Have Automakers Grossly Miscalculated Electric Vehicle Demand?

Right now, every major automaker is sinking huge amounts of money into developing and producing battery-electric cars, having already announced their plans to form an extensive range of EVs.

Yet, it’s quite possible that they have badly misjudged market demand and could end up with huge inventories sitting into dealerships’ backyards.

Deloitte’s analysts project that, by 2030, there will be a huge oversupply of electrified vehicles as manufacturers’ production numbers will greatly surpass demand! If that scenario materializes, then it will inevitably into a huge upheaval in the automotive industry, the effects of which, although difficult to pinpoint at this point, are going to be dire for many manufacturers.

Michael Woodward, UK automotive partner at Deloitte, said:

“Whilst there is a distinct trend developing in the EV market, the story is not a clear cut one. As manufacturers increase their capacity, our projections suggest that supply will vastly outweigh consumer demand by approximately 14 million units over the next decade. This gearing up of EV production is driving a wide ‘expectation gap’ and manufacturers, both incumbent and new entrants alike, will need to adapt towards this new competitive landscape.”

EVs could eventually become even cheaper than gas models

The consulting firm states that EV prices will become comparable, or even lower than, gasoline- and diesel-powered models by 2024. They also expect 21 million all-electric vehicles to be manufactured over the next decade and assert that the market share for electric vehicles will, indeed, increase, but not as much as automakers expect it to, leading to an oversupply.

Last year, a record 2 million electric vehicles were sold worldwide, which is twice the number achieved in 2017 and points to an increased popularity of BEVs (battery electric vehicles). Yet, only one in 250 cars on the road is an EV – and Norway, where the Leaf has climbed to the top of the sales charts and EVs account for a healthy 30 percent, is a unique case. In contrast, electric and plug-in hybrids represented less than 2 percent of total US sales, and just 2.2 percent on a global scale.

Automakers pushing electric cars

VW, in the aftermath of dieselgate, tied up its future with electrified vehicles, committing to a $50 billion investment and the building of the I.D. sub-brand as well as an EV-exclusive new modular platform. Mercedes-Benz, BMW and the rest have also done the same, driving forward with new EVs and bringing the fight to the likes of Tesla, who pioneered modern electric cars and caught the establishment by surprise. While founder Elon Musk may have over-promised and under-delivered more than a few times in Tesla’s relatively short history, and is only now starting to see a way out of the red, he saw the future before the rest.

Moreover, with almost 100,000 vehicles delivered in the last quarter, Tesla is gearing up to achieve its goal of half a million annual global sales, driven mainly by (finally) rolling out the Model 3 consistently. Thus, it became the best-selling premium car in the world’s second-largest market, the U.S., despite the fact that its more accessible version is not available yet.

Musk’s company, though, is a minnow compared to the VW Group or Daimler, who want to produce many times as many vehicles. And despite its success, it had to lay off 3,000 employees in order to make the promised $35k Model 3 viable.

In a couple of decades, the internal combustion engine will, in all likelihood, be just a memory. The problem is that the very same thing that caused its demise may actually result in some brands joining it as well.

 

  • Charles Lane

    No they haven’t. Just the public are going to buy bastardised GLC for 100k. Look at the Taycan, it is around the 100k mark and is already a wait list. They will sell every single one of them. The public want GOOD electric cars and just because it has your fav “insert German brand” badge on it doesn’t mean it will sell if its garbage with a badge on it.

    That Mercedes has no frunk at all, a clear sign of a cost cutting and use of ICE platform to all in the sake of maximising profits. My advise build a ground up modular EV architecture like the MBQ platform or you forever be playing catch up.

    • Six_Tymes

      You had merit up until you typed “frunk”

    • mihsf

      That’s completely stupid. They don’t need to make electric cars right now because there isn’t enough demand. They will maximise profits as long as they can. But they will be preparing for the moment EVs will be the more profitable option. And then, they will be ready to increase production in a short period of time.

  • Six_Tymes

    If oversupply happens, all they need to do is lower prices and they will sell out. so, no matter how this story plays out it’s no big deal.

    • Matt

      Then the automakers lose money on all the vehicles they sell at heavy discount…

      • DetrinKD

        I may be wrong, but isn’t it cheaper to build an electric car? ICEs seem so much more complex to build and engineer. Battery prices are becoming more affordable as well, so I see electric being cheaper to produce in the long haul.

        • ThatGuy

          Not sure if they cheaper to produce than regular cars yet, but you are correct, economies of scale the more the demand and greater the production, the cheaper it is to produce. Like it has been since the beginning of mass production. I also think because its a slightly untapped market any automaker can innovate their own way and make leaps in their own way.

  • BlackPegasus

    I believe Tesla is popular right now because the nameplate itself signifies something different and unique from ICE vehicles. The drive behind Tesla sales has little to do with saving the environment or protesting gasoline. It’s a niche brand, and if automakers like Mercedes and Porsche think they can enjoy the same popularity by bastardizing existing models and turning them into electric vehicles they better think again.

    Startups like Faraday and Lucid Motors will create a cult following similar to Tesla once their products hit the market. Why? Because these companies will be known for simply producing ELECTRIC vehicles, not bastardized versions of already existing products.

