Article Type: News

Europe BEV and PHEV Sales for Q3-2019 + October

Europe sales of Battery Electric Vehicle (BEV) and Plug-in Hybrids (PHEV) were 400 000 units during Q1-Q3. October added another 51 400 sales. Year-to-date growth stands at 39 % over 2018. The September result was particularly strong when the re-launch of popular PHEV for BMW, Mercedes and VW and Porsche, together with high Tesla Model-3 deliveries, boosted the sector to 4,2 % market share, a new record. The first half of 2019 saw a strong shift towards pure electric vehicles (BEV), 68 % for 2019 H1, compared to 51 % for 2018 H1. The change reflected the introduction of the more stringent WLTP for fuel economy ratings, changes in taxation/grants promoting more BEV uptake and better availability of long-range BEVs, including the Model-3. Many PHEV were not available due to model-changes or battery upgrades for better e-range. Since September, the PHEVs are back and were an important growth contributor.

We expect strong results for the last 2 months: The re-bound for PHEV sales continues, Tesla needs to deliver on the guidance of at least 360 000 global deliveries for the year and the Netherlands increase the benefit in kind for the private use of BEV company cars for 2020. 2019 is likely to end with a total volume around 580 000 plug-ins, which is 42 % more than for 2018. Market share can go as high as 6 % in December and is 3,25 % for the year.
Tesla leads the OEM ranking with 78 200 sales year-to-date October, a sector share of 17 %. The BMW Group came second with 70 000 units. The Tesla Model-3 is the best selling plug-in with 65 600 deliveries, clearly ahead of the Renault Zoe with 39 400 sales.

Germany and the Netherlands were the strongest growth contributors, in terms of volumes. Germany has become the largest market for plug-ins in Europe, displacing Norway to the #2 position. Norway is still the word leader in EV uptake, with a share of 45 % in this year’s light vehicle sales, up 6 %-points compared to last year. Iceland comes second with 22 % so far; within the EU, Sweden leads with 10 % of new car and LCV registrations being BEVs and PHEVs.

Definitely Greener

Despite weak PHEV supplies from their domestic OEM until August, Germany gained the #1 position from Norway this year. The growth, 49 % so far, was based on higher BEV sales: The new Tesla Model-3 contributed with 7900 units, Renault increased sales of the outgoing Zoe by 90 % to 8330 units, BMW doubled sales of the i3 to 8200, its battery capacity was increased to 42 kWh and gone is the Range Extender. The Mitsubishi Outlander PHEV (6700 units, +435 %) filled some of the voids left by Daimler, VW Group and BMW. The new Audi e-tron quattro, the Hyundai Kona EV and the Mercedes E300 PHEV added 3000 to 4000 units each.

The fastest growing markets, in terms of %, are the Netherlands and Ireland, both with focus on BEV sales. The UK and Belgium returned to growth with high Tesla Model-3 sales and the return of popular PHEVs.

Apart from the top-15, most other markets posted gains, too. Iceland, Slovakia and Slovenia being the few exceptions. In total, Europe plug-in sales increased by by 39 % until October.

2019 to end on a high note for Europe

Tesla’s position in Europe is not quite as overwhelming as it it in the US, where 4 out of 5 BEVs bought are from Tesla and the Model-3 stands for nearly half of all plug-in sales. Still, without it, EV adoption would be significantly slower in Europe. Of the 125 400 units sector growth until October, 65 600 came from the Model-3.

Q4 of this year will be special, with high pend-up demand for PHEVs from German brands and BEV sales being pulled ahead in the Netherlands, where the benefit in kind value for the private use of company cars increases from 4 % to 8 % of the list price; PHEVs and ICEs are taxed for 22 % of the list price. On top of that, Tesla needs to reach, or better, beat the guidance for global deliveries in 2019. 360 000 units were the lower end, which requires at least 105 000 global deliveries in Q4, “only” 8000 more than in Q3. December deliveries of Tesla Model-3 may reach 10 000 units in the Netherlands alone.

6 % share possible in December, higher than in China

Plug-in volumes and shares from January to October have been consistently above 2018. YTD, the increase is 39 %, share is 3 %, compared to 2,1 % for the same period of last year. Volume increased by 125 400 units, +128 000 for BEVs and minus 2600 for PHEVs.

Unless supply is constrained in Q4, plug-ins can reach 6 % of the European light vehicle market in December. For the first time since many years, this is higher than what we expect in China. For the European market of Passenger Cars and LCVs, we see only a slight decline of 0,2 % to 17,8 million units, not accounting for Russia, Ukraine, Turkey. Our best estimate for the year is 579 000 units and a plug-in market share of 3,25 %.

Share peaks in March, June, September and December relate to high Tesla deliveries at the end of each quarter.

Europe shines in an otherwise gloomy H2

Except for the 2015 boom and 2016 bust of PHEV sales in the Netherlands, EV adoption in Europe is a story of consistent volume increases. It follows our expectation of a general adoption trend, which is unlikely to follow a straight line, but rather the S-curve.
Weaknesses in PHEV portfolios and supply constraints of some BEVs have delimited plug in growth during the first 3 quarters of 2019. Also, there is this persistent rumour that traditional OEM hold back EV sales in 2019 to count them in 2020 sales for achieving the 2020/21 CO2 limits. We can’t see this in the recent numbers, but the year is not over, yet.

579 000 BEV+PHEV sales beat our expectations from earlier this year and give a year-on-year growth of 42 %, which a lot better than the declines we have seen in other regions during the 2nd half of 2019. China NEV sales are in free fall since July (check the China article for more info) and current US sales compare to the Model-3 boom of 2018 H2. Europe stands between growth and decline of global plug-in sales this year.

China NEV Sales for 2019 Q3 + October

The steep decline in China’s NEV sales continues and it is accelerating. Preliminary results for October indicate 48 % fewer deliveries than in October 2018; even October 2017 was higher. The slump started in July, after the announce subsidy reductions became effective and the recent trend has confounded policy makers and market observers alike. Purchase incentives for NEVs have been cut before, but this time, the usual recovery after 2-3 months did not materialise. The prolonged crash was unlikely a part of the plan. The MIIT, setting the course for the NEV industry, is determined to deflate a sector that showed signs of overheating and is being overcrowded by new-comers with uncertain viability. Apart from subsidy cuts, new barriers for entry have been established, limiting the number of manufacturing subcontractors, demand a minimum of R&D funds and production capacity. Requirements for battery capacity and esp. safety were increased another time. Battery fires and recalls have high public awareness and cause suspicion. The combined effect of measures and events is now broad based. Even the market leaders post big losses in their NEV business and the volume erosion among smaller players with 2-3 years of market presence speaks trouble. The overall Chinese car market has been in decline for 16 consecutive months now, while the sales of NEVs kept growing, at least until June. It is for the strong results from H1 that year-to-date, the balance is still positive. 963 000 NEV passenger cars and LCVs have been delivered from January to October, 19 % more than in the same period last year. The forecast for 2019 has a lot more uncertainty than last year. Our contacts in China do not expect a recovery during the last 2 months of the year. Our outlook for 2019 is a volume of 1,1 to 1,2 million NEVs, (Cars, SUVs, MPVs and LCVs) in a light vehicle market of 25,4 million, 8 % lower than 2018. The best estimate, 1164k, converts to a NEV share of 4,6 % and zero growth over 2018. The fundamentals, like Government targets for EV deployment, ICE restrictions, EV portfolios and charging infrastructure investments speak for further NEV growth, but we do not see the sector returning to the relentless 60-100 % growth rates of previous years. Officials have re-stated the target to produce 2 million NEVs (BEV, PHEV, FCEV) in 2020. This includes 150k-200k of commercial vehicles and buses. With the current conditions and sentiment, these numbers could be hard to reach, but we expect at least an improvement relative to the current situation.

Dwindling Demand and Supply

NEV sales took another dive in September, -25 %, following -12 % in August and – 2 % in July. For October the losses accelerated further, with preliminary data showing a dismal 48 % decline, including estimates for imports and LCVs. For market shares, the reductions are less, as the total car market contracted by 3 % to 7 % y-o-y during these months. The NEV share trend is now approaching the level of 2017, which is far below the 2018 actuals and the trend during 2019 H1.
NEV subsidies were reduced several times in past years. The current trend reflects more than just lower demand from reduced handouts. NEVs may experience their first confidence crisis: The Government now pushes for quality instead of quantity, for competition instead of subsidies, OEMs fall back to more profitable ICE production, consumers lose faith in struggling NEV makers, and over-optimistic vehicle specification claims. Aftermarket support is lagging and there have been battery fires. On top of that, purchase taxes on conventionally powered vehicles have been reduced by some percent in order to stimulate the vehicle market.

Zero Growth this Year

The harshness of the downturn was not expected by policy makers, nor most market observers, including us. At the end of 2018, 2 million in 2019 seemed plausible, in June, most forecasts for the year were still at 1,6 million, reduced to 1,5 million after the July result. We are now expecting 1,1 to 1,2 million light vehicle NEVs for 2019, mid-point this means zero growth this year. In a contracting overall market, down ca 8 % from last year, the NEV share is still growing from 4,2 % to 4,6 %.

It is hard to find a silver lining in this development. One is, hopefully, more reasonable planning, going forward. Another should be fewer bottlenecks in raw materials and battery supply.

The following section analyses how NEV makers sales volumes are affected by the crash.

The Meltdowns Winners and Losers

Year-to-date October, NEV sales still show +19 % versus Jan-Oct 2018, living on the strong first half of 2019. This analysis is for the last 4 months of consecutive decline and how it played out for the largest Chinese OEM, foreign brands and start-ups.

Size is no warrant, as the losses of the largest OEMs of New Energy Vehicle witness. BYD sales were 37 % lower than for July-Oct 2018, BAIC -12 %, Geely -34 %, SAIC -55 %. As the NEV total was down 25 % most of them lost sector share, too. BAIC could avoid this with an upgraded EU-Series Sedan (aka EU5) and GAC gained by their Aion S Sedan, both popular among ride hailers. Great Wall did comparably well with their recently created “Ora” sub-brand, even if the sequential volume trend during 2019 is less impressive.

Losses of Chery, Changan and Dongfeng were substantial and deliveries were slow and erratic on their previous best sellers. JAC acts as production contractor to VW and NIO and seems to have abandoned deliveries of JAC branded models altogether.

The balance for foreign brands looks very positive in this context, as many of them had low sales in 2018. Much of the gains come from localised models in J/Vs with Chinese OEMs. GM’s low-cost mini-EV brand Baojun, made by SAIC, is still selling in high numbers, 25k during the last 4 months. VW increased 5-fold, Hyundai Kia +50 %, BMW +34 %. Tesla, still all imported, was up 275 % from beginning Model-3 deliveries.

Others (Ford, FCA, JLR, Nissan, PSA, Toyota, Honda, Daimler, Volvo) were less successful, with low deliveries from their J/Vs and dwindling sales for H2.
Among start-ups and smaller players, NIO, Hozon, X-Peng, WM, FAW and Hanteng increased sales. The balance looks grim for 15 other, distressed makers. Their combined volume was 63k units for July-Oct last year, down to less than 5k for this term. We want to avoid their exposure here; contact us if you must have more information.

Rigid plans, but high uncertainties

The Chinese NEV fleet (vehicle population) is approaching 3,6 million for December 2019, counting light vehicles, 45 % more than at the end 2018. In addition, there are 600 000 heavy electric vehicle on the road in China, most of them buses in metro areas.

The MIIT has restated the goal of 2 million NEV produced in 2020 and more than 5 million NEVs on the road at the end of 2020. While the 5 million stock target is well within reach, the 2 million production target would mean a return to growth at a rate of over 50 % in 2020. With the prevailing market sentiment, it would mean vast oversupply, unless Chinese makers start to export in much larger quantities than the 3500 units of this year. Further subsidy cuts during 2020, which were considered by officials, should not be expected. Rather the opposite is needed. The next round of cuts is due for 2021 anyway.

The Chinese NEV market remains a hard place to navigate. Expect the unexpected.

USA Plug-in Sales for 2019 YTD October

236 700 plug-in vehicle were delivered in the first 3 quarters of 2019, an increase of just 2 % compared to Q1-Q3 of 2018. Including the October result, 23 200 units, which was 33 % lower than in Oct 2018, the sector is now in reverse for the year. The negative trend is much likely to stay for the remainder of 2019 and the first half of 2020. The bleak picture is caused by a variety of factors. First, the numbers compare to the period H2-2018, when Tesla delivered on all the pend up demand for the Model-3. Sales were in USA and Canada only; exports to other markets did not start before Q1 of 2019.

The second observation is that many OEM sold fewer plug-ins in 2019 that they did last year. Whereas the European importers held the line, plug-in sales by the Big-3 were down 28 %, so far and Japanese brands lost 22 %. American and Japanese brands stand for 44 % rsp 38 % of US light vehicle sales, but have introduced only one new plug-ins this year, the Subaru Crosstrack PHEV. Tesla sales are 9 % up year-to-date and stand for 55 % of the plug-in volume in the US. Counting BEVs only, the Tesla  share is 76 %.

Our expectation for the year is a total of 337 ooo units of BEV+PHEV sales, 74 % of them pure electric. The volume decrease compared to 2018 is 6 %. For 2020, manufacturers have announced over 20 new BEV and PHEV entries, most of them PHEVs from European brands. The new big-sellers will be from Tesla and Ford, though. The Model-Y and Mach-E enter the very popular compact/mid-size cross-over segment, being very close in size, price and specification. The given contest in next years’s EV market and with plenty of attention and demand.

More Losses than Gains

The chart compares the quarterly USA plug-in sales of 2019 compared to last year. Q4 of 2019 are our estimates. Tesla sales are down for the 2nd half of 2019 as they compare to the 2018 period when all Model-3 deliveries covered the demand and back-log in North America. Tesla volumes for the year will still be approximately 9 % higher than in 2018. The YTD sales of OEM other than Tesla with last year’s reveal a bleaker picture: a combined decrease of 16 %.

Hyundai-Kia (new Kona EV), Volkswagen (e-Golf, new Audi e-tron quattro), Daimler (Merc. GLC) and Jaguar i-Pace gained, all others posted heavy losses. Nissan Leaf sales remain weak, the new 62 kWh version is overpriced and still without state-of-the-art battery cooling. GM dropped the Volt and reached the 200 000 unit limit in Q2, receiving only half of the $7500 federal EV tax credit in Q4. Ford dropped the slow selling Focus EV and C-Max PHEV and is left with the ageing Fusion PHEV. Toyota offers nothing but the 3 year old Prius PHEV, the Honda Clarity PHEV is in pre-mature decline. BMW still lacks the replacements for 330e and X5 PHEVs in the US.

