The headlines about electric vehicles markets are not great right now.
There’s plenty for everyone right now when it comes to electric vehicles in the news. If you think EVs are a sham and doomed, you have all the supportive headlines you need. If you believe EV markets are in inexorable growth, then there are plenty of (less visible) news stories to support that take as well.
So what’s actually happening in EV markets?
At my firm (note: Spring Lane Capital) we invest into clean transportation markets (among other markets), such as into EV charging and EV financing, but we have also seen 100-fold more opportunities than we have actually invested into in these markets. The electrification trend isn’t so universal that anyone can make a good investment into anything that moves (pun intended).
We along with everyone else see the headlines being mostly negative right now. But we also see more tailwinds than headwinds for the electrification of transportation. That said, the progress toward electrified transportation isn’t universal, and on the ground, you can see how it’s a patchwork.
The electrification of consumer vehicles, especially commuter vehicles, isn’t slowing down. The headlines that are out there may talk about how the RATE of growth is slowing, and how that’s affecting various OEM capital expenditure plans. But it’s still clearly strong market growth.
The latest Bloomberg NEF survey data on EVs shows this well. Consumer EV sales continue to grow, especially if you leave Tesla out of it. Tesla is having its own mostly self-inflicted issues right now, but other electric OEMs continue to grow.
On the commercial and industrial front, however, it’s a complete mixed bag. EVs are now 18% of consumer vehicle sales and 26% of bus sales… but only 4% of vans and trucks sales.
What we see on the ground is that large vehicles like 18-wheelers are still dominated by just a couple of OEMs, and those manufacturers aren’t lowering their prices. They have enough demand for their limited supply right now thanks to first-movers like Amazon and the like, and they don’t see the need to reduce their prices to have demand meet their supply. However, that means the rest of the audience, prospecting for when to make the transition, doesn’t want to make the jump. At such high prices the numbers still don’t make sense.
For smaller vehicles, however, especially with the reduced and fast-falling cost of batteries, the economics have already flipped. It simply makes more sense now to buy an EV as a sedan, at least as far as costs alone are concerned, than a traditional engine.
Tesla decided to go on a cost war, and dramatically reduced their costs a few months back. They’re also increasingly out of favor among some portions of the market thanks to the overt wackiness of their CEO, so the reduced prices didn’t necessarily result in increased volumes. Nevertheless, the lowered prices also had a big impact on the fledgling market for used EVs as so much of the installed base was Teslas, so this meant a big drop in used EV prices as well.
Overall, what this means is that EVs are cheaper than ever, new and used.
Yes, some OEMs like Ford have seen slower market growth than the astronomical targets they had planned around. But the fact is that smaller-model EV markets continue to grow well. Tesla being a bit of an exception.
But also, the commercial and industrial (C&I) EV transition is going even slower. This is where the market is really falling short.
It turns out (shockingly) that businesses don’t want to jump fully into transitioning to electric fleets until the charging side of it is figured out. And the chargers for such customers are moving very slowly. A number of startups that are focusing on helping commercial fleets through the transition are finding that their pace of growth is dictated largely by the pace of charger deployments, and those are dependent upon slow factors like permitting, interconnection approvals and transformer availability.
So in short, the consumer EV transition continues apace, and is still doing very strongly. Maybe Tesla isn’t doing so well, but the other OEMs are growing quickly. Maybe the overall market isn’t going as crazy as some had expected, but it’s still growing quickly.
But C&I electrification is going much slower than expected, and is being held back mostly by the surprisingly high continued cost of some large models, and the overall slow pace of charger rollouts.
This will change. The C&I trend will eventually catch up to the consumer trend. And the fast-falling prices on batteries will accelerate ALL of these markets.
But yes, 2024 has seen a slowdown of the growth trajectory. It’s still growth. 2025 will be a banner year, even if things don’t speed back up.