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In 2024, sales of battery electric vehicles (BEV) settled to
single-digit growth. Though BEV demand continues to grow, the
mismatch between naturally progressing demand and automaker
forecasts set the world on edge.
Given the billions invested and being deployed in the
transition, concern is warranted. Volume has largely increased,
though Tesla has seen softening demand for several of its products.
Tesla’s outsized share of BEV sales has a significant impact
outside of mainland China. At the same time BEV demand has entered
an inconsistent and choppy growth phase in most markets, mainland
China automakers are making inroads with less expensive BEVs. The
ability of some mainland Chinese automakers to offer lower-cost
BEVs and remain profitable has also set most other automakers on
edge, as BEV profitability remains elusive across the industry.
A bright moment in US light-vehicle registrations saw an 18%
year-over-year increase in battery electric vehicles (BEV)
registered in July 2024, the highest of the year so far and above
the 6.0% the overall market improved. The gain was supported by
increasing incentives as well as having more models available at
higher inventory levels. In July 2024, BEV share climbed to more
than 8%. Year to date, BEV registrations are at 7.6%, versus 7.2%
at the same point in 2023. BEV registrations grew 8.6% in the
January to July 2024 period; the total market has improved 2.5% in
the same period.
However, this pace is not what many automakers counted on when
making investment decisions in the 2020-2023 period and the first
half of 2024 was dominated by stories covering a perceived slowdown
in BEV demand. It is more accurate to say that BEV demand did not
meet high projections than to say demand was slowing.
However, in the first seven months of 2024 US light-vehicle
registrations saw more growth in traditional hybrid-electric
vehicles (HEV). Plug-in hybrid electric vehicles (PHEVs) have
improved as well, though that solution still sees slower adoption
than either BEV or HEV. In July 2024, HEV registrations were at
10.4% of the total market and volume grew to just under 146,000
units for the month, compared with about 121,000 BEVs being
registered. In the January to July period, HEVs accounted for 9.2%
of all registrations.
The transition to BEV as a dominant propulsion system is likely
to continue to be inconsistent. Availability in terms of inventory
and vehicle segments still lags behind traditional internal
combustion engine vehicles, pricing is still higher than comparable
ICE products, infrastructure does develop slowly, and there are
still miles to go in terms of consumer education, awareness and
engagement. These issues take time to resolve.
In the meantime, many automakers are revising timing for BEV
investment. BEV profitability remains elusive and there remains the
need to support customers not ready to make the BEV switch, while
still addressing regulations. In 2024, it has become obvious that
the transition to BEV dominance will be inconsistent and less
predictable. HEV and PHEV will remain important for a longer period
than some automakers were targeting.
Automakers are adjusting their plans to ensure the right product
mix at the right time as well as managing capital investment
carefully. BEV production targets have been cut in the immediate
term, products canceled or delayed, longer-term BEV targets
adjusted, and capital investment re-timed. Automakers have not
abandoned the longer-term goal of zero emissions vehicles as part
of the path to a bigger goal for net zero carbon emissions.
Ford and GM have both retimed BEV capacity development, delaying
when programs will come on line and how quickly capacity is being
increased. Ford most recently cancelled two BEV three-row utility
vehicles in the Ford Explorer and Lincoln Aviator space and will
use hybrid electric propulsion systems instead. GM lowered
production targets for 2024 and 2025 and delayed the retooling of a
BEV full-size truck plant. GM has not announced as many changes to
specific product plans but is expected to have canceled or delayed
several projects internally as well. GM’s Cadillac division has
stepped back from its plans to shift to an all-BEV lineup by 2030,
and now says it will offer the “luxury of choice” when it comes to
powertrains. GM has delayed opening of its planned fourth US
battery plant to 2027, aligning with the delays in BEV production
plans, and its partner LG Energy Solutions is slowing development
of one of its US battery plant projects.
Mercedes-Benz and Volvo Cars have also slowed some of their
expectations for electrification. Volvo Cars dropped its forecast
from expecting 100% electrified powertrains (BEV or PHEV) in 2030
to between 90% and 100%. Volvo Cars does expect to see 50% of its
sales in 2025 be electrified vehicles, however. Mercedes-Benz is
increasing investment in ICE projects to ensure its engines remain
competitive as the change to BEV has not come as quickly as it
expected, and Mercedes-AMG has said it will maintain V8 engines
longer than planned.
On the other hand, Hyundai announced a major strategy update to
invest billions more into electrification as well as targeting
annual sales of 5.5 million by 2030; by 2030, Hyundai expects 36%
of its global sales to be BEVs, though also planning an extended
range BEV by late 2026 and not letting up on its goals for hydrogen
powertrains. After Hyundai announced plans to spend US$90 billion
over the next 10 years to support its initiatives, GM and Hyundai
announced a memorandum of understanding to discuss potential
partnerships for platforms, electrified vehicles and BEVs. It is
far too soon to know what will result from those talks. Yet, if the
two companies work together to reduce costs over the next decade,
this could have a substantial impact on the market by making more
affordable electrified products available faster while the
automakers potentially see profitability faster.
Though a transition to zero emissions transportation remains a
central target, consumers are weighing in. In 2024, consumer
purchase behavior is causing automakers to rethink investment
timing. The dynamics of this year reinforce the complex nature of
the change to increasing BEV adoption, that consumers do hold
significant power along the way, and the importance of a nimble
corporate strategy.
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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