Boom and Downturn

The USA plug-in sales history had a temporary decline before and, like for 2019, it was supply related: Toyota phased out the 1st generation Prius PHEV without having the successor ready and GM lost volume during the change-over to the 2nd generation Volt.

2018 had exceptional growth and nearly all of it was created by just one new entry, the Tesla Model-3. Achieving the 2017-18 growth for another year is hardly possible. Tesla delivered 140 000 Model-3 in USA last year and exports were to Canada only. This year, Model-3 deliveries in the US will increase by another 15-20 000 units, but they do not compensate for the volume losses of other, ageing and discontinued entries.

The current impression is lack of choice and lack of news, especially from the Big-3 and Japanese OEM, which stand for 82 % of total light vehicle sale this year. The situation will change a lot in 2020, with a broad based increase from new models with high sales potential.

What to expect for next year

Judging by the OEM announcements, 2020 promises to be the year with the highest number of new EV introductions ever, over 20 new entries, 9 of them BEVs. Most of them will be for the 2021 model-year, which means that most of 2020 growth will happen in Q3 and Q4. The announcements include the Tesla Model-Y, Ford Mustang Mach-E, the VW ID.4 (ak ID Crozz), the Porsche Taycan, 2 BEVs from Volvo, PHEV variants for Jeep and more PHEVs from Europe, Japan and Korea. Rivian wants to deliver their first R1T’s by the end of the year.Most significant is be the arrival of more affordable plug-ins for SUV-Crossovers. More than 6 million ICE units were sold in the C/D-SUV category last year, 1,5 million more than in the C/D-car segments. We can look forward to a healthy boost in EV adoption for 2020 and 2021. The introduction timing of the new and upgraded PHEVs from Europe is still uncertain; demand for them is very strong in Europe, following months of hiatus. Sector growth in 2020 will largely depend on the ramp-up of Model-Y and Mustang Mach-E.

Global EV Sales for the 1st Half of 2019

It includes all BEV and PHEV passenger cars sales, light trucks in the Americas and light commercial vehicle in Europe and Asia. Their share in the global light vehicle market was 3,5 % in June and 2,5 % for 2019 H1. 74 % of sales were all-electric (BEV) and 26 % were plug-in hybrids (PHEV), a massive shift of 11 % towards BEVs, compared to the 1st half of 2018. It was driven by the full availability of the Tesla Model-3, revised taxation/subsidy schemes and the Europe introduction of the more stringent WLTP (Worldwide Harmonised Light Vehicle Test Procedure) for CO2 emissions, all leading to higher demand for pure EVs.
Preliminary results for the month of July show significantly slower sector growth than for H1, only 4 % globally. The two main reasons: (1) In July, revised subsidy schemes became fully effective in China, excluding vehicles below 250 km e-range and cutting subsidies into half for BEVs with longer range. NEV sales (New Energy Vehicles) contracted by 2 % in China in July, following 79 % growth in 2018 and 66 % in 2019 H1. We expect a decline for August as well, followed by a gradual recovery to growth rates of 30 % for the remainder of the year. (2) The US market increased by 89 % last year; most of the growth came from the Tesla Model-3 and in the 2nd half of 2018. Once escaping production hell, Model-3 deliveries were as high as they could get, covering the huge order back-log. Last years’ increase can not be expected for 2019, esp. when most brands other than Tesla sell fewer Plug-ins in the US than in 2018.

By its sheer volume, China is still the largest growth contributor, with 257 000 units (+66 %) added to a total of 645 000 units during the first 6 months. Europe growth for H1 was 34 %, +67 000 units, still held back by tight inventories, waiting lists for popular BEVs and the run-out of high-selling PHEVs. Plug-in sales in USA increased by 23 % in H1, +27 500 units, and with the Model-3 increasing by 45 000 units it means declining sales for many others. Among the fastest growing market with over 1000 units sales were Ireland (+183 %), Netherlands (120 %), Denmark (+86 %) and Poland (+81 %). Many markets in Southeast Asia have triple-digit growth.
The share leader is Norway, as usual. Counting passenger cars only, 58 % of new car sales were electrically chargeable this year. Iceland comes 2nd with 18 % and Sweden 3rd with 11 % for 2019 H1. Our Europe story on H1 has more details on this, but please note that shares presented there, include LCVs, which drag the average shares down. Among the larger economies, China leads with a plug-in share of 6 %. Among other car markets with over 1 million total sales, Canada leads with 2,7 %, all others show 2,5 % or less for H1 combined. The best selling plug-in, by a wide margin, was the Tesla Model-3, with ca 128 000 units delivered globally during H1 of 2019. This puts it close to the leading ICE car models in the Mid-Luxury car segment, still carrying the handicap of import duties in the vast Chinese EV market. In the US it outsells the corresponding ICE entries of BMW, Mercedes and Audi by a ratio of two to one.

57 % of H1 Plug-in sales were in China

China has further advanced in the EV industry with 66 % more NEVs sold year-on-year in H1 and stood for 57 % of global plug-in sales. In June, the NEV share in all light vehicles sold was as high as 8,1 %. In contrast to booming NEV sales, the downturn in the overall car market continued. H1 light vehicle sales in China were off over 12 % compared to H1 of last year. ICE-only sales were down 14 %. On an annualised basis, the 2019 ICE volume is lower by 2,5 million units compared to the 2017 market peak, while NEVs gain nearly 1 million compared to 2017.

Losses in Japan are related to the decline of Toyota Prius Plug-in sales and the transition of the Nissan Leaf to the 60 kWh version. Also the #3 in the sales ranking, Mitsubishi Outlander, stayed just flat. Few bright points otherwise.

Europe CO2 test procedures and tax schemes have become tougher on PHEVs in several countries and it shows in the ratios of BEV to PHEVs sold. The BEV share in the mix increased from 51 % to 68 %. Volumes of BEVs increased by 79 %, while PHEVs lost 12 % versus H1 of 2018. The increases for total Europe was 34 %, but could have been higher with better availability of popular models. You find more info on the Europe results here.
Nearly all plug-in growth in USA can be attributed to the Tesla Model-3; many others were in reverse. The summary for the USA results is here. “Others” include Canada (26 900 sales so far, +24 %), South Korea (16 700 sales, +43 %) and many fast growing, smaller EV markets around the world.

Model-3 retains special status

As expected and still impressive, the new Tesla was the world’s best selling plug-in in H1 and by a large margin. Sales volumes approach those of premium competitors selling 300 to 400 000 units per year. Once production is localised in China, global volumes can be on par with the leaders in the mid-luxury segment.

Beneath the #1, the changes in ranking were many, compared to 2018: The BAIC EC-Series sub-compact stumbled over subsidy hurdles, lost over 30 000 sales and is now on place 38. Meanwhile, BAIC revived the EU-Series, a previous also-ran. It raised to #2 like a Phoenix. The Nissan Leaf retained the #3 position despite softening sales. The next 10 contenders all had sales of 20 to 30k for the first half year. Tesla was in that ballpark in H1 of last year, but lost plenty of volume on S & X this year and fell out the top-10. The BYD Yuan EV, a small SUV with 400 km e-range became an instant hit and sold 29 000 units in China since March.

The Mitsubishi Outlander PHEV is still going strong. With its relatively large battery of 12 kWh it stayed under the 50g CO2 limit even in the stricter WLTP. In Europe it was an attractive substitute for all discontinued PHEVs. The BYD e5 and Geely Emgrand BEVs are attractive in the fast growing ride hailing (like DiDi) business and gained further volume. The Renault Zoe climbed 3 ranks, even if it is replaced by the end of the year.

Note that only 2 out the top-10 are now PHEVs and they are both SUVs.

5 times more MHEVs within a year

Outside the Plug-in space a new breed of hybrids has entered the scene: So called Mild Hybrids, aka MHEV. They use an electric motor as engine assist and recuperate some kinetic energy during deceleration. They don’t charge externally and don’t drive all-electric (yet). Fuel savings are typically around 10 % versus a ICE-only car, but the technology has lower cost than for HEVs and is easier to integrate into traditional powertrains. MHEVs have become standard variants in many cases, esp. by German OEM and they sell in high volumes in e.g the Ram pick-up truck by Fiat-Chrysler. Counting passenger vehicles, the entire space of BEV, PHEV, HEV and MHEV had a volume of 3,05 million “xEV” sales in 2019 H1, BEV 820k, PHEV 296k, HEV 1370k and MHEV 564k . The map shows the split into geographies and concepts for the first half of 2019. Compared to 2018 H1 the changes are as follows: BEV +75 %, PHEV +4 %, HEV +16 %, MHEV +550 % and 51 % for all xEV together.

The Japan ties to HEVs remain exceptional: 89 % of all worldwide HEV sales are from Japanese brands, 43 % of all HEV sales reside in Japan and one in four car sales in Japan is a hybrid.

Japan is still slow to adopt plug-ins and MHEVs. The reasons are many: Solid leadership in HEV design and production is one reason. Lack of domestic plug-in choices is another: only 6 domestic models are offered, 3 of them (Leaf EV, Prius PHEV and Outlander PHEV) stand for 90 % of all plug-in sales; imports represent a small niche. Tax savings on eco-cars are similar for PEVs and the best HEVs. Only 5 MHEV variants are available and they appear pointless against over 70 HEV models with better fuel savings.

Plug-in growth is slowing down

Back to plug-ins, the 1st half of 2019 had healthy growth, +46 % y-o-y, even if the market share development has become unsteady. The peaks and valleys partly relate to high end-of quarter deliveries of The Tesla Model-3. The main reason is in China NEV sales, though. Subsidies were removed for EVs below 250 km e-range and cut in half for all other models. The transition period started in April and the new rules became fully effective in July. NEV sales were pulled ahead to March and June in anticipation of the tougher conditions.

Preliminary results for July show the full impact of the new scheme and the run on NEVs in June. For the remainder of the year we expect much slower growth in China. For the global growth trend this means a reduction from the 46 % we had in the first half to 15-20 % for the rest of 2019.

EV population: One in 175

For the entire 2019, we are expecting plug-in sales of 2,5 to 2,7 million units. This is lower than our previous outlook of 3 million and mainly relates to the subsidy cuts in China, which were more severe than announced in earlier policy plans. Also, PEV uptake in the US is abnormally weak for anything other than the Model-3.

In terms of global share it means 2,7 – 2,9 % for 2019, which is still 7 times higher than just 5 years ago. For details about the volume and share trend by region, please refer to our earlier H1 articles about USA and Europe, or contact us directly. Our next article will cover the Chinese market and its intricacies.

By the end of 2019, the plug-in vehicle population will reach nearly 8 million worldwide, an increase of 49 % over December 2018. With a global light vehicle population of around 1,4 billion, this is just 0,57 %, one in 175. Growth is exponential, though, and the overall picture will change much faster than historic sales suggest. Adoption of successful technology follows S-curves, not straight lines.

China NEV Sales for 2019 H1 + July and August

We held off the 2019 H1 summary for a while in order to get a better idea about the impact of sharply reduced NEV subsidies from July onwards. The overall Chinese car market has been in decline for 14 consecutive months now, while the sales of NEVs continued with rapid growth, at least until June. From January to June, ICE-only vehicles lost nearly 2 Million sales (-15%) compared to 2018 H1 and NEVs increased by 260 000 units (+66 %) for the same period.

Since then, the tide has changed for NEVs as well: July NEV sales were off by -2 %, including imports and LCVs; preliminary results for August show a 13 % decline year-on-year. In summary, the changes in Government support were as follows: NEVs with an e-range below 250 km (up from 150 km last year) do not qualify for subsidies anymore, those with longer e-range have subsidies cut by around 50 %. Direct local subsidies expire, in favour of charging infrastructure investments. The new rules became fully effective in July; following a 3 month transition period with partial subsidy cuts. Some OEM have indicated to lower list prices to compensate, still, NEVs above 250 km e-range can become up to 10 % more expensive for buyers. Those under 250 km range, mostly mini- and small cars, will become much less attractive as NEVs.

Ahead of the July cuts, demand was pulled into June, which has 1/3rd higher sales than normal. The weak July and August sales partly reflected the payback for the June rush. In addition, the supply of several low-range BEVs was reduced or halted, either for further battery upgrades, or infinitely. Smaller makers of EVs in the lower price categories we affected the most during H1, but in July and August, losses have also spread among the more resilient players.

The forecast for 2019 has a lot more uncertainty than last year. Year-to date August, plug-in sector sales in China are still up 44 % compared to 2018, but in decline for the first time since 18 months. Makers of cars with less than 250 km e-range must upgrade batteries yet another time to keep them in the market. Above that barrier there is now only little incentive for EV makers to escape subsidy cuts by e-range upgrades. To make things worse, new cases of battery fires (less than 100 incidents, but still) have disturbed the confidence of consumers and legislators. The overall Chinese car market is still in reverse; the rates of decline are lower now, but they compare to the weakening monthly data of 2018 H2.

The fundamentals, like Government targets for EV deployment, ICE restrictions, EV portfolios and charging infrastructure investments speak for further NEV growth, but it will we slower than the 75 % rsp 79 % of the previous two years. Our outlook for 2019 is a volume of 1,5 to 1,6 million NEVs, (Cars, SUVs, MPVs and LCVs) in a light vehicle market of 25,6 million, 7 % lower than 2018. The best estimate, 1540k,  converts to a NEV share of 6,0 % and a growth of 33 % over 2018.

Reducing dependence on subsidies

Subsidy reductions in China are not a new thing. The Government has risen the bar for approvals several times to push the EV and battery industry towards longer e-range and more advanced battery technology. The picture shows the stepwise reductions of central subsidies, which were considerable. Until 2018, EV makers have mostly succeeded to avoid cuts by battery upgrades and amazingly fast changes in product portfolios to meet new requirements.

The new regime goes further and enforces targets to consolidate the auto industry to fewer and more competitive players, which are not depending on generous state support. In addition, direct local subsidies from provinces and cities were dropped and replaced by support for the necessary charging infrastructure. Times will get tougher for makers with insufficient capital / development funds and sub-standard models.

Impact on NEV sales by OEM’s so far

Year-to-date, growth in NEV sales is still positive for most OEMs. Among the larger players, SAIC, Chery, Hawtai and JMC lost sales, while others, notably Great Wall (new ORA brand) and VW (new Passat PHEV, Tiguan PHEV and e-Lavida, all China made) multiplied their sales compared to last year. Also Toyota, Nissan and Nissan have introduced locally produced models, which explains their growth from next to nothing last year. None of the EV start-ups (e.g NIO, WM) made it into the top-10, yet.

Until August, overall NEVs were still 60 % higher than Jan-Aug last year, but the slump in July and August has also affected more resilient makers like BYD, BAIC, Geely, Changan and JAC, which posted double digit %-losses in volume compared to July-August sales last year.

