Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the BNAF podcast, and today we're going to talk about
Speaker 1: electric vehicles in all their shapes and sizes and focus
Speaker 1: on one of our flagship reports, the Electric Vehicle Outlook.
Speaker 1: We do this one every year, and in true ben
Speaker 1: f fashion, we add a few new things to consider
Speaker 1: each time we approach the topic, and we revisit some
Speaker 1: lingering questions in the industry, so hopefully we'll be able
Speaker 1: to clear up a few things for you today. The
Speaker 1: team in the report look out to twenty thirty, in
Speaker 1: some cases twenty forty or all the way out to
Speaker 1: twenty fifty, depending upon the topic. In regions like the US,
Speaker 1: this last year brought a cooling in demand for electric
Speaker 1: passenger vehicles, but overall globally adoption is rising. And then
Speaker 1: there are commercial vehicles which had another record breaking year,
Speaker 1: and don't forget about buses and three wheelers, which seem
Speaker 1: particularly well suited to electrification when we look at adoption
Speaker 1: around the world. In the report, they get into the
Speaker 1: electricicak of transport, but the conversation is not limited to
Speaker 1: just evs. What does this mean for fuel cells and hybrids?
Speaker 1: And then of course there are the fuel sources. They
Speaker 1: look at things like electricity and oil demand and how
Speaker 1: these could be impacted, along with battery metals which are
Speaker 1: required to make the battery packs for the electric vehicles.
Speaker 1: And overall, what's the point if we don't also look
Speaker 1: at this in terms of the impact on CO two emissions.
Speaker 1: Today we'll hear from Colin Mcerricer, head of Advanced Transport
Speaker 1: and Energy Storage at BNF, and he's joined by Head
Speaker 1: of Electric Vehicles, Alexandra O'Donovan. The Electric Vehicle Outlook or
Speaker 1: EVO report for short, can be found at BNF on
Speaker 1: the Bloomberg terminal, or at BNF dot com for our clients.
Speaker 1: If you're not yet a client, you can see the
Speaker 1: executive summary and some great bits of data at about
Speaker 1: dot BNF dot com forward slash Electric Dash Vehicle Dash Outlook.
Speaker 1: You can also find it in the show notes. Right now, though,
Speaker 1: let's jump into our conversation with Colin and Alex about
Speaker 1: some of the things that stood out to them in
Speaker 1: this year's Electric Vehicle Outlook. Alex, welcome to switched on,
Speaker 1: Welcome to I Know, and Colin, thank you for coming back.
Speaker 2: Great to be back on the program, We're going.
Speaker 1: To talk about the long term electric Vehicle Outlook from
Speaker 1: your teams today, and there's no way we're going to
Speaker 1: be able to get through absolutely everything. It's such a
Speaker 1: comprehensive report. When we think about the future of the
Speaker 1: electric vehicle space, I mean and everything from passenger to commercial,
Speaker 1: to three wheelers, to batteries to oil demand. There's so
Speaker 1: many different things we can go into. So as we
Speaker 1: think about the different highlights that we want to touch upon,
Speaker 1: and probably the questions I should be asking in the
Speaker 1: next couple of minutes, can we start with this outlook?
Speaker 1: And really, you know, why do we do it? And
Speaker 1: how far in the future are we looking.
Speaker 2: So we've been doing this for a decade now and
Speaker 2: the idea idea is to pull together all of the
Speaker 2: threads of different bits of research that we do. So
Speaker 2: our team at Bloomberg ENIF publishes a huge amount of
Speaker 2: data sets and research reports about what's going on in
Speaker 2: road transport and particularly around the decarbonization of road transport,
Speaker 2: and we have various teams covering that. What we try
Speaker 2: and do with the Electric Vehicle Outlook is take all
Speaker 2: those different threads and pull it together. And even despite
Speaker 2: the name being the Electric Vehicle out Look, it's actually
Speaker 2: an outlook for all of road transport. So we're looking
Speaker 2: at trends around electrification. Certainly that's one of the big
Speaker 2: vectors of change in the passenger vehicle market, and commercial
Speaker 2: vehicles and two and three wheelers as well, but we're
Speaker 2: also looking at shared mobility and autonomous driving or urbanization
Speaker 2: and changing driving patterns, all these sorts of things that
Speaker 2: come together to shape the way people and goods move.
Speaker 2: So in doing it for a decade, we've refined it
Speaker 2: a lot. We've added more segments, we've added more countries.
Speaker 2: Each year we try and add more detail into the outlook.
Speaker 2: The timeframe goes out to twenty forty for most of it,
Speaker 2: but for some of the climate scenario stuff where we're
Speaker 2: trying to look at net zero and these broader climate
Speaker 2: targets that countries and companies have put in place, that
Speaker 2: goes out to twenty fifty. Though there's a lot of
Speaker 2: analysis about the near term too. The twenty twenties are
Speaker 2: going to be critical for keeping any of this stuff
Speaker 2: on track, and there's really interesting things things happening in
Speaker 2: the near term. So while it does have a longer timeframe.
Speaker 2: It also has a lot of near term detail as well.
Speaker 1: Now you reference it every year, we look to improve
Speaker 1: it a little bit more invariably that people who are
Speaker 1: actually writing this report are really intellectually engaged with the
Speaker 1: subject matter. But for this year, what's new? What were
Speaker 1: the things that your team came up with that they
Speaker 1: wanted to explore in more detail.
Speaker 2: Yeah. The first one is I mentioned we add some
Speaker 2: new countries. So the big one that we added this
Speaker 2: year was Brazil. So we're seeing a lot of interesting
Speaker 2: activity in Brazil. There's not only is there interest in
Speaker 2: electric vehicles and some Chinese manufacturers setting up in Brazil,
Speaker 2: but there's also this really interesting dynamic there with ethanol too.
Speaker 2: So a big part of the transport mix includes ethanol,
Speaker 2: and so the dynamics of that market are a little
Speaker 2: bit different. It's a big emerging economy. We wanted to
Speaker 2: try and cover that and see sort of how that's going.
