Navigant Research forecasts new EV global sales of > 346,000 units in 2014; 10 predictions for the year
8 January 2014
During 2014, the global plug-in electric vehicle (PEV) industry is poised to grow by 86% and will surpass more than 346,000 new vehicles sold, according to a new white paper—“Electric Vehicles: 10 Predictions for 2014”—published by Navigant Research. This would bring the global total of PEVs on the road to more than 700,000 by the end of the year, according to the firm’s calculations.
Broadly, Navigant expects expansion in both the higher end of the market (thereby putting competitive pressure on Tesla Motors), as Audi, BMW, Cadillac, Mercedes, Saab, and Volvo introduce their first plug-in cars. More mainstream models will come from Kia, Mahindra, Škoda, and Volkswagen. North America, Europe, and Asia Pacific will continue to drive PEV sales, as the technology will have only limited availability in the emerging markets of Latin America and Africa.
Navigant’s 10 predictions of significant trends shaping the PEV market in 2014 are:
Click to enlarge.
Automakers will push for changes in the California ZEV mandates. California’s zero emission vehicle (ZEV) regulations require volume automakers to sell a minimum number of PEVs each year in the state. The requirement has been extended through 2025; however, the mandated sales levels are not likely to be met, Navigant notes.
Navigant’s analysis indicates that only buyers in California and Oregon will purchase sufficient numbers of vehicles in order to meet the ZEV requirement in 2018 and 2019. By 2022, not even California will meet the 10% ZEV requirement.
Navigant suggests that, since the automakers have already designed the vehicles that they will be selling in 2018, they will become more vocal in 2014 to push for changes; the firm expects the dispute to escalate, perhaps resulting in legal action.
Taking legal action over the ZEV mandates would be a repeat of the late 1990s: automakers filed a federal lawsuit that led California to water down its ZEV requirements beginning in 2001, thus effectively ending most automakers electric vehicle (EV) programs for more than a decade. The automakers may also put pressure on the other states that voluntarily follow California’s ZEV mandate. The governors in those states can choose to opt out of following the rules at any time, though currently eight states including California are co-developing strategies to increase EV adoption.
Since litigation is often the most costly and acrimonious way to settle a business dispute, a better alternative would be to create an environment where the ZEV mandates could be met. Possibilities include dramatic reductions in the cost of EV batteries that lead to more cost- competitive vehicles, greater state or federal incentives, or increasing taxes on fossil fuels.
Tesla Motors will have a bumpy year. Noting that 2013 was “by and large” highly successful for Tesla, Navigant suggests that the company will face a set of new challenges this year, the largest of which will perhaps be the scaling up the production of vehicles. Automakers and suppliers face greater quality control issues as production expands, and any perception of a reduction of quality would be magnified by the media.
Too, the planned expansion of the supercharger network in North America to address charging infrastructure concerns will require at least $62 million.
Electric motorcycles breakout. The growth in the two-wheel EV market over the last few years has largely been attributable to either e-bicycles or e-scooters. Sales of e-motorcycles have been increasing, but the market remains a tiny fraction of the e-bicycle and e-scooter market (5.2 million e-bicycles and e-scooters compared to about 30,000 e-motorcycles were estimated to have been sold in 2013 outside of China), Navigant says. Nonetheless, 2014 may be a breakout year for e-motorcycles.
First, there are more products available for purchase with new entrants ready to boost the market profile. Additionally, in a sign that regional economies are rebounding, the motorcycle markets in North America and Europe are showing signs of life after several years of decline. The luxury internal combustion engine (ICE) motorcycle market may be growing in both the United States and Europe, as well.
The result of all the factors is that 2014 could prove to be a significant year for the e-motorcycle. E-motorcycle companies’ product lines have come a long way, and lower-powered e-motorcycles that have not been commercially successful are being revised or dumped all together. In broader context, battery prices have come down providing competitive price points for e-motorcycles, and Tesla has proven that EVs can be lust-worthy vehicles. The result is a marketplace that is more competitive with better products. The finances of e-motorcycle companies are also more stable thanks to the recent focus on the fleet market, which provides a reliable base to pursue new market strategies and new customers in 2014.