On model-level, 2019 sales were highly erratic and can hardly be explained by consumer preferences. Sales of big-sellers like e.g. the BAIC EC series and BYD e5 were on and off and on again, revealing the struggle of Chinese EV makers to adjust portfolios and production to new requirements and restrictions. We expect this turmoil to calm down in Q4, but we do not see the sector returning to the relentless 60-100 % growth rates of previous years.

Recovery in sight

The comparably modest increases in April and May gave a first indication of the impact of the stepwise reductions in EV support. Then, June sales were overshooting by at least 30 %, prior to further subsidy cuts in July. The slump in July and August therefore contains a good portion of “pay-back” and is unlikely to reflect a new, downward trend in NEV sales.We expect a gradual recovery starting in September and increases of 20-30 % over last year for the remaining months. The resulting average NEV share for 2019 is 6 %, which is #5 in the world ranking and two times higher than in any other vehicle market with more than 1 million annual sales. Only Norway, Sweden, Iceland and the Netherlands have higher EV shares, so far.

Spectacular sales and growth history

China is, by far, the largest market for Plug-Ins. 2018 NEV sales reached 1 160 000 units, counting passenger cars and light commercial vehicles.  This compared to 410 000 in Europe and 360 000 in USA.  In 2019, China stood for 55 % of all 1,45 million global plug-in sales, so far, counting light vehicles. On top of that come 75 000 medium and heavy commercial vehicles, most of them electric metro buses.

Regarding the weak July and August numbers, is the party over? Some math on this: Volume/share growth of successful, new technology is usually along S-curves and progressive until the deflection point.  In %-terms, the increases get lower year by year, but deviations from the long term trend are common. By this logic, the 2018 result (+79 %) was over-shooting relative to trend, which translates to lower growth for 2019 to get back to the trend-line. So much for theory.Our best estimate for 2019 is a NEV total of 1,5 to 1,6 million, with a share of 6 % in light vehicle sales.

EV population above targets

The Chinese NEV fleet (vehicle population) is likely to reach 4 million in December 2019, counting light vehicles, 60 % more than at the end 2018. In addition, there are 600 000 heavy electric vehicle on the road in China, most of them buses in metro areas.

5 million NEVs on the road by the end of 2020 is a previously stated target of Chinese authorities. This is for all vehicle types combined, including LCVs, trucks and buses. Even with a slower pace for this this year and the next, this target will be met ahead of time. The drastic subsidy cuts this year can be seen in the light of this: Avoiding a bubble and creating a more competitive EV industry.

USA Plug-in Sales for the First Half of 2019

149 500 plug-in vehicle were delivered in the first half of 2019, an increase of 23 % compared to H1 of 2018. 72 % were pure electric (BEV) and 28 % were plug-in hybrids. The plug-in share of the total light vehicle market was 1,8 % for the 1st half of 2019, compared to 1,4 % in H1 of 2018. Despite the sufficiently lamented Q1 result, Tesla represented 57 % of all plug-in deliveries in the US. Counting BEVs only, Tesla’s share was 78 %. Four out of five Tesla sales in USA were for the Model-3, which remains the best selling plug-in, worldwide.

The Model-3 did not inspire the market towards more plug-in sales in general. Its qualities are in a class of its owns and most other plug-in models posted lower sales than in the previous H1, esp. in the car category, while SUVs faired better. Other inhibitors are the discontinuation of the GM Volt, the change-over to the new BMW X5, BMW 3-Series, Kia Soul and the Sonata/Optima siblings from Hyundai-Kia. Nissan Leaf sales remained sluggish, as battery and charging capabilities are questioned for the current version and sales of the revised 60 kWh version have just started.

For the 2nd half of 2019 we are expecting around 220 000 plug-in sales, for a total of 370 000 units for the year. Even if the increase over the 1st half of 2019 is significant, growth rates y-o-y will be negative, comparing the coming months with the same period of last year, when Tesla filled the huge reservation back-log and had no sales outside USA and Canada.

Back to Trend

The US had exceptional plug-in growth in 2018 and nearly all of it was created by just one new entry, the Tesla Model-3. While 2018 looked like overshooting, 2019 is back to the long term trend.

Achieving the 2017-18 growth for another year is hardly possible this year, simply by the math. Tesla delivered 140 000 Model-3 in USA last year and exports were to Canada only. This year, Model-3 deliveries in the US may increase by another 20 000 units, but there is not enough momentum in the sales from other OEM to generate significant growth.

The situation is likely to improve in Q4, when new, European and Asian import models become visible in the sales statistics. Late in the year, their impact on the overall result will likely be small. For 2019 we are therefore expecting only around 370 000 plug-in sales in total. The uncertainty in this number relates mostly to the extend that Tesla delivers on the 360-400 000 guidance for global 2019 sales. 55 % of global Tesla sales are typically in USA. We are expecting slightly more than 200 000 units to be delivered to US customers.

Tesla quarterly deliveries back on track

Tesla is dominating the US plug-in market and any 2019 outlook has little bearing without a Tesla outlook. The diagram shows the global deliveries of Tesla as reported in the quarterly updates and the Model-3 USA / export volumes as we have collected them from our sources around the world. Q3 and Q4 of 2019 are our estimates based on the guidance of 360 000 – 400 000 Tesla deliveries for the year. We think that 370 000 units from Tesla is a safe, doable volume for the year. That is is the same number as for our USA 2019 plug-in sales outlook is a pure coincidence. There could be additional deliveries of 5-10k Model-3 from the Shanghai plant, which starts production in November or December this year.

A short recap for the last 12 months of sales: Q3 and Q4 of 2018 addressed the huge reservation/order back-log for the Model-3, with sales in USA and Canada only and few build-combinations available. Tesla entered Q1 of 2019 with depleted inventories and had to fill the pipeline for export sales. On top of that handle the intricacies of logistics and paperwork in 20 additional markets. Q1 can be considered an exception and Q2 proofed that neither lack of demand nor supply were persistent issues.

Despite an average sales price of nearly $50 000, the Model-3 has 30 % share in the US mid luxury segment and outsold contenders like the Mercedes C-Class, BMW 3-Series and Audi A4 by a factor of two and more. Tesla reported that order books grew faster than Q2 supply and we are therefore confident that Q3 and Q4 deliveries exceed those of Q2.

Limited growth this year

Comparing the YTD sales of OEM other than Tesla with last year’s reveals a bleak picture: a combined decrease of 19 % for H1. BEVs held up better (+3 %, excl. Tesla) than PHEVs (-28 %), thanks to a boost in e-Golf sales and the new Audi E-tron Quattro. The losses for PHEVs were caused by the demise of the Chevy Volt, the run-out of previous generation 3-Series and X5 and weak sales of the Toyota Prius.

The 2nd half of 2019 will see several new model introductions with decent volume potential, like the new BMW 3-Series PHEV, BMW X5 PHEV, VW Passat PHEV. Hyundai-Kia will bring the Tucson and Sportage PHEVs, JLR could bring the Evoque PHEV and may even introduce their large Range Rovers in the US. We spotted 20 sales in Canada for June. Most of these new entries are imports and will arrive late in the year, if at all.

Nissan Leaf sales suffered from the “rapid gate” and should recover with the new 60 kWh version, available now. The Big-3 and Toyota likely remain in contraction mode for the remainder of 2019. Together, they stand for 58 % of US light vehicle sales, but no news from them in sight for this year. Our optimism for this year is therefore limited. 370 000 plug-ins is our best estimate for now, more than half to come from Tesla.

Heavy losses for PHEVs

H1 of 2019 marks a trend change: PHEV not only lost share in the EV mix, in H1 they also lost volume (-28 % vs H1 of 2018). We have noted this in Europe, too, when WLTP and reduced tax incentives for PHEVs caused the decline. Are the days of PHEVs counted sooner than expected? BEVs are the much likely end-game, with zero emission, design potential and cost reductions all superior to PHEVs. Today, PHEVs ease the transition to electrification for parts of the industry and consumers. They still make sense where duty cycles exceed BEV capabilities or when charging is not ensured.

These arguments become weaker, as new BEVs offer more range, power and versatility at constant or lower prices. GM axed the Volt partly by this reasoning. Many European PHEVs are being upgraded for the 2020 model-year, for longer e-range and lower test cycle emissions. This will recover some of their decline. Mid and long term, our view is that PHEVs will keep loosing share in the EV mix, not at least because of Tesla growth with Model-3 and Model-Y. For volumes they are likely to stay flat, or show small growth at best.

A word on Fuel Cell EVs, not shown in the chart. They represent 0,7 % of this years EV sales, with a mere 1124 units delivered in the first 6 months, down 20 % from H1 of 2018. The Toyota Mirai stands for 85 % of the volume. The other two are the Honda Clarity FCEV and the Hyundai Nexo FCEV.

Europe Plug-in Sales for 2019 H1

Plug-in vehicle sales in Europe reached 259 000 units in the first half of 2019, 34 % higher than for 2018 H1. These include all Battery Electric Vehicles (BEV) and Plug-in Hybrids (PHEV) in EU and EFTA countries, passenger cars and light commercial vehicles. The plug-in share of the European light vehicle market reached 2,9 % in June and 2,7 % for the first half year. The trend, so far, indicates an increases of 33 % for the entire 2019 to around 540 000 units. Demand and supply experiences a profound shift towards pure electric vehicles (BEV). While their share in plug-in sales was 51 % for 2018 H1, it has increased to 68 % for 2019 H1. The change reflects the introduction of the more stringent WLTP for fuel economy ratings, changes in taxation/grants promoting more BEV uptake and better supply of long-range BEVs. The hiatus in PHEV offers continued, with several popular model being upgraded with longer e-range for the 2020 model-year. Year-on-year, PHEV volumes actually declined, loosing 12 300 units (-13 %) during the first 6 months, while BEVs had 79 % more sales.The OEM ranking changed a lot, too, with Tesla becoming #1 by 38 000 Model-3 deliveries in H1. The Model-3 was the best seller in the sector posting 12 500 units more than the previous #1, the Renault Zoe. BMW, Volkswagen and Daimler suffered from pending upgrades of popular PHEV models, with deliveries starting in Q3 and Q4 this year. Winners were Hyundai-Kia, Renault, Mitsubishi and Jaguar-Land Rover.

Germany and the Netherlands were the strongest growth contributors, in terms of volumes. Germany has become the largest market for plug-ins in Europe, displacing Norway to the #2 position for the first time. Norway is still the word leader in EV uptake, with a share of 47 % in this year’s light vehicle sales, up 10 %-points from 2018 H1.

Germany passes Norway in volume

Despite weak PHEV supplies from their domestic OEM, Germany gained the #1 position from Norway this year, even if it is by a small margin. It was a result of strong sales increases from the new Tesla Model-3 (5350 units), Renault Zoe (5550 units, +106 %), BMW i3 (4520 units, +84 %) and the Mitsubishi Outlander PHEV (4130 units, +520 %), which filled some of the voids left by Daimler, VW Group and BMW. The new Audi e-tron quattro and the Hyundai Kona EV, both not available in H1 of 2018, added 1800 units each.

Among the top-15 markets, UK is the only one in reverse this year. PHEVs lost their subsidies and BEV get 1000 GBP less than last year. The UK plans to set the BIK (Benefit In Kind) for company car taxation to zero for BEVs, starting in April 2020. This will postpone many BEV purchases to next year in the UK. Meanwhile, neighbour Ireland has become the fastest growing plug-in market in Europe.

Following more generous subsidies and helped by oddities like petrol truck driver strikes in Portugal, also Southern Europe markets showed strong and consistent volume increases. In total, Europe plug-in sales grew by 34 %, compared to 2018-H1. Q1 increased 40%, Q2 by 28%.

Shifting to pure electric

This diagram shows the share of Plug-ins among all light vehicles sold in a country and the composition of BEVs and PHEVs in the overall share. The %-columns to the right show the gains and losses for BEVs and PHEVs compared to last year in terms of volume.The mix of BEV vs. PHEV varies a lot between markets, highly depending on national taxation and incentive schemes. The recent developments in vehicle portfolios and vehicle taxation have caused a rapid shift towards BEVs in most countries. For 2019 YTD, 68 % of plug-in sales were all-electric in Europe, compared to 51 % in 2018 H1. For the first time, PHEVs have lost volume in Europe, from 95k in 2018 H1 to 83k this year. The WLTP introduction in September 2018 has hurt e-range and CO2 ratings of PHEVs, with lower green car incentives as a consequence.

As usual, Norway is off the chart, with 47 % share YTD and much more BEVs in the mix. The best selling car of all categories in Norway was the Tesla Model-3, with 13,5 % market share this year, so far.

German OEM suffer from PHEV losses

Tesla is the clear winner, following the Model-3 introduction in Jan/Feb this year, with 38 000 units delivered to 25 countries. Model S&X deliveries decreased from 13 200 to 7 800 units, but still.

Plug-in sales of VW, Audi and Daimler were hit hardest, with most of their popular PHEV models stricken from the price lists at the end of last year. The C-Class and E-Class PHEVs are back with new 300e and 300de monikers and larger batteries. The high-volume PHEVs from VW, Audi and Porsche should reappear during the second half of this year. Meanwhile, VW sold 32 % more e-Golfs and Audi registered 6 600 new E-tron Quattro BEV this year. The Mercedes EQC 400 BEV posed 260 units during the 1st six months.The BMW Group was less affected by the PHEV downturn, but lost the #1 in Europe plug-in sales. The 5-Series PHEV sales held up well, so did the 2-Serien MPV and the Mini Countryman. The PHEV versions of the recently renewed 3-Series and X5 will start to show up in the sales statistics of the coming quarter. Hyundai and Kia have partly solved capacity constraints and nearly doubled their sales. Their BEV volume nearly tripled compared to H1 of 2018. Renault is still going strong with the Zoe, Europe’s best selling plug-in of last year, even if the successor is around the corner. Nissan Leaf sales stagnated while buyers are waiting for the 60 kWh version.

JLR is quite new to the sector, with PHEVs on two Range Rover models and the Jaguar i-Pace, with 6100 rsp 6700 units for the first 6 months. In 2018 H1, JLR was still in ramp-up mode. PHEV pioneer Mitsubishi further increased sales of the Outlander, filling some of the voids left by VW and Daimler.

Half of Europe’s EV growth is from the Model-3

Plug-in volumes and shares from January to June have been 34 % above 2018. YTD, the share is 2,7 %, compared to 2 % for H1 of last year, volume increased by 65 400 units. More than half of this growth (38k) can be attributed to the Tesla Model-3.

For the remainder of the year we assume the share development to continue on this trend and follow the seasonality of previous years. Plug-ins can reach over 4,5 % of the European light vehicle market in December and 3,1 % for the year. For the total market of Passenger Cars and LCVs, we expect a decline of 2,5 to 3 % to 17,4 million units, not accounting for Russia, Ukraine, Turkey. The 3,1 % convert to 540 000 units this year.

