The end of the internal combustion engine has begun
The world took a transportation milestone in 2017, though most people wouldn’t have noticed at the time.
That year, consumers bought more than 85 million automobiles, a sales volume that declined in 2018, then again in 2019, then plummeted in 2020 due to Covid-19. Meanwhile, sales of electric vehicles have increased, and have increased further, making electric vehicles the only growing market in the automotive industry, ”which means that we have almost certainly reached the peak of motor car sales. internal combustion four years ago.
The future looks even more electric, according to BloombergNEF’s Annual Electric Vehicle Outlook. The report is full of bold conclusions. On the one hand, he sees mostly electric vehicles sold by the 2030s and mostly electric vehicles on the road by the 2040s “- and that’s just the status quo scenario. In a world of zero net emission, electric vehicles would represent 100% of passenger vehicle sales in just 15 years, all other categories of road vehicles “from two-wheelers to heavy-duty trucks” will be either fully electric or fuel cell initially from the 2040s.
Creating this kind of scenario is important in our day and age, as more and more companies go down a net zero path. Also important: describe where we are now.
Electric cars are getting a lot of attention, but they are just one type of road vehicle that is now electrified. Last year, electric vehicles accounted for over 4% of total passenger car sales and at most 1% of the commercial vehicle market. Meanwhile, electricity accounted for 44% of electric two- and three-wheeler sales and 39% of bus sales. As efficient as modern auto factories are, they will not be able to keep pace with an electric scooter factory targeting 10 million units per year.
Passenger cars have a long way to go to catch up. Having said that, I don’t want to downplay the rate of change so far. The total value of new car sales last year topped $ 2 trillion, even with a massive overall decline in sales. Electric vehicles already represent an annual activity of more than 100 billion dollars, with an impressive growth rate.
In 2011, electric vehicles made up 0.1% of total passenger car sales, but BNEF believes they could account for 10% of sales by 2023, a 100-fold increase in just over a dozen years. I like to think of fast growing markets in exponential and non-linear terms, and once EVs exceed 10% of sales, they are in the last exponent of the passenger car market. At this point, they are not playing for part of the market, but for all.
It’s worth thinking about the future growth of electric passenger vehicles from a business perspective. A slew of new models are coming, many of them from century-old car manufacturers. Some of them are old marks on newer types of vehicles, like Ford Motor Co’s Mustang Mach-E, which is already being manufactured more than its combustion engine sports coupe namesake.
But most emerging electric vehicles are comparable to existing internal combustion models. I am thinking in particular of the best-selling vehicle in the United States for four decades, the F-150, and its electrified double, the F-150 Lightning. Once it hits the market next spring, a few things could happen: it could weigh on regular F-150 sales; it could eat into sales of full-size trucks from other manufacturers; or it could absorb the sales of other categories of vehicles, “say, SUVs.
We already have data on how comparable models from a company with different powertrains might fare on the sales front: Porsche. Porsche doesn’t have a lot of models “- most of them have been sold for years or decades” – which is why its new introductions potentially compete with its existing offerings. Porsche sells two models of internal combustion SUVs (one of which is available as a hybrid version) and now two sedans: the combustion Panamera (and hybrid) and the all-electric Taycan.
The Taycan accounted for 7% of quarterly sales of Porsche sedans in North America when it was launched. Two quarters later, it was just under half. In the first quarter of 2021, six quarters after its launch, the Taycan accounted for 82% of sedan sales, even as the total sedan market grew.
Porsche has managed to develop its sedan market with a new model, but the competition between its incumbent and its new entrant is also clear. The electric Taycan could push its combustion-engined sibling to the brink “- a market too small to merit a model refresh. It’s competition, in miniature, that the global auto market will soon face. All of its growth. is electric, and at a certain point, this growth comes at the expense of combustion engine sales.