Rho Motion’s 3 things to watch out for in the EV Market in the year ahead

Jan 13, 2020

 A new year is always a time for reflection on what has been, and what is yet to be, so here in our own modest way we highlight three EV market trends that we think you should be looking out for in 2020.  This article draws on analysis from Rho Motion’s EV & Battery Quarterly Outlook, the Q1 2020 iteration of which is released later this month. 

CO2 targets begin to bite in Europe

This year sees the phasing in of new European CO2 emissions targets that will be fully implemented in 2021. The new target sets an OEM passenger car fleet average target of 95 grams CO2 per km, with a potential fine of €95 per gram of CO2 over the limit, multiplied by the OEM’s European vehicle sales in a given year.

The target is fairly robust, especially when you consider OEM fleet average emissions in recent years. The first chart serves to illustrate this point, it shows CO2 fleet average emissions for a sample of major OEMs in 2017 & 2018, versus the 95 g/km target.  As can be seen, even at this relatively late stage OEMs are no way near meeting targets with their existing model line-ups. Indeed, fleet average emissions rose in 2018 compared to 2017, owing to lower proportion of diesels sold, and larger vehicle sizes among model line ups.

In our EV & Battery Quarterly Outlook we have made some calculations to also estimate the liability for fines of a sample of OEMs based on their 2018 emissions performance versus the 2021 target. For OEMs with significant sales volumes in Europe these fines could run to multiple billions of Euros. This goes some way to explaining the rate of growth in sales of plug-in hybrid and battery electric vehicles (PHEV & BEVs) in the region last year. For the EU & EFTA for the year-to-November, the latest month available, PHEV & BEV sales rose 31% on the previous year, which was a very strong performance compared to the rest of the global market.

OEMs are left will little option but to continue to introduce PHEV & BEVs into their model line ups, as they are in fact doing, and as such we expect the European market to remain a bright spot for the PHEV & BEV market in the year ahead. One thing to bear in mind, however, is the relatively large share of PHEV in the sales mix, 34% for 11m YTD sales in 2019, versus 22% in China. When looking at the model offerings over the coming year and beyond, we expect that PHEVs will remain an important part of the model mix.   

NCM811 starts to come of age

Since it started appearing in our EV Battery Chemistry Monthly Assessment, which aggregates our model-by-model analysis of EV sales, in the second quarter of 2019, NCM811 has started to gain market share owing to strong sales and large battery packs of the models in which it is currently deployed. In a weak market this effect was even more pronounced, see second chart.

2020 is really when we expect to see the start of proper commercial adoption of the technology based on the announcements of multiple large battery cell manufacturers, meaning the technology will be introduced in multiple new models entering the market. BYD has said that it will have NCM811 cells ready by the second half of 2020, similarly, SK Innovation announced it would start production of NCM811 cells in late 2019. Envision AESC has also stated that it is working toward a 2020 timeline for release of NCM811.

 As we’ve always pointed out, what this really means is a continued gradual increase in market share over the course of the year, and then on into the following years, as newly released models make up a relatively small share of total EV sales. Also bear in mind that many major OEMs, particularly in the West, are in no great hurry to adopt the chemistry before all safety concerns regarding thermal stability of the cells, and performance issues around cycling ability, have been resolved. Nevertheless, this is the year when we see the technology start to come of age. 

Will China bounce back in 2020?

By virtually any measure, and against virtually all predictions, China’s EV market performed poorly in 2019, with very low or no growth likely to be the full year result when we see the sale figures for December later this month. By common consent this was due to the greater than expected impact of the reduction of subsidises, leading to a dramatic drop-off in sales in the second half of the year, see third chart. The EV market also felt the impact of the overall weakness in the total passenger car and light duty vehicle market, with sales likely be down in the region of 9% year-on-year for the full year as well.  

For 2020 there are a number of reasons to be cautiously optimistic. Firstly, the government has stated this month that there won’t be another roll-back of subsidies in July of this year, which has been welcomed by market participants. The subsidy still covers the majority of vehicles in the market, but the remaining subsidy is an order of magnitude lower than the one offered prior to July 2019, so maintaining it will only have a moderate impact. From a policy perspective, what may have more impact is the New Energy Vehicle (NEV) mandate. The policy specifies NEV credit targets for two years, and was meant to completely replace subsidies with a credit-trading system. These mandates require that an automaker has bought or earned NEV credits equal to 10% of its fossil fuel vehicle sales in 2019 and 12% in 2020; this should support market growth this year.

Ultimately in the absence of significant direct government intervention, what will propel the market forward is availability of competitive vehicle models, both in terms of price and performance. On the evidence of the models released at during 2019, and those scheduled for release in 2020, the market continues to move in the right direction. 

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