There’s something that’s often lost in discussions about tech adoption trends, and in particular when it comes to something we cover a lot, electric vehicle sales trends: it’s not a straight, consistent line upward. There are ups and downs. When adoption jumps up fast, those of us bullish on the transition get extra excited and bullish. When the adoption trend slows, people who prefer a more conservative “nothing is really ever going to change” story get to say, “ See, the revolution ain’t happenin’! ” Those ups and downs in the adoption trends are often driven, at least in part, by the reality of how a market actually evolves. As consumer demand rises, production capacity has to rise. When demand has risen quite a bit and production capacity growth hasn’t kept up, there’s a supply crunch that leads to higher prices. When production capacity ramps up a lot, on the other hand, periods can follow where there’s more production capacity than demand, or at least where supply catches up to demand, leading to price drops. A core of the EV market, of course, is the battery market. So, aside from auto production capacity, EV production capacity is a critical element in this whole leapfrog trend or chutes and ladders trend. The good news at the moment is that EV battery prices are expected to drop a lot in 2024 and 2025. That’s according to a recent analysis from Goldman Sachs. When EV battery prices do come down a lot, we can then expect electric vehicle prices to come down a lot, which will boost EV sales further. “In a few months, lower metal prices should start to flow through to EV makers. ‘The good news is battery prices are now falling rapidly,’ Bhandari says,” Goldman Sachs writes . “Goldman Sachs Research expects a nearly 40% decline in battery prices between 2023 and 2025, and for EVs to reach breakthrough levels in terms of cost parity (without subsidies) with internal combustion engine cars in some markets next year. Longer term, our analysts project EVs to take a considerably higher share of car sales, reaching 50% in the US and 68% in the EU by 2030.” The EV battery price cost trend looks dramatic, and very helpful. With Goldman Sachs’ wealth of data across probably every sector in the world, one would think the financial company is on point when it comes to EV battery price trends this year and next. Forecasting EV sales several years out is a much tricker business, and one would hope that the forecast of just 50% EV market share in the US and 68% in the EU is pessimistic and incorrect. As far as why EV battery prices will drop, Goldman Sachs argues that it’s because of a mixture of EV battery material costs dropping and EV battery manufacturers continuing to innovate well. “The bear market for metals is one reason battery prices are forecast to decline. The other is that battery innovation is still ongoing, Bhandari says. Manufacturers are finding ways to simplify the manufacturing of batteries (through structure-related innovations that allow better, simpler packaging), and to use materials, like silicon, that may reduce charging time and increase energy density.” Unsurprisingly, but perhaps a little less convincingly, they also raised the age-old dream of some solid-state battery breakthrough. (I’ve been hearing about this for the past decade plus, but it’s always more of a dream or hope than a clear reality on the horizon. I guess you could say that it’s sort of like the faux pool of water you see on the horizon in the desert.) “Major innovations like solid-state batteries (as opposed to using liquid electrolyte as in batteries today) could, in the coming years, be a game-changer for the industry, as solid-state batteries are expected to allow carmakers to pack in even more energy, for the same amount of weight, than a conventional battery.” One can dream. Chip in a few dollars a month to help support independent cleantech coverage that helps to accelerate the cleantech revolution! Goldman Sachs also brings up the Inflation Reduction Act passed by
Democrats when they controlled
Congress and the
White House, as well as strong EV-supportive policies in Europe. “The US Inflation Reduction Act’s subsidies could bolster the sector in the domestic US market. EU policy — including the bloc’s carbon emission targets for cars and its plans to prohibit sales of internal combustion engine cars by 2035 — is expected to support demand for EVs. The UK’s zero-emission vehicle mandate, meanwhile, requires 22% of cars to be electric from 2024 (though with some flexibility), and EV subsidies are being extended in
Spain and introduced in
France.” Indeed — the policymakers have been making a difference, helping to bring a brighter future for humanity. Of course, that’s what they are supposed to do — they’re supposed to be leaders. But I would not fault anyone for arguing that it’s often not what you expect from a politician. For now, we should thank the policymakers who have enabled a faster transition to electric transport, and we should consider strongly what is needed in order to keep strong policies going. “The regulatory tailwinds are still in place,” Bhandari notes, but the wind can always shift, especially in politics. Circling back, this is a big quote that I think should get more attention: “Goldman Sachs Research expects a nearly 40% decline in battery prices between 2023 and 2025, and for EVs to reach breakthrough levels in terms of cost parity (without subsidies) with internal combustion engine cars in some markets next year .” (Emphasis added.) If electric cars reach upfront price parity in core vehicle segments with gasoline-powered cars, things could get very interesting. Then, all of the benefits of convenient home or workplace (or even destination ) charging, a smoother drive, better torque, greater safety , and cleaner air can really come to life. Without the hurdle of a lower upfront cost for cars in the same class, the mass market might finally open up to all of the other reasons to go electric. (Note: It seems clear to me that Tesla’s vehicles are already at upfront price parity with other vehicles in their classes, which is why they sell so well, but the points above basically concern electric cars from legacy automakers versus other cars with their size and features from those same automakers.) The EV market could get very interesting in the next 24 months. LinkedIn
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