PEV makers pursue revenue beyond vehicle sales. Mature automotive markets—i.e., North America and Western Europe—are close to peaking of sales of new vehicles. Sales of all light duty vehicles are expected to grow at a compound annual growth rate (CAGR) of just 1% annually in Western Europe and 1.3% in North America between 2014 and 2022, according to data from Navigant Research’s Electric Vehicle Market Forecasts report.
Since EVs require less maintenance and replacement of parts, which currently provides considerable revenue to dealers and automakers, car companies are looking to diversify their revenue streams. Automakers will want to tap into connectivity to offer information and entertainment services. Automakers are also launching their own carsharing programs (BMW, Daimler, etc.).
Another revenue avenue that automakers will vigorously pursue includes providing data about the power that is being consumed by their vehicles by partnering with energy aggregator services and utilities, such as demand response and ancillary services. Automakers like Ford are already looking to manage customers’ home energy by extending the data platforms that they are using to track vehicle power consumption.
Fuel cell car launches will spur a new round of “fuel cell vehicle versus battery electric vehicle” hype. Toyota, Honda and Hyundai are all bringing fuel cell vehicles to market in the US in the 2014-2015 timeframe—Toyota perhaps the most enthusiastically (earlier post).
The arrival of these vehicles will generate ample media coverage hyping the return of the fuel cell car, which had been declared dead by EV advocates and the media. Included in the frenzy will be contrived “battery electric vehicle (BEV) versus FCV” debates in the media and among clean fuel vehicle advocates. FCVs offer far greater driving range than most BEVs, and with their significantly higher price point, they will only compete with BEVs in the luxury vehicle market. Since the FCV and BEV platforms share many of the same systems (e.g., batteries, electric drive systems, etc.), the companies developing the components can achieve scale production more quickly if both succeed.
At the same time, a few geographic markets will continue to prepare for FCV introduction by building hydrogen stations. In October, California passed legislation committing to build 100 hydrogen stations by 2024. Germany, the United Kingdom, several Nordic countries, Japan, and South Korea are continuing to pursue their hydrogen infrastructure roadmaps. H2USA, the new U.S. initiative to develop a plan for hydrogen infrastructure rollout, is still in the early stages, and 2014 is unlikely to see any major result.
This upcoming year will thus lay the groundwork for what the early commercial market for FCVs will look like: clusters of hydrogen stations in a few regions of the world, which will become the de facto proving ground for early commercial FCVs that have been produced at low levels to test out the market. The FCV market is unlikely to take see major penetration until the end of the decade, so the competition in 2014 will be limited. With this lengthy timeframe of production ramp up, FCV makers are positioning themselves either to slowly jump in if the market looks promising or to quietly pull back on FCV programs over time.
EVs will play a leading role in carshare growth. EVs are good fit for those who do not want to own vehicles because of the savings and convenience of driving on electricity, Navigant notes. Many EV models are smaller and easier to park, and they uniformly include GPS systems as a standard feature.
Navigant looks for startups, traditional car rental agencies, and car makers to replicate the Parisian AutoLib program, which features only the electric Bolloré BlueCar model and has had amazing growth since its inception in December 2011.
The program now averages 62,000 rentals per week and will expand to 3,000 cars by the end of 2014. This model of saturating a city and its nearby suburbs provides great flexibility for drivers who primarily walk, bike, or rely on public transportation but occasionally need access to a car. IER, which runs Autolib, is expanding to Lyon and Bordeaux in France and will have its initial U.S. presence in Indianapolis. France has been the epicenter of EV carsharing programs, with the Auto Blue, AutoPartage, and Yelomobile fleets all including a considerable number of EVs in their fleets.
