The Exchanges

Q Okay, so we've talked about Ford GM Stellantis, we've talked about Tesla, um, What about Hyundai and Kia? I mean, they're, they're, they seem to be the sort of insurgent players in the, in the EV space, at least in the U.S.,

A Yeah, so they had an impressive twenty-twenty-three. They grew by about 60% year-on-year from 22 to twenty-twenty-three, going from about 73,000 as a group up to about a 120,000 units. And again, it's always a little tricky because we have preliminary data that comes in and it gets updated a little bit. So even since I last kind of published a piece on it, we went from about a 117,000 up to about a 122,000. Their strategy has been A little bit similar to BYD, in that they don't just have two EVs, they have the Ioniq V, which is a crossover. They have the Ioniq VI, which is a sedan. They have the Kia EV-VI, which is basically similar to the Ioniq V, but, you know, a different kind of style from Kia. Um, one that I'm particularly excited about, and I think the market is as well, is the Kia EV-IX, which is the first major EV outside of the Rivian R-I-S two-bit three-row SUV, kind of reaching out to that family demographic, but The Kia EV-Nine starts at a much lower price in the 50,000 dollar price range. And then finally, Kia and Hyundai have more affordable EVs in the form of the Kia Niro and the Hyundai Kona. So, you have some PHEVs thrown in there, and no matter how you slice it, you have a bunch of different options for consumers. Part of this is battery expertise being built up over time. Hyundai and Kia had EVs in the first generation from about 20 16 to 20 19 that weren't p…

AI assessment note: “They grew by about 60% year-on-year from 22 to twenty-twenty-three”

Q make sense of all the public noise going on about electric vehicle sales in the United States and the outlook for them. Uh, let's start with, like, what all the headlines have said. Like, can you just kind of run me through the, like, litany of recent news that has come out that is delivering a sort of bearish sentiment to people who are looking to the EV market here?

A If you went back to really September of last year, you'd be having so many bad headlines that you could fill up a whole episode just reading takes from the Wall Street Journal saying things like the EV bubble is deflating, dealers complaining about EVs piling up on lots. Even USA Today, I think, had a piece which isn't, you know, politically or anti-EV in any way saying that consumers are not buying EVs despite the fact that there are Generous tax credits under the Inflation Reduction Act. Um, we've also seen specific models sitting on lots for a while. So you run the gamut, you pick the paper, people are saying that EV's adoption is on the decline. Um, but we at BNEF have a lot of data, so we, we can dive into that. I think the big takeaway when reading through these headlines, and the way I like to think about it is, are EV sales actually going down, or is People's expectations of EV growth changed from where maybe it was a couple years ago, um, and it's a more macro conversation, though. What is a successful U.S. EV transition, and how do we get there? I feel personally that twenty-twenty-three, based on the data, was a pretty successful year for the market, and a lot of the open questions around twenty-twenty-four. But if you're just reading the headlines, you might think the sky is falling that EV sales are actually going down. By the end of twenty-twenty-three, according …

AI assessment note: “Wall Street Journal saying things like the EV bubble is deflating”

Q Well, that's a good point, right? So let's compare, let's look at, ultimately, EV sales growth matters, but it doesn't only matter in a vacuum, it matters relative to overall vehicle sales. So looking at it from the perspective of market share, what have we seen in terms of EVs?

A Yeah, so if we go back to, I graduated from grad school in 2019, the EV share of sale in the U.S. was about two percent, and that was back in 2019, so about four years ago, if you look at the full four years. In 2020, it was finally starting to show some signs of growth, because in 2021, you had EV share of sales at about four and a half percent. In 2022, it reached about 7.5%. And then last year, it was about 9.5%. So again, that's BEV and PHEV together. But the BEV and PHEV split is 8020 in the US because Tesla has played such a dominant role. Again, we want to see US EVs break that kind of 10% barrier. It would have been in our growth expectations. We saw it happening last year. What ended up occurring is Overall, car sales bounced back too, so everyone was having a good year in terms of drivetrains. You had hybrids doing really well, you had EVs doing really well, and you had the total market doing well, ending up at about 15 and a half million vehicles. We kind of, in our estimates, saw closer to fifteen million vehicle sales for last year. So again, that's a really key point to hone in on, not just for the U.S. market, but as you're looking at Europe and China, what is EV share of sale versus just absolute? Because the U.S. in terms of absolute market Sales was second after China, which is awesome. But if you look at Europe, you're seeing more in that 25% to 30% for UK, G…

AI assessment note: “In 2022, it reached about 7.5%. And then last year, it was about 9.5%.”

