Smith's Exotic Car Imporium

The road to a fully electric future was paved in 2020 with potential new partnerships between automakers and Electric Vehicle (EV) start-ups, advancements in battery range and heightened government efforts to reduce CO2 emissions. J.P. Morgan’s previous EV report explored what the landscape will look like by 2025, cited as the tipping point for the industry, but how far has that wave really accelerated and what gains will the market still need to bypass?

Since J.P. Morgan’s previous EV report in 2018, Battery Electric Vehicle (BEV) adoption has progressed only roughly as expected in North America; rising from 1% in 2017 to 2% in 2018, 3% in 2019, and a forecast of 4% for 2020, according to J.P. Morgan Research estimates. This contrasts from the adoption in Europe and China, where growth has been much faster. J.P. Morgan Research attributes this lag, in part, to the relaxation of Corporate Average Fuel Economy (CAFE) standards in the United States earlier this year, although notes the trajectory of EV penetration could change again should priorities shift in any new political administration.

Tesla’s recent Battery Day detailed plans to significantly lower the cost of its batteries, while also increasing their power and range. Cost and performance gains are primarily expected to stem from design and material improvements, as well as better packaging into its vehicles. Tesla targets a +54% improvement in range, a -56% reduction in cost per kWh, and a -69% reduction in upfront investment per GWh to begin to be realized by approximately mid-2022. However, according to Brinkman, benefits are about three years away. “We generally believe Tesla can at least maintain its comparative advantage in batteries, allowed by its earlier start and currently greater scale,” he said. Tesla also plans to debut an inexpensive $25K model within the next three years, enabled by its lower cost batteries; although, Brinkman anticipates delays. “The ability to price an EV that low seems contingent upon Tesla realizing its targeted battery cost savings, which it does not expect for another three years,” he said.

In the past two years, the European Union (EU) has heightened its focus on combatting climate change with new plans to bolster the European Green Deal. In late 2019, members of the European Council agreed on the goal of achieving a climate-neutral EU by 2050. To support this, the European Commission announced new plans in July for its clean energy strategy including the electrification of end-use sectors, such as autos. Its plan calls for 1m EV charging points, and the use of clean fuels such as renewable hydrogen. Alongside the European agenda to decarbonize the economy, BEV penetration rose in the first half of 2020 across France, Germany, Italy, Spain and the U.K., with these markets comprising 63% of EV volumes across the EU in 1H20, according to J.P. Morgan Research estimates. BEV penetration in September 2020 in these five markets was approximately 6%, up from 1.6% last year and more than 27% of sales are now electric (vs. 8% in 2019) including pure BEV, plug-in hybrid, hybrid and mild hybrid technologies.

In September, EVs had a combined market share of 27.4% in these five countries, up from 21% in July 2020 and 17.9% for the full second quarter, according to J.P. Morgan Research estimates. During September, 59k BEVs, 45k plug-in hybrid electric vehicles and 166k hybrids were registered, implying a market share of 6%, 4.6% and 16.8% respectively. “This upward trend offers a clear guide for where Europe is heading,” according to Jose Asumendi, European Autos Research. “We expect this continue throughout the year and into 2021, with tailwinds from a robust EV launch calendar and supportive government policies that help automakers meet their C02 emission targets.” At least 23 new BEV models are expected to roll out in 2021 and by 2022, 14 additional models could debut.