zero. We didn't talk about much
Speaker 4: about net zero this year. More people, we found, and
Speaker 4: more of our clients want to want to talk more
Speaker 4: about the next five and ten years than the next
Speaker 4: thirty and forty or twenty and thirty, I should say,
Speaker 4: so we didn't talk as much about net zero, but
Speaker 4: there is some stuff in there as well if people
Speaker 4: want to know where the scenarios are tracking and how
Speaker 4: far on or off course different countries or segments are
Speaker 4: as well.
Speaker 2: Got it.
Speaker 1: So we've given you three and there's eight more amazing
Speaker 1: conversations out there.
Speaker 2: Colin.
Speaker 1: It's been really enjoyable and interesting as always talking to you,
Speaker 1: so Colin, thank you so much for joining us today.
Speaker 3: Thanks Tom.
Speaker 1: Today's episode of Switched On was produced by Cam Gray
Speaker 1: with production assistance from Kamala Sholling. Bloomberg NEF is a
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