All this fuss! The year has seen a modest deceleration of EV sales. It is a short term blip and the consequence of entirely predictable economic conditions.
For a start, the EV sector is still suffering from long Covid. Cash rich consumers in a post-pandemic era went on a wild spending spree. Many EV sales back then were drawn forward from today. Same applies to most other desirable gadgets from smartphones to laptops. Higher interest rates have also dampened consumer spirits.
Moreover, affluent early EV adopters have already purchased. In any disruption they represent a small but important part of the sales cycle. That short term sales spike has now been passed.
Most significantly however, It’s still early days for the mid to low-price EV options that will really mobilise the mass market. These growth and maturity phases at the peak of the hockey stick have yet to be reached.
We can take a look at the impact a more mature market will have by admiring the progress of BYD. The Chinese company focusses on affordable, mass market vehicles at prices that scare the life out of US and European car makers.
The BYD Seal, a mid-sized saloon that started selling last year makes a strong case. It retails in China for the equivalent of just £19,882. This is £2400 cheaper than Tesla’s Chinese-made Model 3 SR and £11,200 less than the locally produced VW ID3.
The result is transformative. Last month BYD announced annual net profit of £3.2bn and that is taking into account of a fierce price war in its domestic market. This contrasts with Ford’s $4.7bn operating loss of its EV division for the same period.
Clearly car makers, not just BYD, can achieve vastly more progress when they have volume to leverage.
My belief is that BYD will cause an EV sales storm in Europe and the US. And will eventually settle a manufacturing presence in both markets, to overcome likely import tariffs. Its has signalled such intent in Hungary.
BYD is fundamentally very strong in its model mix and also production logistics. It has a 75 per cent in house component build, compared to Tesla’s 46 per cent. This makes BYD more resilliant to supply chain pressures and means it can import scale economies. According to analysis by UBS, BYD can profitably sell a mid-size EV made in Europe for just over £28,000.
Research by AlixPartners found that seven in ten Americans, Britons, French and Germans would consider an EV from China if it cost 20% less than a non-Chinese alternative.
So, not quite there yet but way past the point of no return.
At Ventum Associates we keep a very close eye on market developments in the e-mobility space.
We are currently talking with significant movers and shakers about their plans. This includes investment, merger and acquisition strategies. If you would like to share your company growth vision with us, get in touch: stewartm@ventumassociates.com