Plug-in Electric Vehicles (PEVs) Sales Stumbled in the US, But Are Poised for Recovery

By: Donatas Bimba

    Until 2015, the US was the largest market for plug-in electric vehicles (PEVs), recording double-digit sales growth every year since 2010. But in 2015 sales volume dropped for the first time since electric vehicles were introduced. Rise of turbocharged engines along with low fuel prices discouraged drivers from choosing range-limited PEVs in 2015. Nevertheless, PEV sales are set to rebound in 2016 and post solid growth afterwards driven by developing charging infrastructure and more affordable models introduced to the market.

    US electric car market declines in 2015

    There were around 114,022 plug-in electric vehicles sold in the US in 2015 – 4% decrease compared to the previous year. Tesla Model S became the best-selling PEV in the US with 26,200 registered in 2015, followed by Nissan Leaf and Chevrolet Volt. These three models accounted for over half of all PEV sales volume in 2015.

    Figure 1. Best-selling PEV models in the US in 2015 (% share of total sales volume)


    Source: Euromonitor International from Hybridcars.com

    Weak demand for electric vehicles also resulted in the US losing its position as the world’s largest PEV market to China, where PEV sales tripled in 2015.

    Figure 2. PEV sales volume in US and China 2011-2015 (number of vehicles sold)


    Source: Euromonitor International from Hybridcars.com and China Association of Automobile Manufacturers

    Turbochargers put pressure on electric vehicles

    There were a number of reasons behind the slowdown in PEV sales in the US in 2015. A lack of charging infrastructure and limited range was the primary cause. According to a survey by Navigant Research, more than a third of PEV owners cite the lack of charging infrastructure as the biggest disadvantage of electric vehicles. In addition, fallen fuel costs (prices stood at US$2.03 per gallon in 2015, down by US$0.28 in comparison with 2014) diminished the clear economic advantage of buying PEV considering higher model prices.

    Besides range frustration and lower fuel costs there was another reason why PEV sales are not spooling up – turbochargers. Many mainstream carmakers, including BMW and Ford, introduced turbocharged engines that result in up to 30% better fuel economy and emissions, without negative effect on dynamics. Forced induction engines were established as a more usable alternative for electric vehicles, offering sufficient efficiency at a reasonable price, thus causing the sluggish demand for PEVs.

    PEV sales are set for a sure bounce back

    Although with slightly less torque, PEV sales are set to bounce back in 2016 and continue to record solid growth from 2017 as improving infrastructure, and upgraded and more affordable models will contribute to market growth. Sales volume will reach 2014 levels in 2016 and are poised to rise at a CAGR of 20% over 2015-2020.

    Figure 3. US PEV sales forecast for 2016-2020 (number of vehicles sold)


    Source: Euromonitor International based on information from Hybridcars.com

    Improving charging infrastructure will be the key factor for PEV sales growth. Automakers found lack of chargers so frustrating that they started building their own stations. In April 2016 Nissan will finish a rollout of 600 quick chargers, while BMW, encouraged by the success of its i3 and i8 models, is actively looking for partnerships to expand its charging network. For instance, BMW and Nissan are teaming up to provide 120 quick charging stations across the nation, while BMW is also backing the ChargeNow DC Fast network of 500 outlets.

    Furthermore, in the upcoming years, a number of long-awaited PEVs will enter the market, including successors of the two most popular PEVs – Volt and Leaf, also Chevrolet Bolt and Tesla’s 3 series. A number of automakers, including BMW, Mercedes-Benz, Mitsubishi and Tesla, also introduced plug-in SUVs, the latter being the most dynamic new car segment in the US. These factors are anticipated to expand the pool of potential customers and increase PEV sales.

    Lower PEV prices will be another factor pushing sales. According to a research by Nature Climate Change, the cost of battery packs needs to fall below US$150 per kWh in order for PEVs to become cost-competitive on par with internal combustion vehicles. GM announced that its batteries for the Bolt model will cost just US$145 per kWh, an astounding price, compared to the industry’s estimated average of US$350 in 2015. Tesla’s Gigafactory, which will begin production in 2016, is expected to drive down pack-level costs to US$40 per kWh via economies of scale, supply chain optimisation, increased automation, and production domestication.

    Lastly, increasing regulatory pressure will force carmakers to adopt electric powertrains. Although consumers were uncomfortable with making that technology jump, and adoption of PEVs has been slower than expected, PEVs are necessary to meet the Corporate Average Fuel Economy (CAFE) requirements, which oblige automakers to raise the average fuel efficiency of new cars and trucks to 54.5 miles per gallon by 2025. The rise of efficient turbocharged engines is one of the main factors that slowed down and delayed the adaptation of PEVs. Nevertheless, turbochargers are set to effectively merge with electricity use in vehicles and act as an affordable solution during the transition to the future of zero emissions.

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