Speaker 2: So we added Brazil to the mix this year of
Speaker 2: core countries, so we now cover the fourteenth biggest auto
Speaker 2: markets in the world really, and then also we added
Speaker 2: a new Tier two country approach, so we said, look,
Speaker 2: there's the core markets we model, what about all the
Speaker 2: other smaller markets, can we do a more generic modeling
Speaker 2: exercise for them, So we did that as well, and
Speaker 2: that covers all of the EU and the FTA countries.
Speaker 2: So then we've also added a lot more detail on
Speaker 2: some of the other vehicle types, so things like hybrids
Speaker 2: and compressed natural gas vehicles. Those compress natural gas vehicles
Speaker 2: are taken off actually in India, which is quite an
Speaker 2: interesting market, about half a million of them sold last year.
Speaker 2: More details on China on the heavy truck side, so
Speaker 2: we're seeing some really interesting activity going on on electric
Speaker 2: heavy trucks and fuel cell trucks in China, and not
Speaker 2: just regular plug in trucks, but also battery swappable heavy trucks,
Speaker 2: so we wanted to add some more detail on that.
Speaker 2: And then we updated and sort of refined all of
Speaker 2: our battery chemistry forecasts going into different vehicle segments, and
Speaker 2: in particular, there's one chemistry that's really winning. We can
Speaker 2: talk about that a bit later, but that's changing the
Speaker 2: demand outlook for some of the raw materials that are
Speaker 2: going into batteries as well. And then lastly we've also
Speaker 2: updated our investment needs to deliver all of this, so
Speaker 2: looking at how much investment needs to flow into the
Speaker 2: battery materials and refining side as well as the battery
Speaker 2: manufacturing side too, and then we've done some more granular
Speaker 2: work on electricity demand and charging infrastructure needs in each
Speaker 2: one of the regions that we cover.
Speaker 1: Now we talk about the energy transition on this show
Speaker 1: all the time, every week, and oftentimes the industries that
Speaker 1: we're talking about are things that actually feel really far
Speaker 1: away from your everyday person. And my theory is that
Speaker 1: when I talk to people who are actually not working
Speaker 1: in this space and are not at our company as well,
Speaker 1: they're really interested in the electric vehicle space almost immediately.
Speaker 1: And I think that's because all of us have this
Speaker 1: experience of getting in a car and moving ourselves around,
Speaker 1: and it's the fact that it falls into the well
Speaker 1: least the passenger vehicles fall into the consumer discretionary bucket
Speaker 1: that makes it so tangible for so many people. So
Speaker 1: let's start there. Let's start with this tangible part of
Speaker 1: the market, which is passenger vehicles. Can you just give
Speaker 1: me the headline on what last year held in terms
Speaker 1: of progress, and you know, what's the benchmark that we
Speaker 1: essentially are comparing next year to you know, how many
Speaker 1: vehicles were sold.
Speaker 3: I think to get a really good understanding of what
Speaker 3: happened last year, we have to really go back to
Speaker 3: twenty twenty one twenty twenty two, when passenger EV sales
Speaker 3: were growing at an average one hundred percent or sixty
Speaker 3: percent annually. So from that perspective, the thirty three percent
Speaker 3: growth rate recorded in twenty twenty three really doesn't sound
Speaker 3: like a record high year, which actually was so a
Speaker 3: lot of the growth in the past years came on
Speaker 3: the back of the virus COVID stimulus packages, fuel economy targets,
Speaker 3: and the sort of associated era of new battery electric
Speaker 3: vehicle models entering the market, and also in China, consumer
Speaker 3: adoption taking over that policy driven demand. But that means
Speaker 3: that some of the automakers like GM or Ford, counting
Speaker 3: on that boom to continue uninterrupted, were likely overly ambitious
Speaker 3: about their sales targets. So that's why towards the end
Speaker 3: of twenty twenty three early twenty twenty four, the TV
Speaker 3: market was dominated by those quite dramatic headlines about global
Speaker 3: decline in EV sales below expectations. TV sales in reality
Speaker 3: the twenty twenty three growth rate was in line with
Speaker 3: what we expected, so in our previous long term Electric
Speaker 3: Vehicle outlook, we called global annual growth rate to reach
Speaker 3: roughly thirty four percent. It was thirty three percents, But
Speaker 3: only because we called it doesn't mean that there isn't
Speaker 3: a slowdown. The slowdwan is real in EV sales, but
Speaker 3: it's just not the same everywhere in the world. So
Speaker 3: countries like China, India, France, they are still showing healthy growth,
Speaker 3: but the latest data from Germany or the US are
Speaker 3: much more concerning. So in Germany the market is still
Speaker 3: getting to grips with the abrupt end of EV subsidies
Speaker 3: and late in December last year. In the US, lackluster
Speaker 3: performance from Port and GM and aging EV lineup from Tesla,
Speaker 3: and also the uncertainity around the outcome of the upcoming
Speaker 3: presidential elections are keeping the marketmuted. So in our outlook
Speaker 3: in the new term, EV sales continue to grow, but
Speaker 3: that growth is much slower than what we've been used
Speaker 3: to in previous years. So EV sales are set to
Speaker 3: rise from the thirteen point nine million in twenty twenty
Speaker 3: three to over thirty million by twenty twenty seven in
Speaker 3: our base case scenario, and that means that in the
Speaker 3: next four years the growth rate is an average twenty
Speaker 3: one percent per year, and not sixty one percent that
Speaker 3: was between twenty twenty and twenty twenty three. At the
Speaker 3: same time, the TV share of global new passenger vehicle
Speaker 3: sales jumps to thirty three percent by twenty twenty seven,
Speaker 3: and only China and Europe really are above that global
Speaker 3: average line by then. But just as with the slowdown,
Speaker 3: which isn't uniform for all the countries, some countries are
Speaker 3: growing much faster than that global average. So with many
Speaker 3: new low cost EV models set for launch in the
Speaker 3: next few years, some of the fastest growth rates that
Speaker 3: we are recording right now in our outlook are actually
Speaker 3: in those emerging economies. So EV sales are set to
Speaker 3: quintupol in Brazil by twenty twenty seven and triple in
Speaker 3: India by then. So, just to summarize, I think I
Speaker 3: sort of disagree with some of the statements that the
Speaker 3: demand for evs isn't there. Electric cars are still more
Speaker 3: expensive to buy than combustion vehicles, and this is quite
Speaker 3: an effective to terrent right now, especially in the environment
Speaker 3: of high interest rates. But as consumers have proven time
Speaker 3: and time again, I think when the price is right,
Speaker 3: the demand is there. And what really is blocking evsls
Speaker 3: at the moment is the lack of those affordable evs
Speaker 3: across mass market segments. And another proof of consumers actual
Speaker 3: real interest in evs. We're highlighting that in EVO this
Speaker 3: year is actually comes out and in tracking the actual
Speaker 3: bad vues. So in markets where evs are quite developed
Speaker 3: have a strong foothold, there's a growing evidence that they
Speaker 3: are winning over those most active drivers, so professional drivers.