This assumes that the German OEM bring back improved versions of their popular PHEVs during the 2nd half of 2019 and steady supply of the Tesla Model-3.

33 % Volume growth this year

Except for a special event, the 2015 boom and 2016 bust of PHEV sales in the Netherlands, EV adoption in Europe is a story of consistent and accelerating volume increases. It follows our expectation of a general adoption trend, unlikely to follow a straight line, rather an S-curve.Weaknesses in PHEV portfolios and supply constraints of some BEVs have delimited plug in growth somewhat during the last 12 months. During Q3 and Q4 of this year, OEMs have announced the sales start of over 25 new and improved models, 10 BEVs and 15 PHEVs, increasing the choice to 45 BEV and 50 PHEV models in Europe. Even if delays are to be expected, they will have a positive impact on demand and volumes during this year.

Our estimate is around 540 000 plug-in sales and a share of 3,1 % for 2019. We expect the ongoing erosion of Plug-in Hybrid sales to come to a halt in Q4 and the BEV-to-PHEV ration stabilising at 70:30 for this year and the next. PHEV volumes can increase again but we don’t expect a rebound of PHEV shares in the mix. BEVs have taken the lead, driven by new and improved products, plus the fact that they are more future proof in an environment where legislation and taxation becomes all more adversed to ICEs.

China NEV Sales for 2018

We held off the 2018 summary for a while in order to get a better idea about the overall market development and the changes in NEV subsidies for 2019. The Chinese car market has seen volume declines for eight consecutive months, which combine to a 10 % drop since June 2018 and 3% for the year. The losses have increased and February 2019 passenger car sales, including imports, were 18 % below last year. Various factors play in, like overspending on cars in previous years, purchase restrictions in mega-cities, better availability of sophisticated ride hailing and public transport. On top of it, the trade conflict with USA, impairing the business conditions for US makers.

NEV sales held up well in this environment, so far. Volume increased 106 % in the 1st half, 68 % in the 2nd half of 2018 and 79 % for the year. China reached 1,1 million NEV passenger cars, plus 60 000 light commercial vehicles, corresponding to a market share of 4,2 % in the light vehicle sector. In December, their share was as high as 7,6 %. January results came in very strong, preliminary February results were more normal. Still, NEV demand could see a roller-coaster ride this year. NEVs with an e-range below 250 km (up from 150 km last year) do not qualify for subsidies anymore, those with longer e-range have subsidies cut by around 50 %. Direct local subsidies expire, in favour of charging infrastructure investments. Some OEM have indicated to lower list prices to compensate, still, NEVs above 250 km e-range can become 5-10 % more expensive for buyers. Those under 250 km range, mostly mini- and small cars, will become much less attractive as NEVs. The new rules become fully effective in July; following a 3 month grace time from April onwards, when grants are 40 % lower. Orders placed before April receive the 2018 subsidies.

The new regime further enforces the ministries target to consolidate the auto industry to fewer and more competitive players. Times will get tougher for makers of sub-standard models. 2019 will see the production of several low range EVs halted, either for battery upgrades, or infinitely. This happened in 2018, when the 150 km minimum range requirement was introduced. As 30 % of sales are in A and B segment cars (or A00 and A0 in Chinese terminology), it will leave a dent in the sales stats.

The forecast for 2019 has more uncertainty than last year. The current car market downturn is the first in decades and the recent rates of decline are disturbing. A “friendly” trade agreement can bring some relief, but without some easing in prices, taxes and ownership restrictions, the overall Car/SUV/MPV market can contract by 10 % or more this year. Whether this is acceptable, or even welcome for policy makers is hard to say. Our prediction for 2019 is a volume of 1,8 million NEVs, (Cars, SUVs, MPVs and LCVs) in a light vehicle market of 26,7 million, 3 % lower than 2018. This converts to a NEV share of 6,7 % and a growth of 55 % over 2018.

High gains for NEVs in a declining car market

The auto market in China has been in reverse since July 2018. Declines are accelerating and February sales were 18 % lower y-o-y, counting passenger cars of all propulsion types, incl. SUVs and MPVs. Losses were strongest in the economy and SUV segments, while mid-size and large sedans still posted growth. Among the OEMs hit hardest by the slump in therms of %-drops were smaller Chinese car makers, but also Ford, FCA and PSA. In terms of volume, GM, Ford, BAIC, Changan, PSA and Dongfeng were the biggest losers. Winners were BYD, BMW, Toyota and SAIC.

NEVs held up well during the downturn, increasing by 79 %, while all other types decreased by 16 %. Companies gaining significant NEV volume and sector share during this period were BYD, Hawtai, Dongfeng, Great Wall, GAC, BMW, VW and Hyundai. Volume losses, despite rapid sector growth, were posted by Kandi, Zotye, Lifan and, yes, Tesla. Model S and X are imported from USA and subject to a 25 % tariff surcharge since last summer, 40 % instead of the usual 15 %.

Growth reduced, but still high

China is, by far, the largest market for Plug-Ins. 2018 NEV sales reached 1 160 000 units, counting passenger cars and light commercial vehicles. This compares to 410 000 in Europe and 360 000 in USA. On top of that came 120 000 medium and heavy commercial vehicles, 80 % of them electric buses in metro areas. Subsidies were very generous, but have been reduced to avoid oversupply, explaining their decline since 2016. China is still world-leading in this category; outside China, the potential for large electric commercial vehicles is not addressed, yet. Total volume was a mere 2600 units, most of them based on Chinese vehicles, including batteries.

For the light vehicle portion, growth has been consistent and high: +96 % to 2016, +75 % to 2017 and +79 % to 2018. This year, we expect NEV sales to reach 1800 000 units, +55 %, counting passenger cars & LCVs, 75 % of them BEVs and 25 % Plug-in Hybrids (PHEV). In a total market estimated to 26,7 million by us (-3 % vs 2018), this means 6,7 % NEV share. Our growth expectation of +55 % is lower than for previous years due to the aforementioned curtailing of NEV subsidies and a general decline in passenger vehicle sales.

More SUVs, more sedans for ride hailing and more E-range for all

One reason for the Chinese lead in NEVs were their ultra-affordable and highly subsidised EVs in the Mini (A) and Small (B) segments. The industry is upgrading, however, as the Chinese Government continuously raises the bar for granting subsidies. The NEV segments are highly dynamic and compared to 2017 a lot has changed: Small cars lost ground, BYD upgraded their SUVs to make space for the new Yuan, which became an instant best-seller in the immensely popular compact SUV segment. The mid-size sedan segment is now the largest, due to the popularity of BEVs in the fast growing ride hailing sector. Losses for small cars: Several B-segment models did not reach the 150 km E-range requirement introduced mid-year and were paused for updates, or discontinued.

The BMW locally produced 5-Series PHEV became the winner in the E-Segment, displacing the imported Tesla Model-S, which does not receive subsidies and was burdened by higher import duties in the 2nd half of 2018. The mini-car segment had a series of sales jams among the previous segment leaders, but could still grow from new models with over 150km range.

A comment on segment nomenclature: EV-volumes uses a global segmentation scheme like many western car companies and agencies. In China vehicles are categorised into Cars, SUVs and MPV. No difference to what we do. Then, instead of our A to F segments, cars in China are classed into: A00 (=A, Mini), A0 (=B, Small), A (= C, Compact & D, Mid-Size), B (=E, Large) and C (=F, Luxury).

Formidable finish and a good start in 2019

Usually, NEV sales in China start low and finish high, with only ⅓rd of the annual volume in the first 6 months. December 2018 had a staggering 7,6 % NEV share in an otherwise depressed car market. Then, January came in with twice the normal rate and February was atypically lower. We can assume some overstocking at dealers here, ahead of the coming subsidy reductions. The ups and downs are likely to continue in the coming months, which makes 2019 harder to predict than the previous years.

Likely, 2019 will see a less steep increase in the 2nd half. We are expecting 6,8 % for the complete year of 2018, with an upside, if the car market continues to decline at the current pace. It appears that NEV demand is more resilient to car market downturns.

Exceeding Fleet Goals

The Chinese NEV fleet (vehicle population) reached 2,4 million in December 2018, counting light vehicles, 75 % more than at the end 2017. This puts China ahead of USA (1,1 m) and Europe (1,3 m). With around 200 million cars in operation in China, the PEV share is still just 1,2 % of the total fleet, but it is higher than in other regions, where fleet build-up has a stronger legacy portion. If China reached the motorisation rate of Europe or USA, it’s fleet would be 750 million cars, more than Europe and USA combined. Hardly sustainable with ICE propulsion.

5 million NEVs on the road by the end of 2020 is a previously stated target of Chinese authorities. This is for all vehicle types combined, including LCVs, trucks and buses. Even with a slower pace this year, this target will be met ahead of time. Another reason to further raise the bar for the industry.

Global EV Sales for 2018 – Final Results

Global plug-in vehicle deliveries reached 2,1 million units for 2018, 64 % higher than for 2017. These include all BEV and PHEV passenger cars sales, light trucks in USA/Canada and light commercial vehicle in Europe and China. Their share in the global light vehicle market was as high as 3,8 % in December and 2,2 % for 2018 in total. 69 % of sales were all-electric (BEV) and 31 % were plug-in hybrids (PHEV). All-electric vehicles have gained 3 % share in the mix since 2017, driven by growth in China, the arrival of the Tesla Model-3 and losses for PHEVs in Europe when the new fuel economy test procedure WLTP became effective in September.

The, by far, largest growth contributor was China, where sales increased by over 500 000 units to 1,2 million in 2018. China stood for 56 % of all plug-in sales. Europe growth was more moderate at 34 %, held back by tight inventories, long waiting lists for popular BEVs and the run-out of high-selling PHEVs. Plug-in sales in USA increased by 79 % and the long awaited Tesla Model-3 contributed with 138 000 units, most of them in the second half of 2018. Deliveries were limited to USA and Canada during the first year. It still became the best selling EV of all categories in 2018 and even dominated luxury car sales in North America. Sales outside China, Europe and USA were 150 000 units (+39%), with Japan again in reverse, but other markets like Canada and South Korea growing much faster than average.
The smaller car markets lead in EV adoption. The share leader is Norway, as usual, where 40 % of new car sales were Plug-ins in 2018. Iceland comes 2nd with 17,5 % and Sweden 3rd with 7,2 %. Our Europe story for 2018 has more details on this. Among the larger economies, China leads with a plug-in share of 4,3 %. All other car markets with over 1 million total sales show around 2 % for 2018.

At the end of 2018 the global fleet of plug-ins was 5,4 million, counting light vehicles. Medium and heavy commercial vehicles add 600 000 units to the global stock of plug-ins. Their global deliveries were 120 000 units in 2018, thereof 98 % in China and 80 % were large buses. For 2019 we expect plug-in sales of 3,2 million light vehicles and 140 thousand heavy vehicles.

As usual, feel free to publish diagrams and text for you own purposes, mentioning us as the source.

China stands for 56 % of sales and for 63 % of growth

China has further advanced its position as the growth motor of the EV industry. 520 000, or 78 % more NEVs were sold in 2018. In December, deliveries reached over 200 000 units for the first time and the NEV share in all light vehicles sold was 7,9 %. In contrast to booming NEV sales, the overall car market saw a severe downturn in the second half of 2018. Y-o-y declines accelerated in Q4 and reached as much as -20 % for January 2019. Has the ICE crisis started?

Japan losses are solely related to the Toyota Prius Plug-in, which has been in steep decline since the arrival of the 2nd generation Leaf in Q4 of 2017. Excluding the Prius, Japan’s plug-in sales increased by 38 %, with Leaf and Outlander gaining the most.

Europe was a mixed bag, with sales held back by supply constraints in larger EV markets, triple digit %-increases in South and Central Europe, a strong recovery in The Netherlands and incentive changes to promote more sales of pure EVs. The increases for total Europe was 34 %, but could have been 20-30 000 units higher with better availablitity.

The USA result was all about the Tesla Model-3, which stood for 138k of the 158k increase last year. 80 % of the Model-3 volume was delivered during the 2nd half of 2018. Others include Canada (42 700 sales, +124 %), South Korea (31 700 sales, +134 %) and many fast growing, smaller EV markets around the world.

Growth in Isolation

This shows the top-10 markets for plug-ins, underlining the significance of China in the development of the sector. 4,3 % NEV share in the worlds largest car market of 27,5 million light vehicles generated 1,2 million of volume. Business is kept local: Few units (2500 according to our records) were exported from China and NEV imports accounted for just 24 000 units. Imported plug-ins are burdened by the usual import duties and do not receive NEV subsidies. The only way to sell at equal terms is to produce EVs (incl. their batteries) in China and all OEMs are rushing to do so. In 2018, still only 58 000 plug-ins were made and sold in China by western brands, half of this volume by BMW.
USA came a distant second, despite the Model-3 splash. Norway remained on #3, closely followed by Germany. The triad China, Europe and USA stood for 93 % of global sales in 2018. Volume is one indicator, another is share in new vehicle sales. Check our Europe 2018 article for an overview by country. To find out more about the success of NEVs in China, watch out for our next article on China 2018, which is coming soon.

Global Top-10 Best Selling Models

As expected and still impressive, the new Tesla became the world’s best selling plug-in by a large margin, despite only selling in high volume during the 2nd half and only in USA and Canada. All were high-spec, long range variants; the 35 000$ base car is still some month off. Even if growth for S and X was close to zero, Tesla had all their models in the top-5.

The #1 of 2017, BAIC EC180 lost momentum before and during a battery upgrade and could not keep up with the rapid sector growth. It is still the #1 in China. The Nissan Leaf Gen-2 did much better than average, even if its battery specification got a lukewarm reception. 87 000 were sold, 84 % more than 2017, making 2018 the best year ever. The BYD e5 had a facelift and battery upgrade and i clearly paid off.

Toyota’s main contender Prius PHEV lost more than half of its volume in Japan; strong gains in USA/Cda could not compensate. The Outlander PHEV started selling in North America (sic!), became an instant hit in Canada and sold better in most other countries as well. The BYD Qin, the first PHEV in China back in 2014, is in its 3rd iteration now and still going strong. The #2 in Europe, Renault Zoe, grew another 27 %. It was launched in 2012 and the next generation starts selling in late 2019 or early 2020.

The top-10 stood for 30 % of the global volume in 2018. At the end of last year, 220 EV models were sold worldwide, for China their number was 150.

Tesla and BYD Take the Price

Depending on which vehicle categories are counted, both, Tesla and BYD lead the 2018 ranking. Counting light vehicles (Cars, SUVs, MPVs, Light Trucks, LCVs) Tesla is #1. Including medium & heavy trucks and buses, BYD leads the tally. BYD is one of the leading producers and exporters of electric buses with ca 13 600 deliveries 2018, 7 % outside China. The diagram is for light vehicles only. While volume is similar, their business could not be more different: BYD has ICE origins, offers 7 BEV plus 4 PHEV models and has 99 % of sales in China, through dealers. Tesla does with 3 models, all electric, sells in over 30 countries, online, and provides its own charging network.

