Auto Execs Go Bearish On EVs (Again) — Not So Bright

Auto execs were super bearish on electric vehicles (EVs) for years. They said there was very little demand for electric vehicles and EVs would remain niche (like 2% or 3% of the market niche). This argument was made countless times in countless venues even up through the point when Tesla unveiled the Model 3 and got hundreds of thousands of reservations. I was on big group conference calls with execs in the auto industry in which I was the odd man out trying to explain why Tesla and EVs in general would grow quickly. It took years to be vindicated, but I was, and I’ve thought about these conference calls a number of times as Tesla and the broader EV market have grown far beyond what all of these skeptics thought was possible.

Finally, the auto world came around. Every automaker started announced much bigger EV plans and even the über skeptics got around to realizing that the industry was electrifying. Nowadays, almost every automobile commercial I see is for an EV. It doesn’t matter the brand — from Hyundai to Cadillac to Ford to Volvo to BMW, I am constantly seeing EV ads and almost never seeing fossil vehicle ads. Nonetheless, after a short stint of being “bullish” on the EV market by 2030, many auto execs have turned bearish again. I’ll discuss one potentially decent rationale for this in a minute, but even that one has a major flaw in it.

Auto Industry Execs Lose Faith In 2030 Electric Future

First of all, here are the details: Last year, a KPMG survey of around 1,000 auto execs found that the median respondent expected 65% of new vehicle sales to be electric in 2030 in the USA. This year, that survey found the median respondent expected 35% of new vehicle sales to be electric in 2030 in the USA. (Note that Joe Biden’s goal is for 50% of the market to be electric by 2030.)

A drop of 30 percentage points is a huge drop. In this case, it’s almost a 50% drop in the forecast for the median respondent. What’s going on?

Shallow Short-Termism

Part of the problem with that forecast is that it seems to be the result of respondents being overly influenced by the news of the day. Concerns about inflation, recession, and the supply chain have automakers and related auto company execs pessimistic about the uptake of EVs.

Sadly, if you poll people in summer or even just when the respondents are sitting in a hotter room, they are significantly more likely to believe in global warming (or some variation of that). That research quickly came to mind when I started thinking about this new survey of auto execs. A little bit of the external environment changes and they’ve lost their faith and are expecting much less adoption of EVs in the next 8 years.

Did They Ever Really Believe?

Perhaps it was some other combination of short-term news (like Tesla skyrocketing to the top of the stock market and seeing huge sales globally) that led auto execs to be more bullish a year ago. Perhaps they got shaken out of their pessimism for a bit and then settled right back into it once given the chance and a few excuses. We do know that they’ve never exactly been visionaries on this topic.

Don’t Look At Europe … Or China

It’s hard to believe this downward attitude truly exists when you know a bit about what’s going on with the EV markets in Europe and China. As reported less than a day ago, 25% of new cars in the Netherlands are fully electric, and 35% have a plug. Across Europe, 14% of new car sales are fully electric, while 23% have a plug. When you see Europe electrifying so quickly, and already so far along, it’s hard to believe the US will be about a decade behind.

When you look at China, our arch rival of sorts, the country is even further ahead. In November, 22% of new auto sales in China were fully electric, while 31% overall had a plug.

The US may be far behind China and Europe when it comes to this metric, perhaps scoring 6% of sales or so, but only climbing to 35% by 2030 would be quite a slowdown, letdown, and surprise.

Battery Supply Crunch?

The one argument that may carry some weight is the argument that the battery supply chain can’t keep up with global demand and the US EV market may be one of the markets hit hardest by that. China and Europe are requiring big switches to EVs, while the US is not. The US could be a low priority for EV sellers as a result.

That said, once EVs are even more competitive, once there are a large number of models out there that people can theoretically buy, once it seems very illogical to buy a gas-powered car instead of an electric one, even if a buyer has to wait a year or so for an electric car to arrive, I expect gas-powered cars to tank. This will be accelerated once consumers realize that gas-powered cars have very poor resale value and once they realize that even if a gas-powered car seems competitive at the moment, few will want one 3–5 years down the road.

What Does The Auto Market Look Like In 2030?

I don’t have a crystal ball, so I can’t see if 35%, 50%, or 75% of new car sales will be electric in 2030, but the historical trends for new tech adoption imply that it will not be a slow, long rise from 10% or so of new sales being electric to 80%+ being electric. European markets that are further along the adoption curve also imply that it won’t be a slow, long rise. Perhaps battery supplies will slow the natural adoption trends, but I don’t think that means they will slow the crash of the older technology — gas-powered cars and trucks. Naturally, that would mean auto execs polled in the KPMG survey (which you can read more about on CNBC) are off the mark. It wouldn’t be the first time that auto execs in this legacy auto world missed the story, ignored what was in front of them, and assumed the world doesn’t change as much as it does. We’ll see. What are your thoughts on these trends and this new poll?

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