The Fuse

EV Sales Finish H1 With a Robust June as Longer-term Outlook Brightens

by Matt Piotrowski | July 06, 2017

Electric vehicle sales are continuing to increase, rising by more than 20 percent year-on-year in June, as government subsidies, aggressive marketing by carmakers, and declines in battery costs drive consumers toward EVs or plug-in hybrids. For the second quarter, total sales were 47,253 units, up by roughly 26 percent year-on-year, as Toyota, Kia, and Fiat did particularly well.

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The cumulative number of sales has reached about 653,000 vehicles, up by more than 40 percent compared to this time last year, in large part because of the variety of models of alternative vehicle models now available, giving consumers more choice.

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EV sales are continuing to increase, rising by more than 20 percent y-o-y in June, as government subsidies, aggressive marketing by carmakers, and declines in battery costs drive consumers toward alternative vehicles.

Higher EV sales are occurring as total vehicle sales are down and gasoline prices remain low. For the first half of the year, automakers reported a decline in car sales, which fell by 11 percent, but an increase in demand for light trucks and sports utility vehicles by close to 5 percent. For 2017, total sales of cars and light trucks are expected to be around 17 million, a strong figure, but below last year’s record of 17.6 million units. Although overall car sales are now in a “post-peak” era and likely to stagnate, EV sales are expected to rise significantly in the coming decades. For instance, Bloomberg New Energy Finance’s latest forecast says EVs will make up a majority a new car sales globally by 2040 as a result of ongoing declines in battery costs.

Volvo reveals EV plans

The strong sales come at a time more auto manufacturers are revealing ambitious EV plans. Volvo said Wednesday that every new model it launches starting in 2019 will have an electric motor, whether running fully on electricity or as a hybrid. The company said that this move is part of “the historic end of cars that only have an internal combustion engine (ICE) and [will place] electrification at the core of its business.”

Volvo, a Chinese-owned company based in Sweden, is likely moving forward with more aggressive EV plans in part because it is figuring autonomous vehicles into its long-term plans. Manufacturers and transportation experts see the evident synergies between AVs and EVs. Volvo says that it plans to have AVs with zero accidents on sale by 2020 and currently has pilot testing program in Gothenburg.

For the U.S., Volvo’s strategy won’t have as much of an impact as it will in other markets, given that the company’s sales are relatively low here.

Volvo’s move is also likely in part to support China’s aggressive EV strategy to reduce pollution in major cities. In the European market, where Volvo has a strong foothold, the company can market EVs as an alternative to diesel-fueled cars, which have lost their luster as a result of environmental reasons and the Volkswagen emissions cheating scandal. For the U.S., however, Volvo’s strategy won’t have as much of an impact, given that the company’s sales are relatively low here. Volvo’s sales were just under 91,000 vehicles in the U.S. last year, or about 0.5 percent of the country’s market. Furthermore, Volvo’s plan is for only new models introduced in 2019 or after, not for those already being produced.

Tesla, meanwhile, announced this week that its all-electric Model 3 sedan will be introduced at the end of this month at $35,000, well below the price for its other models. The $35,000 figure, however, does not include any add-ons. Elon Musk, the company’s CEO, said the Model 3 would cost on average around $42,000. There’s also a backlog that potential customers have to consider. The delivery estimate for any new order would be mid-2018 or later, according to the company, prompting analysts to question the viability of company’s ambitious targets.

With increasing sales of EVs and more companies rolling out new models at a time of low gasoline prices, the outlook for further electrification of the vehicle fleet is improving.

While the news coming from Volvo and Tesla are positive for EVs, headlines may exaggerate the overall impact. As noted above, Volvo’s aspirations will not likely translate into a surge of EVs in the U.S., while Tesla’s price is still higher than advertised and customers have a long wait for their vehicles. Nonetheless, given the increasing sales of EVs and more companies rolling out new models at a time of low gasoline prices, the outlook for further electrification of the vehicle fleet is improving.

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