Speaker 3: And actually it looks that in some of those countries
Speaker 3: matter election, vehicles are driving way more than combustion vehicles
Speaker 3: in China, in Netherlands that can be up to sixty
Speaker 3: percent more than combustion vehicles. So I think the overall
Speaker 3: message here is that high usage of evs among working
Speaker 3: drivers is really a strong signal to us that these
Speaker 3: vehicles are in demand.
Speaker 2: So this year, as I said, roughly twenty percent of
Speaker 2: global car sales will be plug in. So that's a
Speaker 2: pretty remarkable jump from just a few years ago. So
Speaker 2: one in five cars sold this year will be will
Speaker 2: be a plug in, And there's some countries further ahead
Speaker 2: and further behind, and about four percent of all the
Speaker 2: cars on the road in the world will be electric
Speaker 2: vehicles this year, so one in twenty five cars in
Speaker 2: the world. That fleet turnover takes time, but it is
Speaker 2: it is happening, and so I think our view is
Speaker 2: one of sort of cautious optimism that, yeah, there have
Speaker 2: been some headwinds, the growth rate is slowing, but the
Speaker 2: product is still getting better and consumers who use them
Speaker 2: are still generally happy with them. So I think that
Speaker 2: kind of underpins if there's a bit of a tension
Speaker 2: between the near term slow down and the long term
Speaker 2: writer outlook that Alex was sort of talking about there.
Speaker 2: That's kind of what's driving our optimism that that is
Speaker 2: that the trend isn't being derailed by some of this
Speaker 2: near term stuff. It's more just this is naturally what
Speaker 2: happens as industry is mature and get larger, the growth
Speaker 2: rate tends to slow down a little.
Speaker 1: So at one point it seemed like every car company
Speaker 1: was making a battery electric vehicle, and you know, this
Speaker 1: was becoming a very crowded space. But actually there have
Speaker 1: only been a few companies that have been really truly
Speaker 1: successful and in many respects are dominating the market. Can
Speaker 1: you talk a little bit about who you would see
Speaker 1: those companies to be and also kind of what it
Speaker 1: takes to be kind of synonymous with electric vehicle companies
Speaker 1: in various parts of the world.
Speaker 2: There's definitely sort of two tiers of automakers emerging. There's
Speaker 2: some of them that have winning models that are selling
Speaker 2: in real volume, and there's others that have launched evs
Speaker 2: but they're just not really at the right price point,
Speaker 2: the right range, or the right feature set to be
Speaker 2: able to sell in volume, and volume is really critical
Speaker 2: of course for getting costs down. You need to be
Speaker 2: sort of in one hundred thousand vehicles a year and
Speaker 2: up to sort of get that economies of scale that
Speaker 2: you need to make the economics of making vehicles really work.
Speaker 2: And not all automakers across that there's generally a bit
Speaker 2: of a divide between those who have built dedicated EV
Speaker 2: architectures that they're building their models on rather than those
Speaker 2: who are using modified architectures. Most of the automakers now
Speaker 2: have a dedicated BEEV architecture, though they're at different stages
Speaker 2: of scaling it up, and some of the models are
Speaker 2: still on older architecture, so for example, forwards F one fifty,
Speaker 2: there's been a lot of publicity about how bad the
Speaker 2: economics of Fords EV division are that is still on
Speaker 2: the traditional F one fifty platform, and they're not going
Speaker 2: to have a dedicated EV platform out until next year
Speaker 2: for larger trucks or twenty twenty six. So what we've
Speaker 2: seen is that the companies that are pushing hard on
Speaker 2: EV still are doing well. Byd is growing really quickly.
Speaker 2: Tesla's growth has slowed down, which is notable, but it's
Speaker 2: still a significant force and still the largest b EV seller,
Speaker 2: just barely ahead of BID. Some of the other Chinese
Speaker 2: manufacturers are doing well. Volvo is doing well, Hyundaikia are
Speaker 2: doing well again. The groups that have jumped in with
Speaker 2: both feet rather than sort of putting one toe into
Speaker 2: it are generally still selling pretty well, though again it
Speaker 2: varies by region and by brand.
Speaker 3: I think one thing to add here as well is
Speaker 3: that really those doing okay right now is automakers releasing
Speaker 3: more affordable EV models to the market. So those that
Speaker 3: really have the dedicated platforms have some economies of scale
Speaker 3: can actually tempt consumers with affordable attractive ypiece.
Speaker 1: Yeah, because you've mentioned this twice now, Alex, that electric
Speaker 1: vehicles remain more expensive than internal combustion engine vehicles, and
Speaker 1: that you know, potentially the early adopters who are willing
Speaker 1: to pay that premium for the electric vehicle, they have
Speaker 1: done it, and we might be reaching a saturation point
Speaker 1: on those early adopters, and the cost competitiveness is going
Speaker 1: to be the key to unlocking that next big jump
Speaker 1: in adoption. So how close are we to getting electric
Speaker 1: vehicles largely at parity or maybe someday less expensive than
Speaker 1: internal combustion engines from a total cost of ownership standpoint?
