Analysis of Global Electric Vehicle Markets

Global Electric Vehicle Market

The industry that received the most attention in early 2021 was the electric vehicle industry. In addition to Tesla’s sales of almost 500,000 vehicles, major automakers in various countries were also sprinting for development. Along with the technology industry, in the post-pandemic era, the electric vehicle industry is growing and developing rapidly. The reason for the development trend is that the electric vehicle industry has strong momentum driving innovation which is in turn promoting transformation in related manufacturing industries. 

Tesla’s developing technology has challenged the automotive market and has disrupted the original industrial landscape. Almost overnight, automatic driving, software updates, touch panels, and artificial intelligence have become standard equipment for almost every car. China manufacturers are investing extensive resources and expect to join the battle. Japan and Korea manufacturers are making every effort to develop the hydrogen fuel cell, and European and American automakers are striving to reduce carbon to meet standards. In such a highly competitive market, even Apple expects to redefine "cars."

Looking at the auto market in 2020, we can see that the total annual sales of all major brands that year fell below 80 million units, with Volkswagen and Toyota both declining by about 15%. During this automotive economic depression, only electric vehicles bucked the trend.

Looking at the auto market in 2020, we can see that the total annual sales of all major brands that year fell below 80 million units, with Volkswagen and Toyota both declining by about 15%. During this automotive economic depression, only electric vehicles bucked the trend.

In 2021, during the post-pandemic era, the auto market gradually recovered, with annual sales reaching 83.5 million units. New energy vehicles, including plug-in hybrid electric vehicles (PHEV) and battery-only vehicles (BEV) accelerated to 3.4 million units; a growth rate of about 40%.

For Tesla, the greatest challenge has not been sales, but keeping up with production to meet the demand. Tesla reached its goal of 500,000 sales in 2020, which was double 2018 sales. The greatest contributing factor was Tesla’s super factory in Shanghai, China.

Since the Shanghai plant officially started at the end of 2019, production capacity has continued to maintain a high level. In 2020, 137,000 Model 3 cars made in China were sold domestically. Including exports to Europe, that Giga Shanghai plant produced 150,000 vehicles throughout the year, which was close to 30% of Tesla's world annual production capacity.

With the completion of the Shanghai Super Factory expansion project in 2021, Tesla China’s production target was raised to 550,000. The Shanghai plant is currently producing 5,000 Model 3 and 3,000 Model Y vehicles per week, on track to meet this annual goal.

Tesla's current production is still not meeting the demand, and there is a five to seven week waiting list for sales. Other automakers are also facing a similar production delay, and production of electric vehicles is not meeting market demand. Two key components limiting the production capacity of electric vehicles are batteries and chips.

Panasonic, Tesla’s main battery supplier, increased its battery production capacity from 24 GWh to 39 GWh in 2020. LG Chem, the main battery supplier of the Chinese plant, also expanded its production line and was able to provide batteries for 320,000 Tesla electric vehicles. LG Chem was able to increase production in 2021 to supply the nearly 500,000 batteries needed by the Shanghai plant in 2021. The world’s three major battery suppliers, Ningde Times, LG Chem, and Panasonic, together provide 70% of the world’s electric vehicle batteries. With Tesla’s sales skyrocketing, other automakers will be competing fiercely to source batteries. If you can't grab the batteries, you cannot proceed with manufacturing. Today, not only Tesla wants to make its own batteries, but GM, Ford, and Toyota are also considering making their own batteries to solve the battery shortage problem.

The second limiting factor in production capacity is automotive IC chips. This seemingly tiny part is critical to the vehicles production. Whether electric or fuel powered, all vehicles require chips. Compared with the whole vehicle cost, the chip cost is low, but if the supply is insufficient, assembly cannot proceed and production will shut down. Although the shortage of chips since the end of 2020 has affected the shipment of fuel vehicles, because the number of chips used in electric vehicles is several times that of fuel vehicles, the situation is compounded greatly. At present, many car manufacturers can only discontinue production until the shortage of chips is solved.

