Electrified vehicles will account for half of all new passenger vehicle sales globally by 2030, according to Morningstar Equity Research.
China and the European Union, with strong air quality rules pushing electrified vehicles, will lead the way. The U.S. will trail because of its weak federal government enthusiasm for the technology.
Morningstar said in a report that battery electric vehicles will make up 20 percent of new vehicle sales by 2031. Hybrids will have an even larger slice at 30 percent.
Electrified vehicles will account globally for about 60 million annual sales in 2030, the report said.
The analysis is one of several recent reports predicting a global rise in electric and hybrid vehicle sales after 2025. It said the emissions regulation battle between the Trump administration and California will have little effect on electric vehicle sales.
The International Energy Agency said earlier this year that battery-electric cars and trucks will account for about 20 percent of global new vehicle sales by 2030. Wards Automotive also reported that EVs and hybrids will make up a majority of new vehicle sales by 2030.
Today, sales of plug-in hybrid and pure electric cars and trucks account for just 1 percent of the U.S. market. They make up about 2 percent of the global market. Toss hybrids into the mix and the numbers grow to 5 percent of global sales.
Morningstar’s report is of particular interest because it takes into account the likely outcomes of the Trump Administration’s effort to nullify California’s ability to set tougher-than-federal emissions standards.
California’s ability to regulate emissions is in the 1970 Clean Air Act. State regulation is an important driver of hybrid and electric vehicles in both the consumer and commercial markets.
A dozen other states and the District of Columba have adopted California’s rules instead of federal emissions standards. With California, they account for almost a third of all new passenger vehicle sales in the U.S. That gives the states tremendous influence over the kinds of vehicles automakers produce.
TRUMP VS CALIFORNIA
The ongoing battle between the Trump Administration and California over the states right to set its own rules could ultimately impact the way the U.S. market looks. But Morningstar doesn’t expect a drastic change, whatever happens.
If California prevails in its suit to retain its emissions rules autonomy, “automakers will produce vehicles to that standard, effectively making California’s rule the national standard,” the report said.
If California loses, Morningstar said it expects that hybrids and EVs still will continue increasing share.
U.S. automakers will have to continue developing electrified vehicles to remain competitive in the rest of the world. Sales will rise because electrified vehicle costs will fall as production and operating costs drop in the normal course of technology development, the report said.
CARS OR TRUCKS?
The Morningstar report doesn’t separate cars from trucks.
But the U.S. market has been moving away from cars in favor of SUVs, SUV-styled crossovers and light pickups. Together, they account for about 70 percent of new vehicle sales. The trend is expected to continue as automakers start to offer hybrid and electric crossovers and trucks.
Government environmental regulation is a major global driver for increasing hybrid and EV sales, Morningstar said.
Advances in battery technology and improved production methods lowering electrified vehicle costs are a second factor in the predicted growth. Increased range per battery charge will give EVs a major boost, the report said. They will get 300 miles per charge by 2025.
Morningstar and other forecasters say the growth won’t be linear but will build slowly toward a so-called tipping point at which costs will equalize and it will be as cheap or cheaper to buy electric. Many, including Morningstar, have set 2025 as the break-even year.
Wards said in a report earlier this year that it expects automakers around the globe to introduce as many as 85 new all-electric models by 2025.
PRICE AND COST
While EV costs are expected to fall, consumers will still see EVs and hybrids priced higher than conventional internal combustion vehicles. That’s because their powertrains and battery packs will remain costlier than a gas engine.
Consumers need to understand the difference between price and total cost of operation – something ingrained in a commercial fleet manager’s psyche – to fully grasp the savings electrification can bring.
The 15-year cost of buying and operating a $30,000 new car today is around $71,000, according to Morningstar’s analysis. A hybrid over the same period costs about $75,000 while an EV’s purchase and operating costs can total $80,000.
By 2025, the conventional internal combustion vehicle will be $70,000 to buy and operate for 15 years. That is $1,000 less expensive thanks to improved fuel economy.
But a hybrid’s 15-year total cost will drop to $66,000 and an EV’s to $65,000, the report predicts. Lower energy, battery and maintenance costs are major factors in the cost-of-ownership reductions.
Looking at operating costs alone, Morningstar estimated that a conventional car today and in 2025 can cost almost 33 percent more than an EV over 15 years over ownership.
The report sets today’s operating cost at 20.2 cents per mile for a conventional internal combustion vehicle versus 17.9 cents for hybrids and 14.1 cents for EVs. Plug-in hybrids, a shrinking part of the global market, are not included. By 2020, the report said, an internal combustion vehicle will cost 19.5 cents per mile to operate, versus 16.6 cents for a hybrid and just 12.9 cents for an EV.
China, which has a central government and a national goal of boosting EV use, will lead the global increase in electrified vehicle sales, according to Morningstar. EVs will account for 35 percent of new vehicle sales in China in 2030, while hybrids will account for 25 percent.
Western Europe, despite its proliferation of national governments, still will be the second largest market. That’s because of a unified approach, through the European Union, to reducing air pollution, vehicle noise and carbon dioxide emissions. Hybrids will outsell EVs though, accounting for 35 percent of the new vehicle market to EVs’ 25 percent, the report said.
The U.S., then, would trail, largely because it has one set of emissions rules requiring EVs for the 13 states using California regulations and another set – not encouraging hybrids and EVs – for the rest of the country. Hybrids will outsell EVs, accounting for 25 percent of U.S. new vehicle sales in 2030. That compares with a 15 percent share for EVs, according to the Morningstar report.
In terms of total electrified vehicle sales in 2030, Morningstar’s ranking has China first with 23 million units. The European Union will come next with 11.5 million and then the U.S. with 6.6 million.