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There was much cheering in 2018 when plug-in electric vehicles (EVs) hit a US sales record of 361,000. Sales started strong in 2019 but declined beginning in July. The pronounced drop in sales, along with a similar decline in China, has prompted concern that future sales may fall short of expectations.
Source: Data from InsideEVs
However, ups and downs have occurred before. The current slump in electric vehicle sales does not necessarily indicate a change in trend.
Ups and downs are normal
Long-term forecasts of EV sales are typically smooth, ever-increasing curves. In reality, there is considerable variation. US year-over-year sales have ranged from a 4% drop in 2015 to over 80% increase in some years. Even if 2019 sales prove flat to 2018, the growth rate since 2013 will still average an impressive 25% per year.
Source: Data from Alternative Fuels Data Center and InsideEVs
Is there really a problem?
Recent growth in US EV sales is almost entirely due to the Tesla Model 3. Based on estimates from InsideEVs, the Model 3 represents almost half of all plug-ins sold so far this year. This is great for Tesla, but it doesn’t look good for the 40-odd other models on the market. Total sales of all EVs except the Model 3 are down 20% year-to-date. And EV share of US sales is still less than 2%. Historically, about half of EV sales have been plug-in hybrids, which use gasoline when outside a typically short battery-only range.
Source: Modified from Argonne National Laboratory
There is general agreement that the sales slump in China is due to cuts in subsidies and a slowing economy. Suggested explanations for the US slump include limited geographic availability, restricted supply, consumers waiting for new models, lack of comparable models and lack of consumer knowledge, as well as the perennial issues of cost, range and charging time. These may be barriers, but there are some advantages to gasoline-powered cars and many consumers are not ready to replace them with an electric. Slow sales of some EV models have resulted in heavy discounts. A Hyundai spokesperson predicted an oversupply.
Incentives matter – a lot
Enthusiastic predictions of EV sales often ignore the role of incentives and mandates. Both financial and non-financial incentives strongly influence sales. Almost half of US EV sales are in California, where state and local incentives are added to the federal tax credit and a complicated Zero Emission Vehicle (ZEV) mandate requires that EVs be a certain percentage of sales.
The effect of incentives is illustrated by a characteristic pattern of a spike in sales before the incentives expire and a sharp drop afterwards. This is illustrated for the Netherlands PHEV incentives below. The current slump in China is another example.
Source: Modified from UC Davis Institute of Transportation Studies
Where are EV sales going?
It would be foolish of me to add another forecast to the large number currently available. EV sales are still in their infancy. Too wide a range is possible when projecting high growth rates from a tiny base. Even ignoring some extreme predictions, there is more than a five-to-one range in projections of EV fleet size by 2030.
Source: Modified from J. P. Morgan
Government mandates and incentives will play a major, if not the major, role in the near-term rate of EV growth. California, with the longest history of EV support and most stringent requirements, has over 10 times the EV sales of the next highest state.
Nine states have joined California in principle with a ZEV plan, but the details differ by state. How many others will join and how fast they will act is speculative. In addition, the Trump administration’s planned withdrawal of California’s Clean Air Act waiver has prompted a lawsuit by California and 22 other states. The crystal ball of government action on EVs is cloudy.
Earl J. Ritchie is a retired energy executive and teaches a course on the oil and gas industry at the University of Houston. He has 35 years’ experience in the industry. He started as a geophysicist with Mobil Oil and subsequently worked in a variety of management and technical positions with several independent exploration and production companies. He retired as Vice President and General Manager of the offshore division of EOG Resources in 2007. Prior to his experience in the oil industry, he served at the US Air Force Special Weapons Center, providing geologic and geophysical support to nuclear research activities. Ritchie holds a Bachelor of Science in Geology–Geophysics from the University of New Orleans and a Master of Science degrees in Petroleum Engineering and Construction Management from the University of Houston.
UH Energy is the University of Houston’s hub for energy education, research and technology incubation, working to shape the energy future and forge new business approaches in the energy industry.