Speaker 3: Absolutely, So the biggest driver here is are obviously falling
Speaker 3: battery prices, and we can chat about it in detail
Speaker 3: in the moment, But when that up from price parity
Speaker 3: will be reached really depends on how fast battery prices
Speaker 3: will be falling, and it will also depend by the country,
Speaker 3: the econtoms of scale of each of the automakers the
Speaker 3: segment about which we're talking. But overall, with current battery
Speaker 3: buck prices the clients that we're observing, we see that
Speaker 3: up from price parity reached for most countries and most
Speaker 3: vehicle segments in sort of flight twenty twenties, early twenty
Speaker 3: thirties for most cars and segments.
Speaker 1: Well, let's talk about batteries then, because there's a lot
Speaker 1: going on in that space. So part of it has
Speaker 1: to do with battery chemistries, and then part of it
Speaker 1: has to do with where in the world they're manufactured
Speaker 1: and the price is associated with that. But let's start
Speaker 1: on the chemistry side of things. You know, what have
Speaker 1: been the changes in battery chemistries because we know for
Speaker 1: a long time different companies that were developing these batteries
Speaker 1: were looking to increase range or reduce the dependence on
Speaker 1: specific rare earth metals that had a specific cost or
Speaker 1: refluctuating too much. What is happening to battery chemistries and
Speaker 1: is it still actively changing? Are there developments there that
Speaker 1: have the potential to really disrupt the market.
Speaker 2: Yeah, there's definitely very interesting changes going on in this
Speaker 2: market right now. So what you're seeing is that lithium
Speaker 2: iron phosphate batteries, which contain no nickel or cobalt or manganese,
Speaker 2: are taking over a larger and larger share of both
Speaker 2: the EV market and the stationary storage market. They've already
Speaker 2: got a very highest share in stationary storage also in
Speaker 2: the bus market. What you're seeing now is they're taking
Speaker 2: over the passenger vehicle market. Most of the Chinese manufacturers
Speaker 2: prefer and use lithium iron phosphate batteries. They are generally cheaper,
Speaker 2: they're very stable. The main thing is their energy density
Speaker 2: is not as good as the NMC family nickel manganese
Speaker 2: cobalt family of battery chemistries. So what you've seen over
Speaker 2: the last couple of years is that LFP is gaining
Speaker 2: a larger and larger share of that battery market, and
Speaker 2: it's getting quite close to fifty percent of the global market,
Speaker 2: and we think it's going to cross over that sometime
Speaker 2: in the next eighteen months or so. And that's because
Speaker 2: everyone's looking at trying to cut costs, and this is
Speaker 2: the chemistry where we've seen the biggest, most significant cost declients.
Speaker 2: So that's kind of what's happening in the passenger vehicle market.
Speaker 2: The commercial vehicle market it's also happening as well, so
Speaker 2: you see more and more of a shift to LFP,
Speaker 2: again mostly for cost reasons, but also it's very stable
Speaker 2: and the performances quite reliable, so that's really changing the
Speaker 2: demand outlook for some of these raw materials that go
Speaker 2: into the batteries. So we have steadily reduced the forecast
Speaker 2: for the share or the amount of cobalt, nickel, and
Speaker 2: manganese that you're going to need to deliver all these batteries.
Speaker 2: That's been a steady thing that we've reduced over the
Speaker 2: last few years. As this share has risen, we may
Speaker 2: have to reduce it further in the future. But I
Speaker 2: think what's important here is is that there are all
Speaker 2: these different chemistries that you can make batteries with different
Speaker 2: cathode chemistries, and you now have sort of a stable
Speaker 2: of them out there, and if raw material prices for
Speaker 2: one thing or another go way up or way down,
Speaker 2: then you see some substitution effect. And part of what
Speaker 2: you're seeing with this rise of LFP is because a
Speaker 2: few years ago there was a spike in nickel and
Speaker 2: cobalt prices and people were all of a sudden very
Speaker 2: worried that that was going to derail the cost declines
Speaker 2: and evs in batteries. And what you saw as the
Speaker 2: market just responded and shifted more towards the lower cost chemistry.
Speaker 2: You may get a similar effect in the future with
Speaker 2: sodium ion batteries. We're starting to see the first of
Speaker 2: those being produced. It's pretty small scale for now, so
Speaker 2: the market is still very exposed to lithium. All the
Speaker 2: battery chemistries that we have at scale now still depend
Speaker 2: on lithium. But again, I think it just sort of
Speaker 2: highlights how markets respond to things. You get a spike,
Speaker 2: people don't just reduce in price. They don't just reduce
Speaker 2: demand and bring on more supply. They look at substitution,
Speaker 2: and substitution is something that you can now do to
Speaker 2: some degree within the battery market. So that's something we've
Speaker 2: been watching for a while and it's kind of picking
Speaker 2: up speed right now.
Speaker 1: So since you had brought up China, their role in
Speaker 1: the battery space is really important. They are definitely a
Speaker 1: dominant producer from the manufacturing end of batteries used both
Speaker 1: for vehicles and for stationary storage and other applications. So
Speaker 1: on the battery side, battery prices in China have really fallen.
Speaker 1: We discussed this in an earlier episode of this show,
Speaker 1: and there is some concern around overcapacity ultimately leading to
Speaker 1: dumping like we've seen solar industry. So what's happening with
Speaker 1: battery prices, specifically as it relates to Chinese production.
Speaker 2: Yeah, so battery prices in China are really plummeting. So
Speaker 2: just to kind of give an idea, when we did
Speaker 2: our battery price serve last year, globally, the average price
Speaker 2: of a lithium iron phosphate battery cell was in the nineties.
Speaker 2: So far January to May, in China, the average cell
Speaker 2: price is fifty four dollars per kill one hour. We've
Speaker 2: seen it even dip below fifty in some months. So
Speaker 2: that's a huge, huge drop. And so what's driving that.
Speaker 2: One of them is lower raw material prices than in
Speaker 2: previous years. Another one is over capacity. So we have
Speaker 2: seen significantly more capacity being built than there is demand
Speaker 2: for total Chinese battery production last year was more than
Speaker 2: global demand. So that's just to give an idea of
Speaker 2: the scale of overcapacity, and there's a lot more capacity
Speaker 2: coming online in the next few years. Sometimes see this
Speaker 2: oversimplified as this is all just over capacity and everyone's dumping.