Most OEMs posted solid increases in sales, but with global growth at 64 % last year, increases below that number mean lost sector share. Their list is long and mainly consists of western manufacturers, plus Toyota. Weak BEV portfolios are the main reason for this, in an environment that promotes real zero-emission vehicles more than plug-in hybrids. GM, Ford, VW, Daimler, BMW, Volvo and JLR offered only 8 BEV models altogether in 2018. They will introduce 4 new BEVs later this year in Europe – demand is high, already.

Beneath the top-20 there are at least another 30 smaller manufacturers for cars and another 10 for electric light commercial vehicles. Most of them are Chinese and operate in their local domain, a city or province. Many of them are EV start-ups, with varying chances for success. Even if badge-engineering is commonplace, there are few signs of sector consolidation, yet. The number of players keeps growing, every month.

Exponential Growth of Sales and Fleet

By the end of 2018, the plug-in vehicle population reached around 5,4 million worldwide, an increase of 64 % over 2017. Still, the impact on the total vehicle stock will be hardly noticeable in most countries. 5,4 million plug-ins on a global light vehicle population of around 1,3 billion is just 0,4 %, one in 250. Growth is exponential, though, and the overall picture will change much faster than historic sales suggest. Adoption of successful technology is along S-curves, not straight lines.

For 2019 we expect plug-in sales to grow by another 52 % and reach 3,2 million units globally. China is likely to strengthen its significance further and reach 2 million sales. For Europe we expect 540-580 000 units and for the US 440-480 000 units. The 3,2 million units include passenger vehicles and light commercial vehicles. It converts to a share of 3,4 % in a total light vehicle market of 93,4 million units, -1,5 % lower than 2018. 69 % of the 2019 volume are expected to be BEVs. The global fleet reaches 8,5 million under these conditions.

Europe EV Sales for 2018

Plug-in vehicle sales in Europe reached 408 000 units in 2018, 33 % higher than in 2017. These include all Battery Electric Vehicles (BEV) and Plug-in Hybrids (PHEV) in Europe, passenger cars and light commercial vehicles. The plug-in share of the European light vehicle market was 2,3 % for the year and reached 3,5 % in December, the highest ever for a single month. In terms of volume, September and the 4th quarter was affected by the WLTP introduction and the dwindling supply of popular PHEV models. The new WLTP requires more elaborate testing than the outgoing NEDC and back-logs in variant type approvals were common, not just for PHEVs.

Worse for PHEVs, many of them need battery upgrades to stay below 50g CO2/km in the new WLTP regime. These upgrades are being implemented, but it will take until Q3 of 2019 until all popular PHEVs are back on the market. Consequently, plug-in volumes increased by just 26 % in the 2nd half of 2018, following 43 % y-o-y increase in the 1st half. The 2018 result for plug-ins could have been at least 20k higher without the afore mentioned supply constraints. A positive side-effect was that the portion of BEVs increased to 65 % in Europe, where it was around 50 % during the previous 3 years.

The overall market was shaky during H2: 27 % overshooting in August (vs 2017), when the industry did its best to deliver ICE cars (incl PHEVs) with the outgoing, more favourable NEDC fuel economy certifications. This was followed by -21 % pay back in September, -5 % in October and -6 % in November. The year ended with +0,4 % for light vehicles (by ACEA) and a total of 17 750 000 units in the EU and EFTA markets.

An EV share of 3,5 % in December bodes well for high growth in 2019, with another 35-40 % increase in sales. New entrants will provide great support for higher adoption: The Audi e-tron quattro, Mercedes EQC, Porsche Taycan and the Tesla Model-3 are new for Europe in 2019. BMW brings the Mini in BEV variants, PSA finally enters the scene, Volvo and Land Rover launch PHEV SUVs later in the year. Many of the currently halted PHEVs will return with better batteries. The Nissan Leaf BEV, the current #1 in Europe, gets a 50 % larger battery in May, the #3, BMW i3 got 30 % more e-range for MY19. Both are likely to post further, high gains in 2019.

Growth close to trend amid supply constraints

Except for a special event, the 2015 boom and 2016 bust of PHEV sales in the Netherlands, EV adoption in Europe is a story of consistent and accelerating volume increases. Growth in 2018 has experienced set-backs since September, but, accounting back-log from insufficient supply, it still follows our expectation of a general adoption trend. Unlikely a straight line, rather an S-curve. EV volumes have quadrupled within 4 years, but are still a 2,3 % niche in the vehicle market. And EVs still represent only 0,4 % of all 320 million cars and LCVs on European roads.

Consistent, double digit growth rates can change the picture fast, though. Continuing with last years increase of 33 % for the next 10 years, would lead to around 50 % EV share in sales and 10 % share in the European vehicle fleet.

What drives the growth towards mainstream adoption? To make a long story extremely short: (1) more choice of long-range, affordable EVs, (2) levelling of purchase/ownership cost to comparable ICEs, (3) reliable, convenient charging possibilities, (4) restrictions and bans for ICE sales/use, (5) binding mandates for CAFE and emission controls. Number 5 does not directly drive car buyers’ choices, but without (5) there is less of (1,2,3).

Progress on these drivers is gradual and uneven. Few European car markets witness their combined force. Current actions and future plans still support a rapid increase in EV adoption throughout the coming decade.

Enforced shift to BEV

The usual 50:50 split of BEV and PHEVs sales in Europe has come to an end. Enforced by revised taxation schemes and more stringent ICE emission testing (WLTP), demand (and supply) shifts towards BEVs, which easily take all these hurdles. In the 4th quarter, BEVs stood for 65 % of EV sales, in December their share was 69 %. The complete 2018 is lower, at 56 %, as it includes 8 months of the pre-WLTP sales pattern.

We have expected this for some time, as a natural development in the coming years; now it comes imposed, with the WLTP drama. Too early it may be. PHEVs are still needed during the transition towards electrified transport. Further delays during 2019 could certainly cause a dent in the overall sector development.

Losses for Daimler and Volkswagen

Plug-in sales of VW, Audi and Daimler were hit hardest by the WLTP intro. Popular PHEV entries like the Mercedes GLC350e and C350e, the VW Golf GTE and Passat GTE, the Audi A3 e-tron and Q7 e-tron were stricken from the price lists during Q4. The C-Class and E-Class PHEVs are back with new 300e and 300de monikers and batteries of 13,5 kWh capacity, more than twice the 6,2 kWh in the previous models. PHEVs from VW, Audi and Porsche should reappear during the first half of this year.
BMW was less affected by the WLTP intro and became the solid #1 in Europe plug-in sales. The 5-Series PHEV sales held up well, so did the 2-Serien MPV and the Mini Countryman. But the PHEV versions of the recently renewed 3-Series and X5 will not be available until the next model-year in Q3-2019. Q4 of 2018 had just run-out sales of their predecessors.

BEV brands have done better. The new Leaf more than doubled Nissan volumes, the Renault Zoe, the very close #2 in the model ranking, increased by another 25 %, Tesla S&X sales remained, at least, stable. Huge gains in NL were leveled by losses in most other countries. Volvo, still without BEVs, mastered WLTP better than others, so did the Range Rovers of newcomer JLR. The i-Pace contributed with the major part, 6400 units.

The winners, in terms of volume and growth, are Hyundai-Kia, though. They have introduces 6 BEV and PHEV models during the last 30 months and, following supply problems, deliver in higher numbers now. The Hyundai Kona BEV and Ionic BEVs were their best sellers in Q4 in Europe.

Strong progress for EVs in most countries

Norway kept the #1 spot for the Europe’s largest EV market for another year. Sales in Germany were pulled down by the PHEV draught in the second half, otherwise it had won the cup in 2018.

Nearly all Europe markets showed growth during 2018, though at varying pace. Plug-in sales in Netherlands and Denmark have turned around to rapid increases, following years of volume losses in adverse incentive schemes. France and UK continue with moderate increases as their domestic OEMs (PSA, Ford, Vauxhall) have less than compelling offers in the sector. Belgium has cut the incentives on luxury PEVs and sales declined by 7 %. South Europe markets grew faster than the Europe average of 33 %, albeit from smaller bases.

Fast growing Italy could become a highlight of 2019. Effective March 1st, buyers of EVs below €50 000 retail price receive a €6000 subsidy, while taxation will increase sharper for vehicles with higher fuel consumption. And yes, Fiat will be in the game, starting with the 500e, made in Italy.

Smaller car markets lead EV adoption

The chart shows the share of EVs in the individual vehicle markets and the sales composition of BEV / PHEV. Norway is, as usual, off the scale. The plug-in share increased by another 8 percent-points to 40 % in 2018. If you have seen even higher numbers, they consider passenger cars only, where the share is another 6 %-points higher. It explains why Norway can be Europe largest EV market, even if its total vehicle market is just around 200 000 units per year.

Another observation is that EV adoption is lead by smaller car markets. Except for China, none of the larger car markets above 1 million units per year notably exceeds the world average EV share of 2,2 %. The reasons are manifold.

The BEV/PHEV mix is mostly a result of differences in taxation and incentives. Treated equally, PHEVs are still the preferred choice. 2018 policy changes promoted more BEV sales: Sweden introduced a Bonus-Malus taxation system in July, Norway got more weight conscious on PHEVs again, the Netherlands and Belgium reduced PHEV incentives, more ICE bans were announced, Europe introduced the WLTP and a 37,5 % CO2 reduction mandate.

It was effective: The year started with a 47/53 % mix of BEV/PHEV sales and ended with a 69/31 % ratio for December.

USA Plug-in Sales for 2018 Full Year

2018 was an exciting year for EV adoption in USA: 360 800 plug-in vehicle were delivered, 81 % more than in 2017 and the highest growth rate since 2013. Pure EVs (BEVs) gained most and represented 66 % of sales; 34 % were Plug-in Hybrids (PHEVs). In 2017 the ratio was 53 % BEV to 47 % PHEV. The plug-in share in the total light vehicle market reached 3 % in November and December and was 2,1 % for the entire year. The preliminary total for the US light vehicle market was 17,3 million, an increase of 0,5 % over 2017.

USA plug-in sales in 2018 were all about the Tesla Model-3: Plagued by ramp-up problems during the first half of the year, it became the worlds best selling EV of all categories in the second half, once output reached around 1000 units per day. Close to 146 000 units Model-3 were delivered to eagerly waiting customers in USA and Canada, 119 000 of them during the second half of 2018.

The new Tesla proved to be the game changer most of us expected it to be, not just shaking up the plug-in vehicle sector. The Model-3 has become a fully competitive alternative to well established ICE vehicles, now ranking among the 5 best selling cars in the US market. Among Mid Luxury cars in the comparable price bracket, the Model-3 captured 40 % of the segment during Q3 and Q4. A clear break-through and, deeming by the Tesla Q3 financial result, it can be done at a profit.

81 % growth of Plug-ins in 2018

USA made a huge leap forward in EV adoption in 2018. The growth rate of 81 % is comparable to 2011-2013, when the advent of the Chevy Volt, Prius Plug-in, Nissan Leaf and Tesla Model S created the first wave of rapid sales increases. It was followed by a 4-year period of moderate increases, even temporary declines. In 2018, the 2nd wave started and it is 4 times higher than the previous. The more remarkable, as it was just created by one new entry, the Model-3.

Plug-in sales are still concentrated on certain states: According to the Auto Alliance’s ZEV tracker, 50 % of USA plug-in sales were in California during the 12 month period ending Aug 2018. 12 % are in other states with ZEV mandates and 38 % are outside the states with ZEV mandates. The plug-in share varied as much as from 6,6 % in California to 0,2 % in North Dakota during the period. 2,1% on average for 2018 bring the US a lot closer to other, larger car markets, like Germany, France and the U.K.

The game changer

Since it started with volume production, Tesla has been the largest single contributor to EV growth in the US. Without the Model-3, the market had continued at the previous, leisurely pace. Its arrival is a game changer, raising the bar for plug-ins and ICE cars alike. The monthly sales volumes during the 2nd half were among the best sellers in the US car market, close to household nameplates like Toyota Camry, Honda Civic, Honda Accord and Toyota Corolla, all of them ICE driven.

Tesla now stands for half of the USA plug-in volume and, counting BEVs only, 3 out of 4 are from Tesla. The real impact on competition will become more visible when sales comprise more recent orders and less reservation back-log.

By contrast, the 2018 developments at Ford, GM and FCA are less impressive. Also, Nissan has not recovered from the Leaf “Rapidgate” yet. It had much higher sales during its 1st generation.

Gains and Pains in Q4

The table is sorted by the full year 2018 volumes this time. The #1 is no surprise, but how the sales numbers distance it from the rest is still impressive. In Q4 it sold 10 times more than e.g. the Chevy Bolt BEV. Moreover, Tesla came 1-2-3 in the BEV league with all their 3 models.

The Prius continues to be the best selling PHEV and increased by 32 % y-o-y. Two other PHEVs, the Honda Clarity PHEV and BMW 530e became instant successes.
The Bolt deserves better than a 23 % loss vs 2017 and in Q4 of 2018 it finally seems to recover. The Volt held up slightly better but will be scrapped in March 2019, to enable more focus on BEVs for GM. We still hope it will be re-born as a compact cross-over one day. US sales of the new Nissan Leaf look good compared to the run-out year of the old model, but remain sluggish and behind the volumes of the predecessor. It needs a better battery, soon to come.

Meanwhile, Ford’s ended sales of the Focus EV and the C-Max Energi, concentrates efforts on the Fusion Energi and seems to succeed. But the overall result was a hefty decline for Ford last year.
BMW lost volume on 3 of their models: the i3 got a larger, 42 kWh battery for MY2019 and deliveries have just started in the US. The 330e runs-out as the new 3-Series enters the market without a PHEV version for the first 9 months. Same for the new X5; the PHEV variant comes later in 2019 and with significantly improved specifications.

Fuel cell vehicles (3 models available) sold 2584 units during 2018, 12% more than 2017. Toyota delivered 1662 units Mirai. It would rank #22, but we don’t list the Mirai because it does not plug in.

Q4 sales for the other low volume imports are harder to comment, as their deliveries are highly influenced by the logistics of model-year introductions.

Mix shifts towards BEVs – but only to Tesla

The high volume of Model-3 sales during Q3 and Q4 has pushed the mix towards BEVs, which is a healthy development towards real zero-emission cars.
Excluding Tesla from the data reveals a disturbing fact, though: The sales of non-Tesla BEVs actually declined. 47 400 BEVs were delivered in 2018 which were not from Tesla; 16 % fewer than in 2017, when their number was 56600. PHEV sales remained less affected by Tesla growth and increased by 31 % during the same period. It clearly shows that the good is quickly displaced by the better. Long range and fast re-charge are still the key success factors for BEVs.

