The worldwide new car sales slowdown began in 2017, accelerated in 2020 as a result of COVID, and while it has recovered in several markets in 2021, it is still well below the levels of 2019. Plug-in electric car sales increased by more than 43% year over year, from 2.26 million in 2019 to 3.24 million in 2020. In 2020, plug-in electric vehicle sales – including full battery electric and plug-in hybrids – will account for 4.2 % of global new car sales.
The adoption of electric vehicles looks to be following the same pattern as that of all of our most widely used current technology. If EVs continue on this road, it won’t be long before the ICE (Internal Combustion Engine) vehicle follows in the footsteps of (and surpasses) the horse and carriage. This is far faster than current industry forecasts of 30 to 50% new EV sales by 2030.
Image Source: EV-Volumes.com
Surprisingly, not all countries are at the same stage of EV adoption. Norway (which has set 2025 as the deadline for all new non-EV sales) is already nearing the peak, with monthly PEV sales reaching 84.7 % in July this year and full battery EVs accounting for 61.4 %. Many of the EUs neighboring countries aren’t far behind. In July, Sweden had 37.6% PEV sales, Germany had 23.5 %, and the United Kingdom had 17.1%.
Another fascinating sign of the times is the demise of passenger vehicles powered by diesel engines. For example, new diesel passenger car sales in the UK decreased to 7.1 % in July this year, down from 16.5 % a year earlier, while BEV passenger vehicle sales (at 9%) surpassed diesel vehicle sales for the first time.
With the continued decline in new ICE vehicle sales that began in 2017, it’s worth noting that used car prices have risen unexpectedly – initially with recently second-hand automobiles, and then with older ones.
Traditional automotive pundits have linked the drop in new car sales and rise in used car prices to a combination of reduced new car availability due to the chip crisis, tightening economic conditions causing people to delay or avoid new car purchases, and a related increased demand for used cars causing decreased availability and higher used car prices.
Heard of the Osborne Effect?
Customers stopped buying the company’s initial computer product after the premature announcement of its replacement before it was available, and the term was coined after the failure of the Osborne Computer Company. Wikipedia defines the Osborne Effect as “a social phenomenon of customers cancelling or deferring orders for the current soon-to-be-obsolete product as an unexpected drawback of a company announcing a future product prematurely”.
This is easily applicable to electric vehicles: cars that can accomplish everything an ICE vehicle can do have been around since the Tesla Model S debuted.
Given its capabilities and the transition to scale manufacturing indicated by the unveiling of the Model 3 (which, ironically, went on sale in mid-2017), customers are delaying their purchases of new ICE cars as they wait for mass market EVs from the other manufacturers.
This is because electric vehicles are considered as a superior (and unavoidable) transportation technology that is on the verge of becoming widely available. This is especially true given the expectation that EV pricing would soon be equivalent to ICE prices.
The major manufacturers have effectively fed the Osborne Effect by repeatedly announcing upcoming EV models – but delaying their release or producing them in small numbers – in an effort to appear to restrict Tesla sales.
Falling new ICE sales and soaring second-hand sales (and thus pricing) make sense in this context. Buying an ICE vehicle makes less and less sense as the EV versus ICE price parity point approaches, as it is increasingly likely that it will fast become obsolete, with a resale price to match.
GM, Ford, Volvo, and the Volkswagen Group have all set timelines for the end of ICE vehicle manufacturing ranging from 2025 to 2035, while others have set targets for the electrification of their new fleet offerings.
Meanwhile, the EV market leader - Tesla - is planning to double current 2020 production of roughly 500,000 vehicles to 1 million this year, with two more Gigafactories nearing completion and anticipated to start production late this year or early next year. And we can expect an affordable, mass market Tesla coming to market in the future.