Speaker 2: If you look at the margins of the battery makers,
Speaker 2: they're still making money. There has been a bit of
Speaker 2: margin compression there, but if you sort of break out
Speaker 2: all these different effects. What you kind of conclude is that, yes,
Speaker 2: low material prices are playing a role, Yes over capacity
Speaker 2: and cutthroat competition are playing a role, but there's also
Speaker 2: still technology and process improvements going on in the manufactur
Speaker 2: side that are helped driving down price. So it's kind
Speaker 2: of all of these three factors that are playing a
Speaker 2: role in China pushing down battery prices. One big sort
Speaker 2: of open question we have is can anyone else really
Speaker 2: compete with that? And one of the things that we've
Speaker 2: were finding is that even when you factor in some
Speaker 2: of the incentives that are in place in other countries
Speaker 2: to try and encourage domestic production of batteries, it's not
Speaker 2: entirely clear that an automaker in those countries wouldn't prefer
Speaker 2: to just go with a Chinese battery anyway, because it's
Speaker 2: so much cheaper, and because the manufacturers there are, to
Speaker 2: put it lightly, they're really really good at it. They're
Speaker 2: making high quality batteries at low cost in large volumes
Speaker 2: day and day out, whereas some of the newer groups
Speaker 2: that are trying to produce them in North America or
Speaker 2: Europe are a little bit less tested. So that's something
Speaker 2: we're watching very closely, is do the tariffs and incentives,
Speaker 2: Do the protectionist measures that you're seeing in some of
Speaker 2: these other countries offset the fact that China is doing really,
Speaker 2: really well at hammering costs out of the battery supply chain.
Speaker 2: So that's still an open question. It's going to play
Speaker 2: out over the next few years. But certainly we are
Speaker 2: seeing remarkably low battery prices in China, and it isn't
Speaker 2: just from overcapacity, it isn't just from ow material price changes.
Speaker 2: It is also showing that these companies are still pushing
Speaker 2: hard to make the technology better and to improve the
Speaker 2: process of manufacturing these I would say, I would just
Speaker 2: summarize it as we're nowhere near the end of how
Speaker 2: good battery technology can get. We're still in the early
Speaker 2: going of this, and you are going to continue to
Speaker 2: see improvements, not all of them in the same direction.
Speaker 2: Some of them might be around cycle life, or some
Speaker 2: of them might be around cost or energy density, but
Speaker 2: a lot of these things are moving forward and there's
Speaker 2: still a lot of room to run on how good
Speaker 2: this technology can get.
Speaker 3: Well.
Speaker 1: And as we're talking about some of the policies that
Speaker 1: actually play into the supply chains that are associated with
Speaker 1: the batteries and where they're able to sell to. You
Speaker 1: end up seeing in the US these tariffs that have
Speaker 1: really restricted Chinese electric vehicle imports, and the EU is
Speaker 1: making motions to do something similar. So are you expecting
Speaker 1: to then see Well, you had already mentioned that it's
Speaker 1: possible that the batteries may become much cheaper in China,
Speaker 1: and therefore this may end up being a moot point,
Speaker 1: but you can raise tariffs as far as you want
Speaker 1: to go. So you then expecting to see more manufacturing
Speaker 1: of batteries all around the world as a result of
Speaker 1: policy intervention, And as an additional kind of question alongside that,
Speaker 1: do we expect to see the same technologies or is
Speaker 1: technology going to keep moving forward in China? And will
Speaker 1: countries that have essentially established domestic manufacturing have to keep
Speaker 1: pace with that level of technology innovation in order to
Speaker 1: stay competitive the market.
Speaker 2: The global auto market is becoming more fragmented. Right. It's
Speaker 2: been a relatively free trade in auto products with some
Speaker 2: exceptions over the last twenty years. Now you're starting to
Speaker 2: see more tariffs and more protectionism, particularly around dvs and batteries.
Speaker 2: Because this is you as the next generation for the
Speaker 2: auto industry, and groups want to protect jobs and create
Speaker 2: high value industries locally. That is going to have to
Speaker 2: lead to more local manufacturing in many cases, because I mean,
Speaker 2: if the tariffs are high enough, no one can can
Speaker 2: import vehicles and sell them cost competitively. But I would
Speaker 2: just say, the tariffs only protect things for so long.
Speaker 2: So if you take the European example, Europe has just
Speaker 2: implemented tariffs on Chinese made EV's, not just Chinese EV's
Speaker 2: from Chinese brands, but Chinese made EV's also from Western
Speaker 2: brands are hit by this as well. Those brands are
Speaker 2: going to be pushed in some cases, not in all cases,
Speaker 2: but to set up local manufacturing. And I think that's
Speaker 2: what you will see. If the automakers that you're trying
Speaker 2: to protect domestically don't use that window of opportunity wisely
Speaker 2: to as Alex has said, launch cost competitive EV models,
Speaker 2: then the tariffs won't protect them forever. They for one,
Speaker 2: they don't apply in other markets that those countries that
Speaker 2: those companies sell to, and they'll face very heavy competitive
Speaker 2: pressure there. And for another, even in the domestic market
Speaker 2: where they're being protected, it won't last forever. Because those
Speaker 2: groups will set up there. And I think what you
Speaker 2: are seeing right now is a shift towards much more
Speaker 2: local supply chains. But I still think you have to
Speaker 2: be competitive if you're going to appeal to consumers, right
Speaker 2: you can't hide behind tariffs forever.
Speaker 3: I think it's worth sort of thinking about our long
Speaker 3: term outlook really, because you know, our long term outlook
Speaker 3: is is bright. It's driven by those improving economics of
Speaker 3: electric cars compared to combustion vehicles. And you know, by
Speaker 3: by twenty thirty, evs rich reached forty five percent of
Speaker 3: global pascenter vehicle sales in our outlook and seventy three
Speaker 3: percent by twenty forty in our basic case scenarios. So
Speaker 3: now China and Europe still continue to lead globally on
Speaker 3: IV adoption, but in our scenarios by twenty forty, by
Speaker 3: twenty fifty, Europe never really catches up with China in
Speaker 3: EV adoption, in absolute in absolute sales. So that I
Speaker 3: think should be really concerning because it really does look
Speaker 3: as China is way ahead of Europe in technology development,
Speaker 3: achieving economies of scale, and that is also such a
Speaker 3: different picture than it was just a few years ago
Speaker 3: in twenty twenty IV adoption in new car sales in
Speaker 3: Europe was actually twice that of China. By twenty twenty one,
Speaker 3: Europe still head around four percent points advantage over China,
Speaker 3: but it lost it in twenty twenty two, and really,
Speaker 3: in our outlook, never gets it back. So I think
Speaker 3: introducing those punitive import tariffs on electric vehicles manufactured in
Speaker 3: China could really impact adoption in Europe in the short
Speaker 3: term by sort of limiting access to afford the bolivies.