The major reason automakers have been pushing electric vehicles since the pandemic in 2020 is the carbon emission standards promulgated by the EU. According to these regulations, the average carbon emissions of passenger cars was required to drop from 130 grams per kilometer in 2019 to 95 grams per kilometer in 2020. Cars that failed to meet the standard would be fined 95 Euros for each gram exceeding the standard.

Many European countries are also providing subsidies for people who buy electric vehicles, including tax cuts and car purchase rewards ranging from 3,000 euros to 9,000 euros per vehicle. European countries have also set large budgets to expand public charging facilities and improve infrastructure, to lower the threshold for people converting to electric vehicles.

With the implementation of these policies, the European market sold over 500,000 electric vehicles in 2020. Benz’s EQC and Porsche Taycan sold over 20,000 vehicles each. In 2021, Volkswagen’s newly launched ID.3 and ID.4 surpassed Tesla for sales of electric vehicles in western Europe. During the first eight months of 2021, Volkswagen sold over 75,000 model VW ID.3 and VW ID.4 cars in Western Europe.

The world’s largest electric vehicle market is still China. In 2020, 1 million Pure Electric Vehicles and approximately 240,000 Plug-in Hybrid Electric Vehicles were sold in the Chinese market. Among them, Tesla Model 3, under its continuous price reduction strategy, had the highest annual sales of 137,000 vehicles in 2020. In second place was the short-range electric car SAIC-GM-Wuling Automobile Mini EV. In third place was the Great Wall electric car Ora R1. 

It is worth noting that BYD Auto, although not ranked in the top three models, had combined sales of 130,000 pure electric models in 2020, a 17% decline compared to 2019. BYD is still a core competitor in the electric vehicle industry for plug-in hybrid vehicles and commercial vehicles.

Although the China market experienced subsidy withdrawals in 2019, new energy vehicle subsidy policies were extended to the end of 2022. Together with the introduction of cash car subsidies and other programs in various provinces, it was generally expected that China's electric vehicle market would grow by about 40% in 2021. Although strong competition from Tesla's China-made Model Y has compressed the growth space for Chinese independent brands, the growth space for small cars will still be better than for SUVs.

Electric Vehicle Industry Outlook

Although Tesla is from the United States, in the past few years, the Federal Government of the United States and the California government have been unable to reach a consensus on air pollution and carbon emissions standards. With the new U.S. President Joe Biden taking office and the Democratic Party, which is generally believed to be more supportive of green energy, taking power, it is generally estimated that the U.S. electric vehicle market will enter a period of rapid growth in the next five years.

Automotive market reports pointed out that the U.S. market in 2021 had changes similar to those of the European market in 2020. One of the main reasons for this was that Joe Biden had introduced stricter carbon emission regulations, which drove the demand for plug-in hybrid vehicles and pure electric cars in the US market.

In the past, former U.S. President Donald John Trump relaxed carbon emission standards significantly. Although Joe Biden pushed for stricter standards, because most automakers’ greenhouse gas (GHG) emission quotas expire at the end of 2021, 2022 brought deadlines for transformations by U.S. automakers. This was a huge test for car manufacturers that had not seriously reduced their carbon emissions.

Based on the current sales volume and carbon emissions of major automakers in the U.S. market, it is estimated that automakers may generate a carbon tax of up to 2 billion U.S. dollars in 2022. If the United States returns to the Barack Obama era carbon emission standards, by 2025, the carbon tax generated will be 7 billion U.S. dollars. If the automakers fail to meet the standards, the money will either fall into the hands of the US Federal Government or into Tesla's pockets.

It is worth noting that the calculation method of the US carbon emission standard is not based on vehicle weight like the EU and China. The US uses Foot Print (four-wheel area as the standard) to calculate carbon emissions, which is important for pickup trucks and trucks. Cars are at a disadvantage, which explains why GM and Ford’s first targets for electrification are RVs and pickup trucks. The foot print calculation makes it easier for manufacturers to meet the standards with these types of vehicles.

In 2020, the sales volume of electric vehicles in the United States was approximately 350,000 units. In 2021, with the successive delivery of new electric vehicles from major manufacturers, sales reached over 500,000 units.