    • Mr. EP9

      I don’t know about Faraday, man. They’ve had one problem after another and I really see them going under sooner than later.

  • charlotteharry57

    The answer to the question is “yes”. Until gasoline prices escalate. The automakers are subject to increasing fuel economy numbers, but the average Joe could care less. EVs time will come, but certainly not with the gusto that automakers are moving.

  • Randy Terpstra

    Unless various governments impose Norwegian style tax structures on their car buying public, EVs will be a tough sell.

    Semi-related, a taxi company in Montreal has just shut down. Their entire fleet was electric. Of the two reasons cited for the folding of the company, one was the inability of much of their fleet to cope with Montreal’s weather conditions. Cold weather adversely affected the fleet’s range. Other than the Tesla’s, much of the fleet spent too much downtime, having to recharge.

    Neither the technology (or infrastructure) is quite “there”, yet. There’s still work to be done, before EVs become a better alternative to ICE powered vehicles.

  • RobSez

    The deciding factor in EV adoption will be charging infrastructure. Convenient, affordable charging that’s as ubiquitous as petrol stations will make and keep EV demand high. Especially in countries where long distance travel by rail and air is convenient and common. Certainly not in the US. So, yes the automakers are exercising ‘wishful-thinking’ in markets traditionally considered the leading parts of the world for sales.

  • Thetruthísntalwayspopular

    I’ve been saying this for years. The infrastructure simply isn’t there for mass adoption of electric vehicles yet. Until you can charge them as quickly and conveniently as filling your tank with gas, then they won’t be adopted by the public at large. That is going to require billions of investment from governments across the globe. One of the few manufacturers that seem to have cottoned on to this is BMW. They will offer electric vehicles but 90% of their range will still be ICE by 2030. I suspect the next ten years, we will see some companies go bust due to putting all their eggs in one basket.

  • erly5

    Until the infrastructure and range become adequate for the majority, the inevitable new tax on electricity consumption is considered fair compensation to the government for the loss of fuel duty revenue and list prices reduce to levels of ICE cars, electric car sales will underperform. Hybrids are the future in the short to medium term at least, and Norway’s booming electric car market will remain unique for a very long time.

  • mihsf

    People also forget increasing electricity prices and future taxes. Petrol and Diesel are expensive in many countries because of taxes, not because they are actually expensive to produce.
    When governments will see the revenu from petrol decrease because of electric vehicles, they will tax electricity similarly since governments need that money. Don’t expect electric vehicles to be that much cheaper to run by then.

  • karmat

    You have to own your own home for an electric car to make sense right now, because you need the 220 volt charger installed. The exception to this would be if you don’t drive very often, then you can get by running an extension cord from a normal 110V outlet.

    • TheBelltower

      It’s easier to have a 220 that charges at 45miles/hr. But for months before I installed a charger, I used a standard socket. It worked good enough, and it was fully charged in the morning when I needed it. Typically, I plug my car in while I food shop, and I’ve got a full “tank” by the time I’m done. That said, Tesla hit a sweet spot years in advance of everyone else. Some of these competitive EV’s are pretty mediocre and won’t achieve the same level of enthusiasm as we’ve seen.

  • Mill0048

    I suspect for the average American it’s due to cost (still above average new car transaction price), image/design (brand matters and can’t look like a cheap hatchback), compromise (renters/city dwellers often have little access to charging, mileage is still less than ICE), and unknowns (long-term running costs still a concern and familiarity with the technology is weak). Plus the trend I’m seeing is that people just care less about cars than before. It’s more of a necessity than a genuine interest.

  • Rob Kay

    I’ve been driving electric for six years, and there is no way I would ever go back to ICE: the comfort, economy, convenience and so on are huge plus factors, even if you disregard the environmental and air quality aspects.

    • Thunderbolt

      convenience ?

  • Sebastien

    I would prefer more regular hybrids or PHEV rather than full EV. I don’t like to be limited. Maybe in few years when new battery tech will be available.

    • donald seymour

      That’s only because you’re smart.

  • TB

    Maybe it’s because there’s a premium for EV’s at the moment…?

  • Marc Gruben

    All of what you say is true. However, our country doesn’t have enough electrical capacity to charge 276 million cars yet. Trillions of dollars will need to be invested in new infrastructure to accommodate this need. We won’t approve new nuclear powerplants (which are, honestly, the best solution) and nobody has yet answered how we will dispose of old, used up battery packs. Before we write off the ICE, which has 100% of the infrastructure in place needed to support it (automobile recycling, parts and service suppliers, gas stations EVERYWHERE), let’s make sure we have addressed how all those ancillary components are going to be replaced.

    • There is more than enough capacity already. Noone is using electricity at night, but baseload generation stations must continue making it – they can’t just stop for a few hours. Absolute majority of cars will charge overnight for 99% of their charging needs. And the battery packs taken off 15-20 year old electric cars (when they’ve lost half the capacity) would be perfect to use in large scale grid storage projects to store excess solar power generated at midday to be used later in the evenings and also at night to charge cars. Even fast charge stations would benefit from having a few old battery packs around so that they can slowly charge those packs when there is no car charging and use energy from the old packs to charge up a car faster. This would mean that fast chargers would not need as beefy power connections. Plus those batteries are very easy to recycle at the same refineries that make the raw materials now.

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