July 2, 2025 • 34 mins
Sales of electric vehicles are set for another record-breaking year. Thanks to falling battery costs and a rise in affordable models, plug-in EVs will represent a quarter of global passenger car sales in 2025. And while a rollback in government support has taken a bite out of EV uptake in the US, other countries are more than making up for this setback. Chinese automakers have been growing their footprint overseas, leading to strong growth in emerging markets. In China itself, organic consumer demand will lead to 50% of new vehicle sales this year coming with a plug, far surpassing government targets, and strong domestic sales of range-extended EVs have led them to become the fastest-growing drivetrain in the world. On today’s show, Tom Rowlands-Rees is joined by Colin McKerracher, BloombergNEF’s Head of Clean Transport, to discuss findings from this year’s Electric Vehicle Outlook.
Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com
Links to research notes from this episode:
Electric Vehicle Outlook 2025 - https://www.bnef.com/flagships/ev-outlook
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is Tom Rowland's Reese and you're listening to Switched
on the podcast brought to you by BNF. Today we're
discussing BNF's Electric Vehicle Outlook, our annual flagship report, analyzing
how electrification will impact road transport between now and twenty fifty.
Speaker 2 (00:14):
In the very near.
Speaker 1 (00:15):
Term, electric vehicle sales are set for yet another record
breaking year. That's a big deal, especially since headlines have
focused on how the US is slashing support for evs.
But the EV story isn't just about the US. It's
a global story and the number of countries getting into
the EV game is growing. The biggest player is China,
which continues to lead the EV adoption pack. Over fifty
percent of new passenger vehicle cells in China this year
(00:36):
are set to come with a plug. China is also
a star when it comes to sales of range extender evs,
which are now the fastest growing drivetrain in the world.
Even outside of its own borders, China is making a splash.
The market for electric vehicles was once considered top down,
with developed economies moving first, but Chinese automakers have been
targeting developing economies hard As a result. Thailand now has
a higher passenger EV adoption rate than the US, and
(00:58):
Brazil's adoption rate is higher than Japants. To learn more
about this global EV story, I'm joined by bnif's head
of Clean Transport, Colin Mcherica, to discuss the Electric Vehicle
Outlook twenty twenty five, which bn EF clients can find
at BNF go on the Bloomberg terminal or on BNF
dot com. All right, let's get to talking about the
Outlook for electric vehicles with Colin. Colin, thank you for
(01:27):
joining the podcast today.
Speaker 3 (01:29):
Pleasure to be here. Nice to speak to you. Tom.
Speaker 1 (01:31):
We're here to talk about what we at BNF call EVO,
which stands for our Electric Vehicle Outlook. You've been doing
this for a really long time, so can you tell
us a little bit about the history of it and
what is new Because we do this again and again
every year, presumably we don't need to just update our
numbers every year. I'm assuming that we do new and
cool things and that's what keeps us going because that's
(01:51):
how it is at BNF. We always have to do
something new.
Speaker 3 (01:54):
Yeah, definitely, So I've been doing this. I was sort
of tallying it.
Speaker 4 (01:57):
This is actually the tenth year that I've run this report,
and obviously a lot has changed since then, and I
would say sometimes it feels now like everybody and their
dog has a forecast for how this type of stuff
is going to evolve. I think back in twenty fifteen sixteen,
when we were doing the first one, there was kind
of a few oil companies plus Opek, who are putting
out long term outlooks, and their view was very down
(02:18):
on anything to do with electrification and basically saying liquid
fuels or what's going to power the world's mobility mix indefinitely,
and none of them saw any significant role reviews, and
we sort of thought, look, we've been looking at this
battery cost curve stuff for a while.
Speaker 3 (02:29):
We think we're on the cusp of something about to change.