Wireless charging moves from the lab to the street. The first commercial wireless charging products will be shipped in small quantities in 2014. There will also be continued development of dynamic charging, a promising application particularly for the transit sector in 2014.
However, wireless charging still needs to move from retrofit equipment to a dealer option in order to see greater market penetration. For the near term, wireless charging will remain a promising premium option for a small segment of PEV customers.
EVs will reduce vehicle carbon dioxide emissions in the US by more than 1 million tons. Data from Navigant Research’s Electric Vehicle Market Forecasts report shows that by the end of 2014, the United States will have just over 304,000 PEVs on its roads. Of these, 170,000 will be plug-in hybrid electric vehicles (PHEVs) and 134,000 will be BEVs.
Assuming that these vehicles replace a car that would have gotten the current fleet average of 25 mpg and that the annual electric miles driven was between 10,000 and 12,000, the total reduction in CO2 emissions in 2014 will be about 1.2 million tons.
More than 2.2 million electric-drive motors will ship in 2014: HEVs, PHEVs, and BEVs. In 2014, light duty electric traction for HEVs, PHEVs, and BEVs, will surpass the 2 million mark globally in annual shipments for the first time. More than 1.9 million HEVs will be sold globally in 2014, far outpacing the sales of BEVs (216,235) and PHEVs (130,226).
Most original equipment manufacturers (OEMs) have now invested in their own electric motor manufacturing capability for the high-power drive motors, but the next wave of technology is likely to be electrification of ancillaries such as power steering, brake assist, and heating, ventilation, and air conditioning (HVAC). The ICE is also likely to get efficiency improvements from electric oil and water pumps. All of these represent loads that have traditionally taken energy from the engine by being driven directly and continuously from belts connected to the crankshaft. What is not yet clear is if OEMs will develop their own small electric motors or look to purchase off-the-shelf. The 12V supply is seen as a limiting factor for major electrification and adding a 48V subsystem appears to be the preferred solution in the immediate future.
Vehicle-to-grid pilot projects will expand and begin generating revenue across the US. Vehicle-to-grid (V2G) technologies have been tested sporadically during the past few years; V2G revenue generation in the United States began in earnest in 2013. (Earlier post.)
During 2014, the number of projects will expand to additional regions thanks to the Federal Electricity Regulatory Commission’s (FERC) Order 755, also known as “Pay for Performance,” requirements. The order, passed in late 2011, mandates that the compensation be higher for assets supplying frequency regulation markets that quickly and accurately respond to the grid operator’s generation signal, which plays to the strength of EV batteries. The FERC’s Order 755 significantly enhances the revenue potential that PEVs can accrue per kW of service provided to the grid. The order applies directly to independent system operators (ISOs) and regional transmission organizations (RTOs) in the United States. ISOs and RTOs have begun to implement the order, and all ISOs and RTOs should have full implementation in 2014.
Selling in new markets will also be a test for Tesla. The first deliveries of the Model S in China are anticipated to take place in 1Q 2014, but as of the start of the year, the company cannot use its brand name due to a local trademark issue.
Tesla is also readying the Model X, a more affordable crossover for launch by the end of 2014. Manufacturing and distributing vehicles in multiple regions of the world presents many logistical issues, though established automakers have overcome similar challenges in the past.
Finally, the first real competition in the luxury EV space will emerge this year. Plug-in models that will be fighting for market share include the BMW i8 and i3, the Audi e-tron, the Cadillac ELR, the Mercedes B-Class Electric Drive, and the Porsche Panamera S E-Hybrid. Since consumers will have more options when it comes to luxury EVs, Tesla may see a decline in overall market share for 2014.
Throughout 2014, Tesla Motors fortunes will have tongues wagging (and international car buyers salivating) as the brand becomes a global phenomenon. The company has had a nearly flawless record of execution thus far, but as the stakes get higher, even the smallest of missteps will likely be exaggerated as the company will continue to be one of the focal points of the EV industry.
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