Q Stellantis and look at what's happening with those individual companies. You can point out that Tesla has limited models and, and they use that to explain in part why they, Why they're expecting less growth next year, though they didn't define it particularly highly. What about, though, the Hertz sell-off? I mean, first of all, explain what Hertz announced, um, but then I'm curious what your take on it is.

A Yeah, so Hertz announced they were going to be selling about a third of their fleet, um, around 20,000 EVs, given that they had seen issues with the expense and the operating and maintenance around it. And also, uh, And Hertz said a little bit less to this point, but they took a big residual value loss on those Hertz's. So when Hertz was buying those Tesla models, it was at the peak, peak, peak of inflated car prices. Some of it spurred on by Russia's invasion of Ukraine. Some of it spurred on by high commodity costs, including kind of spikes in lithium that occurred in 20, 22. And so what you saw, and let's use the Model Y as an example, Many of the Model Ys that Hertz was likely to have bought, because that's when they made their announcement that they were beginning to purchase those EVs, was in the 60,000 dollar range, or the high 50 to 60,000 dollar range. If you look at the kind of Model Y today, Buying a new Model Y is going to cost you closer to 40 to 45,000 dollars. So that's nearly 20,000 dollars cheaper in terms of the individual unit, and really about a third of the price. So, in addition, you had a charging issue. Hertz hadn't built up enough charging infrastructure at their various facilities. They weren't seeing the full kind of benefit of charging at home or residentially, as opposed to having to use, uh, specific services to recharge their EVs. I even took a, a…

AI assessment note: “Hertz announced they were going to be selling about a third of their fleet”

Q All right, so stepping back on all of this, then, like, here's a simple way to put it. So the EV sales in the United States grew, you said, around 50% in twenty-twenty-three. What is your expectation for twenty-twenty-four, twenty-twenty-five? Like, what, what do we think is gonna happen here?

A So we, we just released our year ahead, um, at the end of December, and we see about 32% growth. So you can say in some respect that the, the critics are correct in that there will be a sales slowdown this year, but part of it is for the reasons that we've been talking about, right? So When you start to see automakers changing their near-term views, whether it's production plans or model delays, um, you have to take that into account. One GM vehicle that I'm particularly excited to see how it does, assuming everything else is kind of firing on the correct cylinders, is the Equinox EV. That EV was supposed to come out in 2023. It's been delayed to probably the middle of this year, and given everything else going on with the Blazer, um, and the Silverado, we don't know exactly when it's going to ship. But that has an impact on our kind of sales expectations. And then when you take into the fact that Tesla is not going to grow necessarily by too much, you really are relying on the improvements of Rivian, Hyundai, Kia, Volvo to power the US market, and then Tesla to kind of stabilize. So for that reason, you know, we have a 32% kind of base case for this year. I think Cox Automotive has released their year ahead, and that's about 35%. Year on year growth. So neither of these are kind of end of world EVs falling off. Um, but again, it's a slowdown from 50%. Ultimately, as your base …

AI assessment note: “we just released our year ahead, um, at the end of December, and we see about 32% growth.”

Q point something. So, you know, EVs still growing faster than the overall market. So I guess, you know, I still want to, I want to tease out this, um, What has happened versus what, what seems like it will happen? Like what, why, who, first of all, which automakers have been saying that they're going to pull back on production plans? And what are we supposed to make of that?