Speaker 3: And also while considering such tariffs, European automakers should also
Speaker 3: consider that they do risk shielding domestic automakers from competition, right,
Speaker 3: so they will not have that competitive pressure on them
Speaker 3: to put to keep getting better.
Speaker 1: So this adoption that we're seeing flattening off, you know,
Speaker 1: still breaking records year after year, but not as great
Speaker 1: as the year before, could increase if the companies themselves
Speaker 1: are not maintaining competitiveness across the batteries, which are the
Speaker 1: most expensive part of the electric vehicle.
Speaker 3: Yeah, I think so. And then I think, you know,
Speaker 3: like China really could be two evs to transition to
Speaker 3: reaching climate goals. What Tesla was to kick starting that
Speaker 3: EVA transition. So I really think that I would want
Speaker 3: all the goal romants actually carefully consider how to benefit
Speaker 3: from what China has to offer today to resual climate goals,
Speaker 3: to accelerate transition, to stay competitive, rather than focusing on
Speaker 3: sort of short term panealizing that progress.
Speaker 2: The market that I'm actually a bit more concerned about
Speaker 2: in the nerd term is probably the US. I think
Speaker 2: things in Europe will be okay, where we still have
Speaker 2: tightening fuel economy regulations and a number of other things
Speaker 2: that Analyx has pointed out. It's the adoption is already
Speaker 2: at a reasonable level across some markets in Europe. I
Speaker 2: think the US is a bit more worrying. So you
Speaker 2: have seen adoptions slowing down, growth rates slowing down. I'm
Speaker 2: still going to be a record year for sales there
Speaker 2: this year, but the growth rate really slowing there. And
Speaker 2: of course there's an election this year in the US,
Speaker 2: and if you listen to many of Donald Trump's current speeches,
Speaker 2: often he talks very negatively, speaks very negatively about evs,
Speaker 2: and he's there's a growing sort of polarization there, and
Speaker 2: I think you would see a lot of the supportive
Speaker 2: policies that have come under the Biden administration removed or
Speaker 2: at least targeted by a Trump administration. Whether they're successful
Speaker 2: and repealing all of those would probably end up in
Speaker 2: the courts, but it is something we're watching quite carefully.
Speaker 2: I think as well, the US market is looking more
Speaker 2: protectionist as well in this so that the tariffs in
Speaker 2: Europe that we're introduced are trying to thread this needle
Speaker 2: between having still some competition from China with not making
Speaker 2: it too difficult for domestic manufacturers. The tariffs that are
Speaker 2: in place in the US are just saying we don't
Speaker 2: want any competition from China in our domestic market's one
Speaker 2: hundred percent tariff. Nobody can really sell at that rate
Speaker 2: and make any money. So I think that's actually the
Speaker 2: market that I'm a little more worried about. The domestic
Speaker 2: automakers in North America have, particularly Ford and GM, have
Speaker 2: retreated more and more from the world stage. They're not
Speaker 2: really competitive with exception of a few segments outside of
Speaker 2: the North American market, and they are not facing the
Speaker 2: same competitive pressure on evs that other automakers are facing internationally.
Speaker 2: So I think that's the one that I'm a little
Speaker 2: more concerned about. In the near term is the US.
Speaker 1: So due to the politicization of this industry and other
Speaker 1: industries that we actually end up covered in the US,
Speaker 1: US specifically, the outcome of this next election will have
Speaker 1: potentially a very meaningful impact on adoption. I want to
Speaker 1: pivot now though for a second, because we started today's
Speaker 1: show talking about passenger vehicles, but one of the interesting
Speaker 1: things in this year's report really had to do with
Speaker 1: the commercial fleet. So can we talk a little bit
Speaker 1: about this commercial fleet, which, even if people don't immediately
Speaker 1: think about it, is actually very much in all of
Speaker 1: our lives because all of the things that we consume
Speaker 1: have gotten to us somehow and increasingly are coming to
Speaker 1: us on vans and trucks straight to our home. So
Speaker 1: how about this commercial fleet of electric vehicles who we're
Speaker 1: increasingly seeing on the roads.