The EV population reached one million in October

The first million EVs on the road was reached in October this year. This is accounting for 1 % scrapping of totalled, worn-out and otherwise deregistered vehicles per year. Counting cumulative sales, the 1st million was already reached in September. At the end of 2018 the population was 1,1 million, nearly twice the number in operation in December 2016.

Our records show that the US stock now consists of 340 000 Teslas, 135 000 PEVs with ChaDeMo sockets, 100 000 BEVs with CSS sockets and 510 000 BEVs and PHEVs, which (except for the Mitsubishi Outlander) do not fast-charge.

Charging logistics remain an obstacle for most EV doubters, esp. when they lack access to charging at home or at work. Convenient and reliable fast-charging is the key to long-distance travelling. Tesla’s Superchargers have a good part in the brands sales success.

USA Plug-in Sales for Q3 and YTD 2018

232 500 plug-in vehicle have been delivered in the first nine months of 2018, an increase of 63 % compared to the same period of 2017. 63 % were pure electric (BEV) and 37 % were plug-in hybrids. The plug-in share of the total light vehicle market was 1,8 % to date, compared to 1,2 % in 2017. We expect the share to reach up to 3,5 % in December and 2,1 % for the complete 2018.

US sales in Q3 were all about the Tesla Model-3: During the first half of the year, it was still plagued by ramp-up problems and contributed with only 2000 to 60oo units per month. In Q3, it started to meet the sky-high expectations with clearly outstanding market performance. 54 300 units were delivered in Q3, to eagerly waiting US customers; weekly production was in the 4000 to 5000 range. With total plug-in category volumes of 110 500 units in Q3, The Model-3 stood for half of this volume and nearly the entire year-on-year increase in the sector. Growth was 107 % for the quarter.

Tesla is not just shaking up the plug-in vehicle sector. The Model-3 has become a very desirable alternative to well established competitors. A clear break-through and, deeming by the Tesla Q3 financial result, it can be done at a profit.

In August and September, the Model-3 was among the top-5 best selling cars of all categories, including ICEs, with volumes approaching ubiquitous mid-size cars like Honda Accord and Toyota Camry. In the segment with similar size, performance and price (aka Entry Luxury or Mid-Luxury) the Model-3 stood for half of September sales. It sold more than BMW 3&4 Series, Mercedes C-Class, Audi A4/A5, Acura TSX and all others combined. It can be added that the Model-3 has been the worlds best selling plus-in for the last 4 months.

Model 3 among the 5 best selling cars of all categories

The vehicle markets of USA and Canada are close to a 2/3rd light truck and 1/3rd car ratio. The car space is getting all tighter, competition heats up. Ford has even pondered to stop making cars altogether. Tesla approached this hot-pot with a seemingly impossible proposition: A car with a battery as the only power source, from a young, vulnerable company harassed by short sellers. Without a significant customer base, but many fans and a firm belief in its own capabilities.

A few years later and the Model-3 is chasing the four best selling cars in the US sales charts. Cars like Honda Civic and Accord, Toyota Corolla and Camry, household nameplates for US car buyers. At much higher prices than the aforementioned, without rebates, without advertising, distribution still banned in several US states. Hard to believe, harder to predict, but now it’s a fact.

The Model 3 surely gets a head start from 2 years back-log of reservations, the last number released was 420 000 at the end of Q2-2018. After that, Tesla went to the normal ordering process without reservations. A Tweet in July revealed 5000 new net orders per week. Global EV adoption in general, without Tesla and without China, is growing by over 30 % this year and likely the next. It is safe to assume that Model-3 demand will not dry up anytime soon.

And leaving the competition behind

Tesla Model 3 deliveries (finally) took off in July, leaving behind all direct competition. With the exception of the Audi A4/A5, the other segment players are showing sales drops. Mercedes C-Class sales have gone down 28% y-o-y. Even if the declines could be seasonal or model-year introduction related, some alarm bells should ring now. The total market does not grow at the same pace as Tesla and someone has to give. With none of the Model 3 direct competitors offering all-electric versions in the near future, the Fremont-made EV has an open road to rule this segment.

Tesla explained during the recent Q3 reporting that Model-3 buyer’s previous cars / alternative choices do not follow a clear pattern. Buyers traded in from a variety of car segments, often lower priced than the Model-3, indicating that the Model-3 has broad appeal and is highly aspirational. Just as the cars it is outselling now.

Gain and Pain

The list of best sellers show that range is still king in the US: Long range BEVs or plug-in hybrids on the top 6 places. In Q3, the podium positions went all for Tesla. Beside the Model 3 outlandish performance, the Model X continues gaining traction, beating even its direct ICE competitors (Mercedes GLE; Audi Q7) in September. Tesla Model S (-11% YoY) deliveries were likely cannibalised by its new, smaller sibling; to be expected after 6 years in the market.

Two entries among the Top 10  (Honda Clarity PHEV and BMW 530e) became instant successes. The Honda is still ramping up production, so it could be the Best Selling PHEV soon.US sales of the new Nissan Leaf remain sluggish; it needs a better battery. Chevrolet Volt (-14 % YoY) and Bolt (-17 %), are both down YTD, but at least picking up in Q3.

Ford’s plug-in portfolio and sales are fading. With the C-Max Energi out of production and the Focus Electric kept as a slow selling compliance vehicle, it was up to the Fusion Energi to remain present in the market. Unfortunately, it’s sales are dropping fast (-37% on Q3), suffering from the increased competition of younger, better equipped models, like the Honda Clarity PHEV.

Fuel cell vehicles (3 models available) sold 1972 units during the first 9 months, 31% more than January to September last year. We can’s see them reaching the same popularity as plug-ins any time soon nor in the next decade.

Tesla is leading the model and the manufacturers rankings and it is safe to say that this lead will be firmly held by Tesla for years to come. How high can the Model-3 go? Stay tuned.

Just the beginning

Without the Model-3, the market had continued with the previous, leisurely growth. Its arrival is a game changer, raising the bar for plug-ins and ICE cars alike. The real impact on competition will become more visible when sales comprise more recent orders and less reservation back-log.

For 2018, we expect total plug-in sales to reach around 365 000 units this year, 82  % higher than 2017. The plug-in share is likely to reach 2,1 %, which is getting the US closer to other larger car markets in terms of share. For this year we expect Tesla to stand for half of USA plug-in volume and, counting BEVs only, 3 out of 4 will be from Tesla.

The Model 3 weekly production rate is of high interest in this context. The weekly tallies in Bloomberg’s Model-3 Tracker, are still erratic, but they are increasing and stabilising around 5000 units per week. The current bottleneck is in the logistics to get them to the customers. Tesla expressed a target towards 7000/week by the end of 2018. We interpret this as an average, not a sprint peak rate. Based on this, we expect ca 160k units production for 2018.

Reaching the 1st Million

At the end of September the plug-in population was ca 970 000 vehicles on the road. The first million can be celebrated in October this year. This is accounting for 1 % scrapping of totalled, worn-out and otherwise deregistered vehicles per year. Counting cumulative sales, the 1st million was reached in September, already. By the end of 2018 we expect the PEV population to be 1,1 million, nearly twice the number in operation in December 2016.

Our records show that the US stock consists of 260 000 Teslas, 130 000 PEVs with ChaDeMo sockets, 90 000 BEVs with CSS sockets and 420 000 PHEVs, which (except for the Mitsubishi Outlander) do not fast-charge. They use the Type-1 connector for Level 1 & 2 charging, like all BEVs, except Tesla.

Charging logistics remain an obstacle for most EV doubters, esp. when they lack access to charging at home or at work. Convenient and reliable fast-charging is the key to long-distance travelling. Tesla’s Superchargers have a good part in the brands sales success.

Europe Plug-in Vehicle Sales for Q3 of 2018

Plug-in vehicle sales in Europe reached 291 000 units at the end of Q3-2018, 35 % higher than for the same period of 2017. These include all Battery Electric Vehicles (BEV) and Plug-in Hybrids (PHEV) in Europe, passenger cars and light commercial vehicles. The plug-in share of the European light vehicle market reached 2,7 % in September, the highest ever for a single month. In terms of volume, September was overshadowed by the implementation of the new WLTP for fuel consumption.  Plug-in volumes increased by just 3 % in September y-o-y, but in a total market down over 20 %, the plug-in share reached a new record. The downturn in September is the pay-back for 25 % overshooting in August, when the industry did its best to deliver ICE cars (incl PHEVs) with the outgoing, more favourable fuel economy certifications.

In addition, the new WLTP is much more elaborate than the outgoing NEDC and back-logs in variant type approvals are common. Low selling variants get lower priority in the test labs. This includes many PHEV variants of German OEM and inventories are drying up now. PHEV registration were down significantly in September and the first numbers we have for October show little improvement. Supply constraints for PHEVs have  lead to higher sales of pure electric cars, which reached 62 % of all plug-in sales in September, where an average of 50 % is normal for Europe.  For the complete Q3, PHEV sales were down 13 % vs Q2 and BEV sales were up 3 %. Volume losses were higher than gains.

Nearly all Europe countries, except Belgium and Greece, posted growth for 2018 YTD, many of them over 100 %, albeit still from low volumes. For the full year of 2018 we now expect 410 000 plug-ins to be delivered in Europe, and a market share of 2,3 %. This is 20 000 units lower than our previous outlook in June and is solely related to supply constraints.

PHEV heavy-weights lose volume

VW, Audi and Daimler are hit hardest by the WLTP regarding plug-in sales. Most of their portfolio are PHEVs and their supply is drying up. Sales of popular PHEV entries like the Mercedes GLC and C-Class, the VW Golf and Passat, the Audi A3 and Q7 are declining fast. Model-year 2019 models are not available yet and it’s still unclear when they will be.

BEV brands have generally done better. The Q2 to Q3 drop of Renault and PSA can be explained with the August vacation doldrums in France. Otherwise they still show gains.

BMW still appears to be less affected, as the Mini Countryman and the BMW 2-series MPV are still selling well. Losses on the other PHEV models are accelerating, however. The successor of the popular 3-series PHEV will not be available until summer next year.

Porsche had a huge boost in Q3 by the new Cayenne, September deliveries indicate that the WLTP trouble starts even there.

Volvo had the low-point in the beginning of Q3 and sales are now recovering again.

BEVs compensated – partly

Since we published the results for the 1st half year, Norway’s Q3 share increased by another 2 %, Iceland crossed the 20 % line and Sweden reached 12,5 %. The Netherlands approach 5 % share, most of it BEVs. Then it drops quickly, reaching around 2 % in the larger economies.

Q3 was eventful regarding policies, with Sweden introducing the Bonus-Malus taxation system in July, Norway getting more weight conscious on PHEVs again, Germany announcing the Berlin package and, of course, the WLTP certification mandate from 1st September. It caused the August boom and the September bust in Europe’s car sales.

The effects on plug-in sales can still appear erratic when seen over one quarter, by country. The broader trend is a shift towards pure electric, as incentives favour more BEV sales and many PHEVs are on hold. Comparing Q3 with Q2, even seasonality (France, Belgium) can play in.

All in all, PHEVs sold 13 % less than in Q2, where they should have sold 10 % more. BEVs sold 3 % more than in Q2. A faster shift to more BEV sales was hampered by supply. The combined back-log of BEV deliveries can be as high as 70 000 units in Europe, with waiting times of up to 15 to 18 months for electric SUVs (Kona, Niro) from Hyundai-Kia.

Germany reaches Norway volume, South Europe on fast track

At the close of Q3, Germany lead the European country ranking over Norway by a tiny margin, 53 500 plug-in registrations, vs 53 300 in Norway, including LCVs. August, September and also preliminary October results have Norway on top again. Much likely, Norway will keep the #1 spot for 2018 after all, when the year is over.

Most Europe markets showed growth during the first nine months of 2018, though with varying pace. Plug-in sales in Netherlands and Denmark have turned around to rapid increases, following years of volume losses in adverse incentive schemes. France and UK continue with moderate increases as their domestic OEMs (PSA, Ford, Vauxhall) have less than compelling offers in the sector. Belgium has cut the incentives on luxury PEVs and sales declined by 2 %. Most others have double or triple digit growth during the period, albeit from smaller bases.

In total, Europe plug-in sales grew by 35 %, compared to Jan-Sep 2017. Q1 increased 40 %, Q2 by 45 %, Q3 by 21 %. Supply is likely to delimit the pace in the 4th quarter as well. With some optimism that the announce production increases of e-Golf, i3, Zoe, and Kona hit the market, we expect 30 % y-o-y growth for the 4th quarter. More PHEV certifications could relax the situation further.

Shifting to pure-electric

The usual 50:50 split of BEV and PHEVs sales in Europe is coming to an end now. Enforced by revised taxation schemes and more stringent ICE emission testing (WLTP), demand (and supply) shifts towards BEVs, which easily take these hurdles. In September, BEVs stood for 62 % of plug-in sales. The complete Q3 is lower as it includes the run on PHEVs in August. For Q4 we are expecting a BEV share of 59 % or higher.

We have expected this for some time, as a natural development in the coming years; now it hits us earlier, triggered by the WLTP drama. Too early it may be. PHEVs are still needed during the transition towards electrified transport, but they need to get better than just being NEDC cycle beaters. Further delay would certainly cause a dent in the overall sector development.

Growth still on track – for now

Growth in Europe has experienced set-backs since September, which are likely to continue into Q4. We do not expect the PHEV shortage to be compensated by BEV sales. Most car buyers will not easily replace one by the other and there are bottlenecks on BEVs, too. We have reduced the outlook for 2018 to a total of around 410 000 units, 20 000 lover than in the previous round. The resulting share is 2,3 % of Europes light vehicle sales.

The reduction is merely supply related. OEMs and their supply chains are still underestimating the short and mid-term demand of BEVs and PHEVs. Still, the increase over 2017 is 34 %, coming from the strong results of the first 8 months.

Regarding population, the number of plug-ins on the road reaches over 1,3 million cars and LCVs at the end of 2018. This is 43 % more than at the end of 2017, but it still represents only 0,44 % of the European light vehicle fleet.

Global Plug-in Sales for the 1st Half of 2018

2018 is going to be another great year for plug-ins: 783 000 units were delivered during H1 2018, a gain of 66 % over the same period last year. Preliminary results for July show an increase of 53 % over July 2017. China stands for 51 % of the global volume, so far, and reached a peak share of 4,8 % plug-ins in worlds largest car market. Battery electric vehicles (BEV) stand for 64 % of the global volume, plug-in hybrids (PHEV) for 36 %. This marks the global average, depending on the individual incentive schemes, the mix of battery electric vehicles and plug-in hybrids varies significantly between countries. BEVs can represent as much as 88 % of plug-in sales, like in the Netherlands, or just 12 % like in Finland. The Europe average was 51 % BEV for 2018 H1; in China BEVs stand for 73 %. In USA this number was 53 % until June, now shifting fast towards higher BEV share with more Tesla Model-3 deliveries.

