Transition To EVs Marked By Growing Intent, Trade War Pricing, New Investment Fund
Erosion is a slow, steady process as the forces of nature do their work, wearing down even the toughest of surfaces over time. Indeed consumer habits and tastes can be just as difficult to wear down, but the latest study from McKinsey and Co. indicates resistance to electric vehicles is eroding as the intent to buy builds.
That shift comes amid conflicting conditions that include an ongoing trade war, lingering skepticism over charging convenience and consumers who simply are resistant to change.
At the same time, a company running a fund related to battery electric vehicles is so confident about the future of battery-electric vehicles it’s encouraging investors to place their bets on BEVs.
Sound like a stew that’s difficult to stir? Oh, it has all the ingredients, it’s the recipe that’s up for debate.
EV Intent Growing
Let’s start with evidence consumers are more willing to at least think about making the conversion from internal combustion engine—ICE-vehicles to either hybrid-electric or battery-electric cars and trucks.
According to the McKinsey Mobility Consumer Pulse Survey, published on July 28th, the proportion of consumers considering battery-electric vehicles rose by five percentage points to 20% between December 2021 and December 2022.
At the same time the proportion considering a plug-in hybrid, or PHEV, rose by four percentage points to 22% according to the McKinsey study.
While the study showed an increase in intent to choose an electrified vehicle, it also revealed a four-percentage-point drop in EV skepticism by consumers, from 23% of consumers who “categorically do not want to switch to EVs”, to 19%.
Remember, erosion is a gradual process, so 4% is at least evidence of its occurrence. One of the forces that appears to be breaking down some of the resistance to going electric is prices for EVs are dropping, in large part sparked by deep discounting by market leader Tesla.
The average transaction price for an EV in July was $53,469, down from $53,682 in June and down from more than $61,000 in January according a report released last week by Kelley Blue Book.
Cost Effect of U.S.-China Trade War
But a challenge to that trend continuing is the ongoing trade war between the U.S. and China, contends the head of an Israeli company that develops and produces components for EV batteries.
The issue, says Addionics co-founder and CEO, Dr. Moshiel Biton, is China’s dominance in EV battery and component production—a condition that could raise the costs of manufacturing EVs.
“I think there is no secret that China today controls battery manufacturing in the world,” said Biton in an interview. “They control more than 70% of the pathways in the supply chain and the raw materials are either owned by a Chinese company or manufacturers in China.”
With that kind of control, plus high-quality of materials and components, Biton contends China has an unfair advantage with the ability to demand higher prices.
How to break China’s hold?
“I think, for instance, the U.S, with all the IRA programs, it’s becoming I would say, very attractive to produce and manufacture in the U.S. I even will be more aggressive and say it’s a crime for manufacturers not to produce in the U.S. today because it’s very attractive. You can get like grants, incentives, tax benefits, etc.,” said Biton.
An EV Investment Fund
At investment firm Defiance ETFs, the sky is only in the black over battery-electric vehicles. The Defiance Pure Electric Vehicle ETF, an exchange-traded fund, tracks the top five performing stocks for companies where at least 50% of their revenues come from producing manufacturing, selling electric pure electric vehicle cars: Tesla, Rivian, Nio, Li Auto and Xpeng.
Sure, companies like Tesla and Rivian have seen the value of their shares sink, but Defiance ETFs CEO and CIO Sylvia Jablonski says that’s not indicative of where the overall EV market is headed globally.
“You have like 10 million sold in 2022 by the end of this year, 80% of all vehicles sold could be EVs. You know, in the story of like, just globally in China, more than half of vehicle sold or EVs. Already in the Nordics, it’s like 90% By 2040 the IEA basically expects $1.3 trillion, which is like a 25% compounded annual growth rate,” said Jablonski in an interview. “You know, people have said things like, well, I wouldn’t have bought one before, but now they’re, you know, now there’s a more diverse option in terms of how they look, basically they were ugly before now. They’re not anymore. You can’t charge them before now you can so I think that you know, my view on this is that all of those things are resolvable, and they’re being resolved.”
Even with other companies converting their portfolios to EVs, Jablonski is steadfast in declaring the current leader will remain so despite production and quality issues, declaring, “they will have more competition as other companies sort out their supply chain issues and build the stations and things like that, but I think that Tesla will emerge the clear leader and there’s always a first mover advantage no matter kind of like what market you’re in. Tesla’s just head and shoulders above everybody else.”
A Hybrid Half-Way House
While a conversation to battery-electric vehicles is the auto industry’s ultimate goal, that’s a big ask for many consumers who cling to the convenience and habit of simply filling up their tanks with gasoline or diesel.
For that reason, executives at one auto industry supplier surmise many consumers won’t go all the way right away in trading petrol for pure electric power.
“We have been, and are still very involved in the strong hybrid vehicles which we think can be a big, big part of that transition to full electric,” said John Nunneley, senior vice president, design engineering and IT at Hitachi Astemo during a media briefing last week at it’s North American headquarters in Farmington Hills, Mich.
“It also depends on the day you ask the question and who you ask the question to so coming from Europe, you know, the internet is really good, especially in Germany. So this charging anxiety is not at all what we see here. So we saw in Europe, the EV market really coming up much faster, less stress,” added Hitachi Astemo Americas CEO and president Tim Clark at that same briefing. “Here, we have a longer distance between towns. You try driving an EV to California from here you’re gonna stop a lot. So I think there’s a kind of a hope to go EV but then maybe something will come up and maybe some new hybrid technologies will be better.”
An Inevitable Conversion
But while plug-in hybrids may serve as a transition for some, as the McKinsey study indicates, erosion of consumer resistance is progressing to what Addionics’s Biton predicts will be eventual surrender to the combined forces of society and technology.
“Transition maybe will not be as accelerated as fast as people anticipated, maybe will be a bit slower, but eventually,” declared Biton, “we will see a full adoption.”
Follow me on Twitter.