Speaker 2: Yeah, So the commercial vehicle segment is really interesting and
Speaker 2: it's very varied. So there are some things that we
Speaker 2: would call commercial vehicles, like buses, municipal buses that are
Speaker 2: already achieving very high rates of electrification led out of Asia,
Speaker 2: but happening in other places too. But when we think
Speaker 2: of vans and trucks and medium and heavy duty it's
Speaker 2: quite varied there too. What you're seeing is that this
Speaker 2: is probably going to be a real breakout year for
Speaker 2: commercial electric vehicle sales, and that's led by a couple
Speaker 2: of things. Just some contexts. Last year, a little over
Speaker 2: five hundred thousand commercial electric vehicles were sold. This year,
Speaker 2: we're forecasting just under a million, or about a million
Speaker 2: in total. Now. That skews more towards the lighter vehicles,
Speaker 2: but there's also activity happening in the medium and heavy
Speaker 2: duty vehicle sales, and if we look out a few years,
Speaker 2: we think the light vehicles get it to get to
Speaker 2: about twenty percent of sales by twenty twenty seven, and
Speaker 2: medium and heavy duty between nine and ten percent. So
Speaker 2: it's definitely further behind what's going on in the passenger
Speaker 2: vehicle side, but it's actually one of the fastest growing
Speaker 2: parts of what we're observing right now, and that's primarily
Speaker 2: because these groups are driven by economics alone. There isn't
Speaker 2: a lot of brand considerations or behavioral considerations. It is
Speaker 2: much more around economics for commercial vehicle drivers, and the
Speaker 2: economics are starting to get good, particularly again in China,
Speaker 2: where there's the lowest battery costs you're starting to see
Speaker 2: things like vans and lights of medium duty trucks already
Speaker 2: getting cost competitive. The heavy duty long haul ones are
Speaker 2: going to take a bit longer. That's more the latter
Speaker 2: half of this decade. But we are still seeing sales
Speaker 2: in those heavy segments, again lead out of China and
Speaker 2: a few other markets picking up. So you're starting to
Speaker 2: see a few percent of sales in a heavy segment
Speaker 2: being already electric or fuel cell. And what's really interesting
Speaker 2: there is there's actually a variety of solutions being applied
Speaker 2: to tackle that probably the most difficult segment to electrify,
Speaker 2: which is those heavy trucks, and so what you're seeing
Speaker 2: is a mix of regular battery electric plug in charging,
Speaker 2: some battery swapping ones, so heavy trucks with swappable batteries,
Speaker 2: and then some hydrogen fuel cell vehicles. So again lead
Speaker 2: in China, but happening a little bit elsewhere too. We're
Speaker 2: starting to see hydrogen fuel cell vehicle sales pick up
Speaker 2: a little bit in that heaviest vehicle segment. There's still
Speaker 2: a long way to go there, but there's encouraging signs
Speaker 2: of progress, not just in China, but places like California
Speaker 2: where sales are picking up quickly, and in Europe with
Speaker 2: new trucks CO two regulations that have been finalized now
Speaker 2: we're seeing more activity there as well. The truck makers
Speaker 2: are now also starting to benefit from those cheaper batteries
Speaker 2: we talked about. There's a bit of convergence there. A
Speaker 2: few years ago, there used to be huge gap between
Speaker 2: what commercial manufacturers we're paying for batteries and what large
Speaker 2: volume passenger vehicle manufacturers we're playing for batteries. That gap
Speaker 2: is starting to close as the battery market gets more
Speaker 2: and more competitive, as it turns to a buyer's market,
Speaker 2: and that's going to start to flow into vehicle economics
Speaker 2: and the trucking segment kind of in the next few years.
Speaker 2: So that's one we're optimistic about. It's still not on
Speaker 2: track for our climate targets, if that's something that's important
Speaker 2: to you, but certainly it's something where we think it's
Speaker 2: going to be really interesting market to watch in the
Speaker 2: next few years. And we do have a fairly optimistic
Speaker 2: or at least what we think of a fairly optimistic
Speaker 2: view on what can get done this decade.
Speaker 1: Well, and since you brought up hydrogen fuel cells and
Speaker 1: I know, in this circumstance we were talking about the
Speaker 1: fleets of things that were being delivered in the commercial
Speaker 1: end of things, where it may have a space. People
Speaker 1: still keep bringing it up, though, regarding passenger vehicles, and
Speaker 1: actually the pop culture reference here that I keep thinking
Speaker 1: about when you bring up hydrogen fuel cell cars as
Speaker 1: do with the movie Mean Girls came out a long
Speaker 1: time ago. They did a reboot recently basically the same
Speaker 1: plot line, except different actors, and in both of them
Speaker 1: it was stopped trying to make fetch a thing. Is
Speaker 1: hydrogen a thing? Or should we just stop trying to
Speaker 1: make it a thing?
Speaker 2: I confessed to not having seen either of the Mean
Speaker 2: Girls movies, the original or the remake, but I think
Speaker 2: when it comes to this topic, I do feel like
Speaker 2: there is an effort to make this a thing, and
Speaker 2: consumers really do not seem interested. So the just for
Speaker 2: a point of reference, there were more Ferraris sold than
Speaker 2: hydrogen fuel cell vehicles globally last year, and it wasn't
Speaker 2: even close. Ferrari was way way ahead. You'd have to
Speaker 2: get down into the really niche manufacturers like Lamborghini before
Speaker 2: you'd find comparable numbers of fuel cell vehicle sales. The
Speaker 2: proponents of this technology are ever optimistic that it is
Speaker 2: going to take over the market, or at least be
Speaker 2: a meaningful part of it, But the reality is sales
Speaker 2: have fallen the last couple of years. So they peaked
Speaker 2: in twenty twenty one at around seventeen thousand passenger fuel
Speaker 2: cell vehicle sales. Last year they were down to around
Speaker 2: nine thousand, so a very significant drop. Almost all of
Speaker 2: the sales are now concentrated in South Korea because there's
Speaker 2: very generous incentive there. If you look at California, sales
Speaker 2: have dropped pretty dramatically. They were covered a little bit
Speaker 2: because Toyota is trying to clear out inventory of the
Speaker 2: maris that they have. If you go to some of
Speaker 2: the dealers and look at the pages, they're offering incentives
Speaker 2: of twenty to thirty thousand dollars plus a fuel card
Speaker 2: worth fifteen thousand dollars, and still they're really struggling to
Speaker 2: move them. If you look at the reviews of these vehicles,
Speaker 2: people are generally okay with the vehicle, but the refueling infrastructure,
Speaker 2: the refueling experience is terrible. It's both expensive, sparse, and
Speaker 2: it breaks down a lot, and some of those can
Speaker 2: be fixed. You can probably fix the sparse part if
Speaker 2: you throw enough money at it. But it will always
Speaker 2: be expensive. It will always be significantly more expensive than
Speaker 2: refueling with electricity if we're talking about green hydrogen. So anyway,
Speaker 2: there's all these different things that we could talk about
Speaker 2: back and forth. There's lots of debates that have been
Speaker 2: had about this, but the bottom line is consumers don't
Speaker 2: seem interested. They're only buying them in places where the
Speaker 2: incentives are huge. They're buying fewer and fewer of them
Speaker 2: the last few years, and we're just not seeing any momentum.
Speaker 2: So last year actually we stop including a passenger fuel
Speaker 2: cell vehicle forecast in the U Outlook, and we said
Speaker 2: we will return to it if and when fuel cells
Speaker 2: reach zero point one percent of global auto sales. So
Speaker 2: not a high bar, but they are way a way
Speaker 2: off that you would need to see eighty thousand sales
Speaker 2: a year, and you're essentially seeing a fraction of that.