It is safe to predict that global sales of plug-in vehicles will surpass the 2 million mark this year. We are expecting 2,1 million deliveries, a 64 % increase over the 2017 result. This is considering the regional growth trends and the seasonality of sales, with 60-65 % of deliveries occurring in the second half of the year. The above numbers are for battery electric vehicles (BEV) and plug-in hybrids (PHEV) and comprise the light vehicles categories cars, SUVs, MPVs and light commercial vehicles. Medium and heavy commercial vehicles will add another 280 000 sales in 2018, nearly all of them in China. The global plug-in vehicle population will reach approximately 5,4 million light vehicles by the end of 2018, 64 % more than at the end of 2017. Medium and heavy commercial vehicles add 800 000 units to the global stock of plug-ins.

The by far largest growth contributor is China, where we expect sales to increase by over 500 000 units to 1,1 million in 2018. The long awaited Tesla Model-3 will contribute with over 130 000 additional units this year. With deliveries still restricted to USA and Canada in 2018, the Model-3 already was the worlds best selling EV of all categories in June, July, much likely in August and in many months to come. It will completely dominate the North American plug-in vehicle market from now on.

Among the fastest growing markets for the first 6 months were China (+105 %), Canada (+168 %), The Netherlands (+126 %), South Korea (+169 %), Spain (+99 %,) Finland (+148 %), Denmark (+691 %), Portugal (+119 %) and Australia (+98 %). Many Central Europe countries have increased sales 3 to 4-fold, albeit from small bases. The share leader is Norway, as usual, where 37 % of new car sales were Plug-ins this year. Iceland comes 2nd with 14 % and Sweden 3rd with 5 % for 2018 H1 combined. Our Europe story on H1 has more details on this. Among the larger economies, China leads with a plug-in share of 3 %. All other car markets with over 1 million total sales show 2 % or less for H1 combined.

Over 2 million deliveries and over 5 million on the road

Growth in the 2nd quarter has beaten our expectations, with a staggering 70 % more plug-ins sold than in 2017 Q2. In May, the share in the global light vehicle marked reach over 2 %, for the month of December it can go as high as 3,5 %. Inventories for popular model are tight in a number of markets as in Norway, Sweden and Germany. Delivery times of 6 month and more are now common in Europe, where most cars are built to order. OEM have announced production increases for the coming model-year.

We increase our forecast to 2,1 million worldwide plug-in sales for 2018, thereof 350-360k in the US, 420-430k in Europe, 1150k in China and 160k outside the aforementioned. The 2,1 million units include passenger vehicles and light commercial vehicles. It means +64 % in terms of volume increase and a light vehicle industry share of 2,2 %. Two thirds of the 2018 volume are expected to be BEVs.

By the end of 2018, the plug-in vehicle population will reach around 5,4 million worldwide, an increase of 64 % over 2017 year end. Still, the impact on the total vehicle stock will be hardly noticeable in most countries. 5,4 million plug-ins on a global light vehicle population of around 1,3 billion, is just 0,4 %, one in 250. Growth is exponential, though, and the overall picture will change much faster than historic sales suggest. Adoption of successful technology is along S-curves, not straight lines.

China leads growth and volume

China usually starts the year with NEV sales and shares below trend. 2018 had a strong start with +115 % increase in Q1 and +100 % in Q2, including light commercial vehicles. From mid June, new requirements regarding e-range (>150 km) and specific battery capacity (>105 Wh/kg) became effective for subsidy approval. This put a lid on sales of some very popular small and mini-EVs. We expect growth in China to slow down in Q3 and Q4 until OEMs have solved the compliance issues of these models.

Japan is among the very few markets with a contracting plug-in sector this year. More comments about the reasons towards the end of this article.

Europe is a mixed bag, with sales held back by supply constraints in larger EV markets, triple digit %-increases in South and Central Europe, a strong recovery in the The Netherlands and incentive policy adjustments to promote more sales of pure EVs. The increases for total Europe were 40 % in Q1, 45 % in Q2 and 30 % in July.
The USA numbers for January thru June show only partly the Model-3 effect. July deliveries were over 14 000 and August estimates are nearly 18 000 units, pushing total sector growth to 90 % rsp. 120 % in these months.

BYD stays on top – for now

BYD leads the ranking for 2018 H1, a position it has held since 2015. BYD delivered 72 000 units in H1, twice as many cars as in 2017 H1, thanks to the success of the new Song SUV and a revised Qin Sedan. Both models are PHEVs. Tesla follows very closely, climbs from #3 in 2017 to #2 in the ranking and is growing faster (Model-3) than BYD now. The top spot for the complete 2018 looks certain for Tesla, with way over 200 000 deliveries worldwide.

Some Chinese OEM were not ready for the new EV battery requirements and lost considerable sales. The worlds best-selling EV in 2017, the BAIC EC180/200 series, had no deliveries in June. ZhiDou (a Geely affiliate) lost all their D1/D2 series volume that month. Clear winners in China were SAIC (Shanghai Automotive), Chery and the newcomers GAC (Guangzhou Automobile) and Hawtai, albeit from small volume bases.
Among the international OEMs, Volvo and Hyundai-Kia gained most share versus last year, while the sector representation of Ford went from bad to worse. Most European OEM do not participate (yet) in the steep plug-in growth in China and their volume gains are below the global sector growth of 66 %.

Beneath the top-25 there are at least another 25 smaller manufacturers for cars and another 10 for electric light commercial vehicles. Most of them are Chinese and operate in their local domain, a city or province. Many of them are EV start-ups, with varying chances for success. Even if badge-engineering is commonplace, there are few signs of sector consolidation, yet. The number of players keeps growing, every month.

Battery Chemistry Evolution

The traction battery landscape has changed a lot in the past 10 years. In absolute shipment terms, the traction battery volume increased from just 1 Gigawatt-hours in 2011 to 37 GWh in 2017, according to our Battery Shipment Tracker. This reflects the rapid increase in plug-in vehicle sales and the increasing battery capacity of those vehicles. These numbers are for the light vehicle sector; heavy vehicles, mostly buses in China, swallowed another 26 GWh last year.

The chart shows how the light vehicle battery shipments developed by their cathode chemistry. Following an experimental phase with a large variety of costly, low volume concepts, the appearance of the Nissan Leaf EV in 2011 lead to the dominance of the LMO type (Lithium Manganese Oxide). NMC (Nickel Manganese Cobalt) batteries went mostly into the GM Volt. The next phase has the fast expansion of Tesla with their large NCA (Nickel Cobalt Aluminium) batteries, developed with Panasonic. Starting 2015, fast growth in China generated more LFP (Lithium Ferro Phosphate) share in the global shipments, mostly supplied by BYD.

Today, the most popular battery chemistry for light vehicles is the NMC family, with their main suppliers CATL, LG Chem and Samsung SDI. Heavy vehicle still rely on LFP batteries, with CATL and BYD as main producers.

The traction battery business is critical for the success of vehicle electrification and we can just scratch the surface here. Feel free to contact us for further insights of our battery database.

Japan rules HEV sales and production

A word on HEVs and on Japan, which does not participate in the rapid growth of plug-ins this year. HEVs do not charge from the grid, have very small traction assist batteries (1,5 to 3 kWh) and very limited all-electric-drive capabilities (if at all). Their advantage is price. The entire space of BEV, PHEV and HEV had a volume of 3,5 million sales units in 2017, BEV 866k, PHEV 415k, HEV 2210k. The map shows the split into geographies and concepts for the first half of 2018, with a total volume of 2 million units. Plug-in vehicles grow faster (+66 % over H1 of 2017) while HEVs increased by just 6 %.

The ties of Japan and HEVs are exceptional: It all started with the Toyota Prius and Honda Insight, now 87 % of all worldwide HEV sales are from Japanese brands, 47 % of all HEV sales reside in Japan and one in four car sales in Japan is a hybrid.

So, why is Japan still hesitant to adopt plug-ins? Solid leadership in HEV design and sales volumes is one reason. Lack of domestic plug-in choices is another: only 6 domestic models are offered, 3 of them (Leaf EV, Prius PHEV and Outlander PHEV) stand for 90 % of all plug-in sales; imports represent a small niche. A strong belief in fuel cell solutions (FCV) and the shutdown of nuclear power plants are other important considerations. Tax savings on eco-cars are similar for PEVs and the best HEVs. Unlike in the other regions, plug-in sales in Japan are unlikely to rally anytime soon.

China Plug-in Vehicle Sales for the 1st Half of 2018

China keeps impressing the industry and its observers with an amazing uptake of Plug-ins, or New Energy Vehicles, NEVs, as they are called in China. NEV deliveries for the first half of 2018 were clearly above the past 2 years growth rates: Nearly 373 000 plug-in passenger cars, including 15 000 imports, were delivered in January thru June. This is 114 % more than for the same period of last year.

On top of that come 49 000 commercial vehicles, so far, mostly LCV and electric buses, 60 % more than 2017 1-6. China is, by far, the worlds largest market for Plug-ins. 50 % of global plug-in volume was sold in China, for 2018, counting passenger cars only. For electric commercial vehicles, 70 % of the global volume is in China and exports of electric buses from China to other markets are significant.

In May, the NEV share reached a new high with 4,8 % in a total monthly passenger car market of nearly 2 million units. Keen to raise the standard of the Chinese EV industry, the Government introduced new requirements to receive NEV subsidies in June: a minimum 150 km e-range for BEVs and a specific battery capacity of 105 W/kg. This has slowed down the pace considerably as some popular BEV models did not comply and stopped selling. June growth was reduced to 80 % and preliminary results for July show a 61 % y-o-y increase. We expect this trend to continue during the 2nd half, until best-sellers like the BAIC EC-Series are back on track again.

Despite the slow-down, we expect NEV sales in China to reach 1,1 million passenger cars this year, up 83 % from 2017. In addition we expect 275 000 commercial vehicles the be delivered in 2018. For passenger cars we expect the NEV share to reach over 6 % in December and 4,2 % for the complete year. Back in 2016, the Chinese Government set NEV targets for 2020: 6 % share in vehicle sales and 5 million NEVs on the road. With the current adoption rate, these targets, considered highly ambitious in international comparison back then, will be surpassed by a good margin.

Over 1 million deliveries this year

China is, by far, the largest market for Plug-Ins. 2018 NEV passenger car sales thru June were 373 000 units, 3 times higher than in USA, the #2 in the country ranking. With 96 % of sales from domestic OEMs, China is also the largest producer of Plug-ins. Since the boom started in 2015, y-o-y growth has been accelerating, +65 % to 2016, +72 % to 2017 and the expected +83 % to 2018.

This year, we expect NEV sales to reach 1100 000 units, counting passenger cars, 74 % of them BEVs and 26 % Plug-in Hybrids (PHEV). In a total market forecasted to reach 26,3 million passenger cars (+2,2 % vs 2017), this means 4,2 % NEV share.

Our detailed, regular reporting is for the passenger car market. In addition, 49 000 commercial vehicles were sold in the NEV category in 2018 H1. For 2018 we expect this number to reach 275 000 units, half of them large buses, most of them fully electric. For electric busses, 98 % of world sales are in China, today. The domestic sales leader is Yutong, the export leader is BYD. We are maintaining a database for worldwide electric commercial vehicle sales. Contact us for more details.

⅔ rd of volume in the second half

The monthly share development helps to explain the forecast: Only ⅓rd of Chinas NEV sales are during the first half of the year. The first quarter is usually hampered by pending approvals and subsidy paperwork. Is takes until April for shares to connect to the endpoint of the previous year.
This year had a good start and a new share record for NEVs was set already in May. The May result contains a good amount of sales brought forward from models which lost their subsidies in June (the aforementioned tougher requirements on battery capacity). Among them the worlds best selling EV, the BAIC EC series. This put a 15-20k dent into June sales, which is likely to continue into Q3 and parts of Q4.

Still, unless shares and growth completely depart from the usual seasonality, we can expect 1,1 million NEV sales when 2018 is closed. The December share can be as high as 6,5 %, which is twice as high than for other larger economies with total vehicle markets of 1 million and more.

Segment dynamics

An important reason for the Chinese lead in NEVs is their success in offering ultra-affordable EVs in the Mini (A) and Small (B) segments. The industry is upgrading, however, as the Chinese Government continuously raises the bar for granting subsidies. The NEV segments are highly dynamic and compared to the 2017 picture, a lot has changed: Mini and Small cars lost ground, BYD upgraded their SUVs to make space for the new Yuan. The BYD Qin PHEV 10-folds sales after its face-lift. SAIC enters the Compact segment with a Station Wagon (!) and leads it. E-range improvements for, both, BEV and PHEV are the norm, together with the annual model-year changes.

The BEV share is high in international comparison. Europe and USA typically have around 50 % BEVs in their plug-in sales. The reason is partly in the segment composition of Chinese plug-in sales. Over 40 % of NEV sales are in the Mini and Small segments, where PHEVs make little sense. The BEV / PHEV mix has been trending towards pure electric since the last 2 years. In 2017, 81 % of sales were BEVs, for 2018 we expect 74%, due to fewer mini-EV sales and the strong rebound of PHEV models for BYD.

96 % of China NEV sales are China-sourced. Import cars are subject to custom duties (recently increased from 25 % to 40 %) and imports do not receive NEV subsidies. At least, import BEVs are exempted from the prohibitive taxes on big engine luxury cars and SUVs. This makes Tesla a compelling alternative in the high-end import segment. Of all imported plug-ins, 2/3rd are delivered by Tesla.

A comment on segment nomenclature: EV-volumes uses a global segmentation scheme like many western car companies and agencies. In China vehicles are categorised into Cars, SUVs and MPV. No difference to what we do. Then, instead of our A to F segments, cars in China are classed into: A00 (=A, Mini), A0 (=B, Small), A (= C, Compact & D, Mid-Size), B (=E, Large) and C (=F, Luxury).

Change is certain

Despite a complete sales black-out in June, the worlds best selling plug-in, the BAIC (or BJEV) EC180/200 series maintained the #1 position in Q2 and for the 1st half of 2018. This could already change in Q3, if the planned battery upgrade is late and subsidies remain withdrawn. Change is the only constant and, except for the BAIC EC series, the top-30 ranking looks a lot different from the 2017 result. The huge %-variances are a good indicator.

The reasons behind this unprecedented dynamics: Febrile, large scale industry activity and, sometimes, Government intervention to meet revised targets for NEV deployment and competitiveness.

