Rho Motion’s 3 things to watch out for in the EV Market in 2021
Jan 12, 2021
It is time once again to take a look back at what came to pass in the EV market last year, and to lay out what we can reasonably expect in 2021. This article draws on analysis from Rho Motion’s EV & Battery Quarterly Outlook and our EV Battery Chemistry Monthly Assessment, for more information on our products and services get started here.
Europe and China sales to remain close in 2021, China to remain top in battery demand however
In 2020 Europe made significant gains on the previously all dominant Chinese market in terms of total EVs sold; and we expect that full year sales for total BEV & PHEV sales in each geography will be roughly equal. In 2021 we expect that we will continue to see these two largest EV markets remain relatively close in terms of overall units sold. However, it is important to note that the drivers and characteristics of this demand have been quite different in 2020, and will remain so in 2021.
In Europe, a significant part of the uptick in 2020 was due to intervention in the market by national governments, which was itself legitimised by the onset of the Covid-19. Germany for instance increased its subsidy to a maximum of €9,000 as part of its relief package, France to €7,000, and this had a strong effect on sales in the second half of the year. This was supported by the release of a number of new models, notably the VW ID-3 which had significant pre-orders. What is most noteworthy from a battery demand point of view is that nearly half of all EV sales in Europe were PHEVs, something we predicted in our 3 things to look out for in 2020. This had a noticeable impact on pack sizes both in the region and globally. Based on model line-ups and ongoing market trends we expect that the share of PHEVs will remain very strong in Europe in 2021.
In China, government intervention has been fairly limited, the subsidy scheme was extended but remains well off 2019 levels. Alongside an economic recovery from the worst of the shutdown in Q1 2020, which has not been seen to the same extent in any other major economy, what also drove the recovery in the EV market in China is a greater availability and diversity of models at difference price points and for different use cases. Aside from the popularity of the China made Tesla Model 3 in 2020, many smaller models that have recently been introduced into the market. The affordability of these models has made them very popular, with some BEV’s, such as the Wuling Hong Guang Mini, being priced for around USD5,000.
Biden could mean big things for the US market in 2021
In the US the new administration could coincide with a significant uptake in the US market this year. A simple and likely highly effective policy lever the Biden Administration could pull would be to remove the volume cap that saw the phasing out of the tax credit for Tesla, and later for GM. There is clear correlation between Tesla’s sales and the stages of reduction of the credit, and a lack of stimulus to replace has seen the US market stagnate in 2020. The lack of upfront fiscal cost to reintroduce the credit should make it an easy decision, as the foregone tax revenue for sales would be relatively marginal. We also understand that the new regime will look to introduce tougher fuel economy standards which will also give a boost to EV sales, albeit over the longer term.
Greater diversity in vehicles, diversity in chemistry
Based on what we saw in 2020, and the model line ups for the year ahead, we can expect to see the further diversification of both vehicle offerings and resulting cathode chemistry in 2021. China as ever will lead the way in this regard, with a greater number of models coming into the market at a larger range of price points than in Europe or North America. Typically we can assume that BEVs with smaller battery packs, below 25kWh, are likely to be LFPs, although LFP cell-to-pack technology is finding applications in much larger pack sizes as well. This trend will very likely come to Europe in the coming years as well. We may well also see the commercial roll out of NCMA in the second half of the year, and in Europe we have seen models introduced with NCM712 as another pathway towards higher nickel and energy dense batteries as an alternative to NCM811. Despite this, we do expect that NCM811 share will continue to build, mainly in China, where its use expanded significantly in 2020. Looking at the anode, we expect to see an ongoing trend towards more blended natural and synthetic graphite anodes, and that at the higher end of the market a push towards greater use of silicon additives to boost density. Overall the key point here is that as the market expands, more tailored solutions to different use cases become viable, at both a vehicle and battery level, which may require a change in the way the conversation around battery chemistry takes place in the first place.