A And I think this is where we get into the interesting story, not only for what happened last year, but as you're looking into 20, 24 market share and 25 and 26. I mean, you can't talk about cars in America without talking about the big three. General Motors, Ford, and Stellantis. And really, they had mediocre years last year, right? So let's take Ford, for example. In twenty-twenty-two, they had around 60,000 EV sales. Pretty solid, but, you know, nothing to write home about when Tesla alone for the Model Three and Model Y was selling somewhere in the 300,000 range in twenty-twenty-two. Flash forward to twenty-twenty-three, Ford has about 72,000, you know, EV sales. So there was growth, but there wasn't this massive growth. There wasn't doubling of sales. Ford also has only two EV models, the F one 50 Lightning and the Mach-E. So again, one of those models, the Mach-E, has been around for four years. And the Lightning, we're going to get into, I'm sure, all of the pickup challenges that EVs are facing in that segment in particular. But again, not huge growth. Stepping over to GM, I think an even more complicated and potentially more problematic situation there. So GM has been ramping up its battery platform, uh, Ultium, over the past couple of years. So that includes opening new facilities and partnerships, uh, with LG. And really this new platform hasn't taken off yet in terms…

AI assessment note: “you can't talk about cars in America without talking about the big three.”

Q you mentioned BYD, and, and we are talking about, primarily talking about the U.S. market, um, but still, I want to ask about the Chinese auto OEMs. Like, what, what is both, what's happening in In China and globally, and, and do you foresee a world in which they do enter the U.S. for passenger vehicles? Obviously BYD is already here for, for electric buses and stuff like that. Yeah.

A So what's crazy about BYD is if you go and you look at their sales data, going back into 2010, 20 11, 2014, 2015, really up until about 20 18, 2019, they were doing about 400,000 car sales Annually. So you would just see, and that's when they were doing gas car sales. You'd see 400,400 1400 thousand. In about twenty-twenty-two, they make this choice, maybe beginning of twenty-twenty-two, end of twenty-twenty-one, that they're going to phase out the sales of internal combustion engine vehicles. We're just going to sell new energy vehicles, as they're referred to in China. You know, your best PHEVs, FCVs, if there are any FCVs. And BYD suddenly starts to see this kind of explosion in EV production and Um, they go from about 400,000 units to about 1.6 million units in 2022. And then last year they hit three million units in 2023. And at that point, BYD begins to kind of go global. They're looking at the European market. I had spoken to some folks in Israel and they said that BYD had the top selling model in the first half of 2023 in Israel. Um, they started making efforts to go into Brazil. Signing partnerships there. Not that they're manufacturing vehicles there, but really aggressive on top of their performance in the Chinese market. And so they kind of went for it. You know, as we were just talking about with Hyundai-Kia, there's an element of how serious are you about the EV t…

AI assessment note: “BYD begins to kind of go global. They're looking at the European market.”

Q Yeah, the between two waves, it's like between two ferns, but of cars. Um, so Tesla would be the counter example to Ford GM and Stellantis here. Is it a counter example, or are we learning that it's subject to some of the same challenges?

A I think Tesla's challenges are less on the scale-up side, right? The Model Y, at least according to Tesla, was the top-selling vehicle in the world last year, bar none, um, at about 1.2 million EVs delivered. And one thing that's interesting about Tesla, and I'm sure many of your listeners know, they're pretty opaque on their data, and pretty opaque on how they even release deliveries. So Tesla typically will group the Model Three and the Model Y together on any of their quarterly deliveries. And so for last year, they would say something like, oh, 1.7, you know, five million of all the vehicles sold were three Ys, and for the first time I've ever seen, they were like, oh, the Model Y did really well. Here's the actual data on the number of Model Ys delivered. Even for us at BNEF, we have a data provider that will break out, you know, by region what the Model Y, you know, is based on their estimates, um, and then we'll have to kind of rejigger it based on, you know, what Tesla says and make sure that everything lines up, and there's an intensive data process we go through. Anyway, in terms of Tesla, where their challenge has been is really they only have two high volume models, and they have over the past four years not introduced until the Cybertruck any new model, but you almost have the three and the Y in a league of their own, and then you have what Tesla refers to as other…

AI assessment note: “I think Tesla's challenges are less on the scale-up side, right?”