Since June of 2017, the total number of plug-in models available in China has grown by 45, from 56 to 101. We tracked 38 BEVs and 18 PHEVs from 28 OEM in June 2017 versus 70 BEVs and 31 PHEVs from 39 OEM in June 2018. Consumer choice, but also competitive pressure, is now by far exceeding the European and USA markets. 11 new OEM have entered the Chinese NEV market within the last 12 months, but only 1 of them (Tata with JLR) had more than 2000 sales this year and 8 of the newcomers stayed below 1000 units. A shakeout seems likely.

The top-5 manufacturer ranking after 6 months is: #1 BYD 71 900 units +103 %, #2 BAIC (BJEV) 61 000 units +102 %, #3 SAIC 55 000 units +300 %, #4 Geely/Zhidou 25 200 units -6 % and #5 Chery 24 500 units +120 %. The next 5 are JAC, JMC, Hawtai, Changan and Zotye. Tesla is #12 with 9500 deliveries (all imported) and BMW is #13 with 7300 deliveries, nearly all of them 5-Series PHEV and X1 BEV from local production by their J/V with Brilliance.

Exceeding the goals

The Chinese NEV fleet (vehicle population) reached the 1st million in October 2017 and ended 2017 with 1 260 000 NEV passenger cars in operation. By the end of 2018 and counting passenger cars, we expect 2,35 million NEVs to be in operation in China, 90 % more than at the end of last year. This puts China ahead of USA (1080k) and Europe (1350k). With around 200 million cars in operation in China, the PEV share is still just over 1 % of the total fleet, but it is higher than in other regions, where fleet build-up has a stronger legacy. If China reached the motorisation rate of Europe or USA, it’s fleet would be 750 million cars. Hardly sustainable with ICE propulsion.

5 million NEVs on the road by the end of 2020 is a previously stated target of Chinese authorities. This is for all vehicle types combined, including LCVs, trucks and buses. With the current rates of NEV adoption, this target is very likely to be exceeded. Encouraging.

Europe Plug-in Sales Results for 2018 H1

Plug-in vehicle sales in Europe reached 195 000 units in the first half of 2018, 42 % higher than for the same period of 2017. These include all Battery Electric Vehicles (BEV) and Plug-in Hybrids (PHEV) in Europe, passenger cars and light commercial vehicles. The plug-in share of the European light vehicle market reached 2,2 % in June and 2 % for the first half year. The trend, so far, indicates further increases around 40 % during the remainder of the year. 51 % of plug-in sales are pure electric vehicles (BEV) and there rest are Plug-in Hybrids (PHEV). Only 87 fuel-cell vehicles were sold during the period, up from 66 last year. With powerful Hyundai and Toyota behind them, the numbers speak for themselves.

The German market is the strongest growth contributor, in terms of volumes. Even if growth rates do not reach 100 % as last year, this year’s 52 %, combined with the sheer size of the German market, push volumes forward. Norway is still Europe’s largest market for plug-ins, with a staggering share of 37 % in this year’s light vehicle sales. Counting passenger cars only, the share was 46,5 % in 2018 H1. A good indication of what is possible with compelling savings on vehicle taxes, much lower operating cost and a well developed charging infrastructure.

All Europe countries post growth for 2018 H1, many of them over 100 %, albeit still from low volumes. For the full year of 2018 we expect 430 000 plug-ins to be delivered in Europe, and a market share of 2,35 %. This is for the total of all EU and EFTA countries. The European plug-in vehicle fleet is now over 1 million and we expect the population to be 1350 000 units when the year ends.

Growth is everywhere this year

Norway still leads the European country ranking. 36 500 plug-ins were delivered including June and for the complete 2018 we expect 84 000 sales, a share of 45 % in Norway’s market for passenger cars + light commercial vehicles. Germany sales grow faster, though, and we expect it to take the volume lead in Europe with 88 500 registrations when 2018 is closed.

All Europe markets showed growth during the first half of 2018, though with varying pace. Plug-in sales in Netherlands and Denmark have turned around to rapid increases, following years of volume losses in adverse incentive schemes. France and UK continue with moderate increases as their domestic OEMs (PSA, Ford, Vauxhall) have less than compelling offers in the sector. Belgium has cut the incentives on luxury PHEVs and sales grew by a mere 4 %. All others have double or triple digit growth during the period, albeit from smaller bases.

In total, Europe plug-in sales grew by 42 %, compared to 2017-H1. Q1 increased 40%, Q2 by 45%. A caveat for high growth in the 2nd half is vehicle supply. Our tracking of plug-in vehicle inventory shows an average of only 4 days of supply on stock and 2 months of order back-log. Models with more than 10 000 unfulfilled orders, each, are Hyundai Kona, VW e-Golf, Jaguar i-Pace and Nissan Leaf and obviously the Tesla Model 3, all of them BEVs.

The Nordics lead in EV adoption

This diagram shows the share of Plug-ins among all light vehicles sold in a country and the composition of BEVs and PHEVs in the overall share.

Except in Denmark, where the market was confused by incomprehensible green car taxation plans, the nordic countries lead in EV adoption. The plug-in share in Norway is off the chart, as usual, with 37 % YTD. EVs have a long tradition in Norway (the Th!nk and Buddy microcars) and EV awareness in Norway started some years ahead of other countries. Thanks to clear, stable incentives in form of generous tax and toll savings, EVs have become the smart choice for light duty transport, despite long distances and a less than balmy climate. Low-cost electricity from 99 % hydropower helps, too. Iceland is in a similar position.

The mix of BEV vs. PHEV varies a lot between markets, highly depending on national incentive schemes. PHEVs captured more share compared to 2017, driven by the growing number of entries from German OEM. For 2018 YTD, 51 % of plug-in sales were all-electric in Europe.

PHEVs are the main contributor to high plug-in shares in Iceland, Sweden and Finland. It can be expected that future incentive schemes will reduce support for PHEVs and increase them for EVs. An example is the introduction of a tougher “bonus-malus” vehicle taxation system in Sweden from 1st of July. It created a swing of 10 % towards BEVs in the July registrations.

Market share development indicates 430k for 2018

Plug-in volumes and shares from January to June have been significantly above 2017. YTD, the share is 2 %, compared to 1,44 % for H1 of last year. Volume increased by 42 % during this period.

For the remainder of the year we assume the share development to continue on this trend and follow the seasonality of previous years. In a total market of 18 million light vehicles for 2018 (+1,9%), these shares convert to 430 000 units as the year-end result.

Supply may set limitations, especially for BEVs. Inventories are tight for most models and some have long waiting lists. Manufacturers have announced higher output for e.g VW e-Golf and BMW i3, but the situation for e.g the Hyundai Kona is still unclear, which could put a dent into Norway sales, where 7000 customers are waiting for it.

Exponential fleet growth

930 000 Plug-ins were on European roads at the end of 2017. Adding the 430 000 of 2018 and accounting for some scrapping, their number will increase by 45 %, to approximately 1350 000 at the end of 2018. With nearly 300 000 000 light vehicles on European roads, this means 0,45 % of them can plug in. A tiny share of the total fleet, but growing exponentially. The number of public charging locations does not keep pace anymore, we counted 80 000 public locations in Europe at the end of 2017 and expect they number to reach 100 000 by the end of 2017, a 25 % increase within a year.

Even if 80-90 % of all charging is done at home/work, BEV drivers in particular face several challenges when travelling longer distances, today: Finding the nearest station with the right connector type/power is one, having the station operators tag/card/app is the next, learning the unique operation routine is the third and the occasional malfunction is the forth. And then you have not even left the country yet. Range anxiety is amplified by charging anxiety and, unless public charging becomes easier and more reliable, it will restrict all EV adoption, except for Tesla. We can only encourage charging providers to unite on best practices and quality standards.

Change at the top and few losers

Unlike in USA, the new Nissan Leaf had a successful start in Europe and displaced the long term leading Renault Zoe from the #1 position. New and improved models definitely pay off, as the triple digit growth rates of Volvo XC60, Porsche Panamera, Smart and others can witness about. The new Volvo SUV gave the Mercedes GLC and the Mitsubishi a tough match last quarter. The Audi e-tron and BMW’s Active Tourer had facelifts and a related sales dips during Q1 and Q2, but volumes were back to normal in June.

Since June of 2017, the total number of models available in Europe has grown by 5 from 51 to 56. We tracked 27 BEVs and 29 PHEVs in June 2018. A good indication that the 42 % YOY volume growth is not just product driven. It is also the result of better awareness and insight, both, in the industry and among car buyers.

The top-10 manufacturer ranking after 6 months is #1 BMW 35 450 units +29 %, #2 VW 33700 units +44 %, #3 Renault 21 400 units +10 %, #4 Nissan 19 300 units +42 % and #5 Daimler 18 800 units +35 %. Growing fastest is #6 Hyundai-Kia with +234 % and #7 Volvo with 164 %. Mitsubishi (#9) is the only brand that lost volume (-3 %), Tesla is on #8 (the Model-3 sales start is not before 2019) and, finally, PSA is #10.

USA Plug-in Sales for the First Half of 2018

122 000 plug-in vehicle have been delivered in the first half of 2018, an increase of 37 % compared to H1 of 2017. 53 % were pure electric (BEV) and 47 % were plug-in hybrids. The plug-in share of the total light vehicle market was 1,4 % for the 1st half of 2018, compared to 1,1 % in H1 of 2017. The increases were consistent, month-on-month, like in 2017.

Growth is accelerating, even if many of us expected more. The reason is not only in the ramp-up delays of the long awaited Tesla Model-3: US sales of the new Nissan Leaf remain sluggish (unlike in Europe and Japan), as battery and charging capabilities are questioned for the current version and many wait for the 60 kWh version of the coming model-year. The Chevy Volt, selling 23 300 units in 2017, is down to 7 858 sales during the first half of this year. Both models have plenty of inventory in their large distribution networks.

Sadly, we have to reduce our outlook of for the complete 2018 to 350 000 units (was 400k), as 3 big-sellers did not reach the H1 volumes to be expected. Strong sales of Toyota Prius PHEV and Honda Clarity PHEV could not quite compensate. Fuel cell powered models (3 available) sold a mere 1400 units during the first 6 months, 400 more than January to June last year.

Better news can be expected for the 2nd half of 2018: Unprecedented growth rates and volumes with better Model-3 supply and the 1st million plug-ins on US roads, in November.

The wait is soon over

USA is the 2nd largest country for Plug-ins, after China, but growth and market share are less impressive than in many other developed economies. Sales remain concentrated in few states: According to the Auto Alliance’s ZEV tracker, nearly 50 % of USA plug-in sales are in California, 12 % are in other states with ZEV mandates and 38 % are outside the 10 states with ZEV mandates.

2018 will be a game changer in the US, as the Tesla Model 3 will start to be produced in high numbers, essential for Tesla to satisfy the six-figure long waiting list and to show a profit. We expect total plug-in sales to reach around 350 000 units this year, a 75 % increase over 2017. The plug-in share for 2018 is likely to reach 2 %, which is getting the US closer to other larger car markets.

US plug-in vehicle market to be dominated by Tesla

For Q1 and Q2, our sales estimates are 24 100 units Model-3 in the US and 2500 in Canada. Tesla produced 38 300 Model-3 during this period, the balance being “in transit” to customers. Likely, some late June deliveries were postponed to early July. This, in order to stay below the 200 000 accumulated sales mark, where the federal tax incentive is phased out. Reaching this number a couple of days later, in July, prolongs incentives for another quarter.

The weekly production rate is a matter of high interest. Tesla has reached the 5000/week rate during single day sprints. Checking Bloomberg’s Model-3 Tracker, the average for June was around 2100/week. In a recent meeting with investors and analysts, Tesla expressed 7000/week as a target by the end of 2018. We interpret this as an average, not a sprint peak rate. Based on this, we expect ca 160k production and 130k sales to US customers for 2018.

Despite restricted supply, the Model-3 has been the best selling plug-in for every month since January. For the complete 2018 we expect Tesla to stand for half of USA plug-in volume and, counting BEVs only, 3 out of 4 to be from Tesla. For the first half of 2018, all Tesla models were among the top-5, already.

More Tesla, more BEVs in the mix

More Tesla volume means more BEVs in the mix, which is a healthy development towards real zero tailpipe emissions. 45-50 % of plug-in buyers still prefer PHEVs and for good reasons: Light trucks now stand for 60-70 % of vehicle sales and there is only one BEV, the Tesla Model-X, starting at $80k, 8400 sales this year. The Jaguar i-Pace has not landed, yet. PHEV buyers can choose among 8 models from 7 brands starting at $27k, total sales 9100 this year. The other reasons are BEV range and charging, where only Tesla has offered widely acceptable solutions.

The Model-3 lowers the price barrier, without sacrifices on range and charging (ok, you will pay for the juice). The additional 100 000 deliveries in 2018 H2 (our expectation) will leave a clear trace in the BEV / PHEV ratio.

It does not solve the issue of a more affordable BEV SUV, where the coming Hyundai Kona (already completely oversubscribed in Europe), the future Tesla Model-Y and others will do the job. In China, this segment is red-hot and new BEV SUVs appear on a monthly basis. It’s just a question of time until this trend reaches Europe and the US.

3,5 % share by the end of 2018 and 2 % for the year

Plug-in vehicle shares tend to develop in accordance with peaks in Tesla deliveries, high at the end of the quarters and with troughs after that. The June peak did not happen this year, as Tesla stayed clear of the 200 000 limit for full federal tax incentives. Presumably, this volumes shows up in the July sales, instead. Assuming that the expected production increases materialise, the remainder of the year will see rapid share growth towards over 3 % in December, for an average of 2 % for the year. It means that USA is catching up with other larger car markets, which have 2 % and more electrically chargeable vehicles in their total sales.

This is for the average of all US States. California is likely to surpass 10 % plug-in share in December, while staying below 1 % in at least 20 other US States. It took 7 years for California to get from 1 % to 10 %, some indication for the future potential for other US States.

Reaching the 1st million

The current plug-in population is around 860 000 vehicles on the road. The first 1 million can be celebrated in November this year. By the end of 2018 we expect it to be 1080 000, nearly twice the number in operation in December 2016. Charging logistics remain an obstacle for most EV doubters, esp. when they lack access to charging at home or at work.

In April this year, we counted 23 000 public charging locations with ca 65 000 connectors of all types in the US. Since April 2016, the number of stations with DC fast chargers (CCS or Chademo) increased by 66 %. Stations with Level-1 and Level-2 charging were up 24 %, Tesla Supercharger stations became 85 % more. The EV population (52 % BEV and 48 % PHEV) was up by nearly 100 % in the same period. Level-1&2 charging PHEV owners will find it increasingly difficult to find a charging occasion, unless they charge at home/ at work.