China accounted for half of the world's EV sales in 2021 and isn’t slowing down. Many companies are capitalizing on this demand and looking to take advantage of accelerated widespread adoption.
China Passenger Cars Association claims that the nation accounted for 53% of global market sales for EVs in 2021. Rapid growth is expected globally in 2022 due to consumer demand growing more independent from state support. Europe accounted for 33% and the US 11% for global market share. Inside the respective nations, EVs were 3.5% of new vehicle sales in the US, 15% in China and 20% in Europe with Norway leading the region in adaptation. The US is playing catch up while manufacturers are tusseling for space in China and Europe. 2022 is shaping up to be a follow up year that further solidifies a globally momentous transition.
Leaders of China’s new drive
Globally, the leaders in EV sales were led by Tesla, VW, BYD, GM, and Stellantis. In China domestic producers maintained their dominance with SAIC leading as the top seller. For YoY growth, Xpeng grew the fastest with a total volume of over 98,000 EV’s sold in China. Xpeng, NIO, and Li Auto, experienced 263%, 109%, and 177% YoY growth. These famous innovators in the industry are trying to gain ground on production against bigger local titans like BYD, SAIC, and GWM. They’re hundreds of thousands of units off in sales but have to scale up production and capture the eyes of consumers as better options against the current leaders. Even so, the leaders in volume also have high rates of growth and will likely put up a fight in convincing new buyers to make the switch.
Legacy auto manufacturers across the globe emphasize progress yet the reliability of their established brand while start-ups and other innovators are shining light on their state-of-the-art boldness as specialized electric automakers. China is taking off the training wheels by cutting subsidization for EVs by 30% in 2022 eliminating them by the end of the year. Domestic buyers in the short run will likely look to buy EVs firstly for cost then for personal best preference as EVs and their battery suppliers race to slash wholesale prices. Consumers have likely known for years that this was coming. While a subgroup of consumers will go for primarily immediate affordability, some will be looking for the longer term investment of an EV that will have up to date software and practical design.
Aside from looking at short term competitors, the long run for Chinese companies' global appeal will depend on global demand. Within China though, the CCP will likely look to get local OEMs to keep Tesla’s rapid growth at bay while benefiting from the healthy competition from the global leader. In hindsight, China’s actions gives investors hints that this scenario will be a similar case going forward under Xi’s leadership. Projections from the China Association of Automobile Manufacturers and China Passenger Car Association range between 5 and 6 million sales of EVs for 2022. There’s plenty of room for revenue assuming supply chains stabilize. Profitability will likely have a light outlier as subsidization eases but the burden should likely be split between the consumers and producers depending on if demand for EVs strengthen in China. Regardless, the very top leaders will likely remain there by next year.
The big third of the market
Europe has made great progress with EV’s and has plenty of guidance. To scale, this market can make great strides towards China’s level of sales as global icon Tesla will begin production from Berlin and expand the regional EV fleet. VW is this region's local champion and will face steep competition from Tesla. Already having the best selling EV model, I expect Tesla to become the top vehicle company overall and solidify their presence in Europe. This will beg more competition and further bloat the EV market to investors' delight. Legacy brands currently hold more of a stake in Europe’s market but Chinese newcomers are getting set up this year as well. These import brands could attract more demand and publicity for next-gen and high end EVs. Consumers will enjoy the diverse selection and incentivize companies to stand out. Tesla will continue to achieve breakthroughs while China’s bunch will campaign and Europe’s legacies further chase Tesla.
Outside looking in
The Biden administration is looking to follow in the footsteps of the Eisenhower administration by establishing a better network of highway charging stations. This is a necessary retrofitting of proper adapters in more accessible volumes to get America close to on par with China and Europe's progress. The new spending is intended to accelerate the transition of the US passenger fleet. This comes at a time where US infrastructure has become increasingly blighted, outdated, and insufficient. The American market is certain to be different for EVs due to a unique cultural demand for pickups and the generally more car centric urban structure of the country. The speed of the nation's adoption should get a boost from the new spending but will ultimately hinge on whether the spending is truly effective. Otherwise, I would expect sluggish state support for legacies to result in Tesla to grow even faster and substantially under-contested.
Federal support for EVs is not as direct as China or even Europe but the US executive does have its personal favorites in the EV industry. Legacy brands like GM and Ford are favorites as Biden personally has shouted them out in public appearances and notoriously snubbed Tesla from the conversation. It wasn’t until recently, more than a year into office, that Biden acknowledged Musk’s company referencing it simply as, "our nation's largest electric vehicle manufacturer.” Established American ICE manufacturers will need all the help they can get in out pacing Tesla who has a network of their own charging stations across the country and seek to absorb big chunks of market share. Tesla’s Gigafactory in Texas will add significant manufacturing capacity and help the company lead America’s rise in global market sales.
America is still comparably lower in EV sales and has plenty of room to evolve. It might take more sensationalism and popular appeal but Tesla is way ahead on marketing with basically low advertising costs if any. Wholesale cost is generally the upfront barrier and ultimately, the Build Back Better plan which includes subsidies likely needed to provide an extra boost for consumers to solve this dilemma remains to be approved. Overall, America will grow their lagging EV market but Europe and China will be at levels that US investors want to be while pending legislation limits potential growth.
Global Outlook
2020 was an outlying year for all markets and 2021 wasn’t quite normal either. Adaptations to weakened supply chains and shifts to newer, more sustainable logistics are evolving the global market and should give more multinationals precaution in building for the future. While China has gained control upstream with EV resources, general EV manufactures from across the world will continue to race towards the future. The EV market has become more tightly wound to infrastructure modernization and tech sector innovation. After years of arguably reinventing the wheel for commercial gain, capitulating on obsolescence for aged ICEs, and sluggishly investing in “fuel efficiency”, there is a catalyst for significant change. EVs won’t be built to copy old cars but to have form follow function. Superficial bells and whistles should be quickly discarded in this new market as winners will build profitable, new, cutthroat vehicles that are cheap and maximize the utility of a truly 21st century transportation vehicle. Nations with the best ecosystem for adaptation will benefit the most but companies with the best vision will become their country’s money maker.