Speaker 2: So we're a long way from where you need to
Speaker 2: be to have any sort of optimism that hydrogen is
Speaker 2: going to play a role in passenger vehicle sales.
Speaker 1: So then last question to you, alex are plug in
Speaker 1: hybrids should we be still trying to make them a
Speaker 1: thing for those people who are unwilling to commit to
Speaker 1: a full electric vehicle but are taking a step away
Speaker 1: from a full internal combustion engine.
Speaker 3: Yeah, thanks Lena. That's a good question because we sort
Speaker 3: of stopped including FCVs, but we kind of pay a
Speaker 3: little bit more attention this year to plug in hybrids
Speaker 3: because it does look like they do make a comeback
Speaker 3: this year. But the biggest change this year on PBS
Speaker 3: really is coming up of China. This is where we
Speaker 3: seeing the resurgence of PF sales. So while our forecasts
Speaker 3: for EV sales in China really hasn't changed that much,
Speaker 3: if anything, it has increased. P haves now form a
Speaker 3: larger share of overall EV sales in the country, So
Speaker 3: you have to keep in mind though that these are
Speaker 3: not ps that we're used to in Europe. The batteries
Speaker 3: of plug in hybrids deployed in China sold in China
Speaker 3: are almost twice the size of those in Europe or
Speaker 3: in the US. The ranges are quite significant, so those
Speaker 3: plug in hybrids can go for good over one hundred
Speaker 3: kilometers on one charge, so while in Europe we've been
Speaker 3: used to plug in hybrids being used as a really
Speaker 3: compliance tool with fuel economy targets, in China, it does
Speaker 3: seem that automakers there are kind of skillfully using plug
Speaker 3: in hybrids to reach more of those more resistant TV
Speaker 3: consumers outside of the major cities, those consumers that are
Speaker 3: still more concerned about range and charging availability. What I
Speaker 3: can't tell you really in any sort of certainty is
Speaker 3: really what is it a short term trend or OURP
Speaker 3: haves here to stay. It's much more difficult to forecast
Speaker 3: P have adoption than it is for best because in
Speaker 3: the new term, like plug in hybrids can be quite
Speaker 3: easily added to automaker's lineup. You don't need much of
Speaker 3: a fan fire around it, you don't need dedicated platforms,
Speaker 3: et cetera. So it is just much easier. So it's
Speaker 3: really difficult to pinpoint that exact number. But I think
Speaker 3: there's one thing to keep in mind when we there's
Speaker 3: cussing plug in hybrids and whether they should or should
Speaker 3: not be a long term trend. So putting too much
Speaker 3: faith and plug in hybrids really comes with some risk attached.
Speaker 3: So our analysis shows that the share of kilometers driven
Speaker 3: in the electric mode by plug in hybrids, it's really
Speaker 3: quite low, roughly eleven to fifty four percent depending on
Speaker 3: the country and the ouder type. So if p haves
Speaker 3: are displacing battery electric vehicle sales and are not utilizing
Speaker 3: that full electric driving capacity that they do have, they
Speaker 3: actually do add to oil demand. In our analysis, and
Speaker 3: you know, we build several scenarios of what like what
Speaker 3: that oil demand addition could be from not using those phfs. Well,
Speaker 3: but in that worst case scenario, if you want to know,
Speaker 3: we can add up up to twenty percent more to
Speaker 3: oil demand than in our base case scenario. And that
Speaker 3: warfs case scenario is like, you know, much more pfs
Speaker 3: on the road and much less electric driving utilization by
Speaker 3: those pehos.
Speaker 2: Just to clarify, that's twenty percent more than passenger vehicle
Speaker 2: oil demand use would be not adding twenty percent to
Speaker 2: global oil demand use. And I think this is one
Speaker 2: of these tricky topics for us where we've gone through
Speaker 2: and looked at all the literature and looked at everything
Speaker 2: about how these are driven, and you kind of you
Speaker 2: can look at the different different ways and there's two
Speaker 2: you can kind of come to two opposite conclusions depending
Speaker 2: on what you think it is. You could say, look,
Speaker 2: plug in hybrids are reaching buyers who were never going
Speaker 2: to go fully electric, and therefore it's always a net
Speaker 2: positive from a climate point of view, because they are
Speaker 2: doing some of the kilometers in electric mode and that's
Speaker 2: better than doing none of your kilometers in electric mode.
Speaker 2: Or you could conclude the exact opposite that say, these
Speaker 2: are pulling buyers away from battery electric vias, and less
Speaker 2: of their kilometers are being done in electric mode, and
Speaker 2: therefore there's more internal combustion engine kilometers driven in the world.
Speaker 2: And actually teasing out exactly which way that consumer was
Speaker 2: going to go is a very difficult task. So I
Speaker 2: think we're sort of saying, look, this is a thing
Speaker 2: right now. Plug and hybrids are going faster than better electrics,
Speaker 2: regular hybrids, and pure internal combustion engine vehicles. But we
Speaker 2: need a few more years of data to see exactly
Speaker 2: what that's coming at the expense of Is it coming
Speaker 2: at the expense of pure combustion vehicles? Is it coming
Speaker 2: at the expense of better electric vehicles? And the conclusion
Speaker 2: is kind of opposite depending on which one of those
Speaker 2: it is, at least from a climate point of view.
Speaker 2: The one thing is it does seem to be. As
Speaker 2: Alex pointed out, the newest ones that are launching are
Speaker 2: less aimed at compliance with fuel economy regulations and more
Speaker 2: aimed at trying to make a product that consumers actually want,
Speaker 2: and that is a notable shift from where we were
Speaker 2: a few years ago.
Speaker 1: Well, we could be here all day, but unfortunately our
Speaker 1: time is up. So it has been really great talking
Speaker 1: to you Alex and Colin, and thank you for coming
Speaker 1: on the show.
Speaker 2: Thanks Dana, Thank you for having us Dana.
Speaker 1: Today's episode of Switched On was produced by Cam Gray
Speaker 1: with production assistance from Kamala Shelling. Bloomberg NIF is a
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