Speaker 4 (02:32):
So when we try and do things at BNF, we're
always trying to do things with what's useful for our
clients and as well try and inform a public debate
as well. But at the first instance, be useful to
our clients and provide data to that's helpful. And so
whenever you get into long term stuff, you always have
to be a bit careful because I have a sort
of thesis that the further you go out in time,
the fewer people that is operationally useful for. So if
(02:54):
you go all the way out to twenty forty and
spend a lot of time talking about twenty forty and fifty,
you just kind of lose people some people along the way. Now,
it's not to say there aren't useful and interesting things
to talk about those long term parts, but you have
to balance it with some near term things that are
going on. So that's kind of what gets out. Your
other question is about what do we do that's beyond
just updating this outlook every year, because we have our
models and we have our adoption outlook that follows two
(03:17):
different scenarios and all this sort of stuff, and that
gets updated with the latest data. But then we do
try and say, okay, how can we keep making this
better every year? And after ten years you just keep
incrementally improving things, and sometimes that's new countries added. This year,
we've done a bunch of things. We've added a new
drive train, so there's something called range extended electric vehicles
that are included in there, and we've done more on
terrace and trade. How that's impacting things looked at some
(03:38):
of the regional dynamics for things like flex fuel vehicles
in Brazil or compressed natural gas vehicles in India, and
and you have to do a lot of work on
batteries and the supply chain, so there's a whole new
forecast there for solid state batteries, looking at electrolyte chemistry
as well as updating our anode and bathout chemistry forecasts.
And then also looking at all the battery plants that
(03:59):
are coming online over capacity issues that are sort of
not just looming but actually here in that market. And
then lastly the three other things we've done this year.
Each year we do three what we call thematic highlights,
so those are sort of special standalone chapters that look
at a growing or topical issue around emobility around the world.
So this year's were the commercialization of solid state batteries,
(04:19):
the rising cost of ev charging, and a special deep
dive on Brazil looking at alternative ways that Brazil's ethanol
could be used in a scenario where electrification displaces a
lot of ethanol use in road transport.
Speaker 1 (04:31):
It sounds like you've gone above and beyond, because before
you got even to talk about those thematic highlights. I
was thinking, Wow, this is already a really complex year,
particularly with all the tariffs coming in and maybe changing
the picture, as you say, especially if we're trying to
make sure we talk about things that are relevant for
the next few years. I mean, was it more of
a headache doing EVO this year than in previous years.
Speaker 4 (04:55):
So one of the things I've found after a decade,
it's ten years now working for me work on auto,
automotive related topics and transport related topics, and twenty years
now working in clean energy overall.
Speaker 3 (05:05):
I started in May two.
Speaker 4 (05:06):
Thousand and five, and particularly on the auto stuff, I've
just kind of realized it's something every year, it's always
something different, but there's always something that kind of is
a big spanner in the works for what you might
think of as this business as usual that never seems
to go back to usual in the auto sector. And
so for a while that was COVID and okay, look,
how do you how many cars are people going to buy?
(05:26):
What if people aren't moving around as much, what does
it do to energy demand? And keep in mind that
we're not just looking at how many cars get sold,
We're looking at this work is what informs all of
our things around the road, fuel demand outlook and how
much gasoline and diesel are going to be consumed and
all these other things as well. So we're definitely not
just looking at cars and trucks sold. We're looking at movement,
and we're actually at the basis level starting with literally
how much do people and goods move around the world,
(05:48):
So that's in freight ten kilometers and trillions of passenger
kilometers traveled, and how is the mix of that changing.
So with those sort of big, really big picture things
in mind, and the auto industry is about a two
and a half trillion dollar annual revenue industry, they're kind
of affected by everything. So one year it's COVID, the
next year it's a semiconductor shortage, the year after that
it's tariffs and trade drama. There's kind of always something,
(06:10):
and to be honest, that's sort of what keeps it interesting.
You could sort of look at that and sigh and say, oh,
why can't we have a normal year, But another way
to look at it would be like, wow, we get
to work on some of these topics where the biggest
things in the world are relevant and are directly impactful,
and I think automotive is a pretty fascinating lens to
look at the world through because it does tie in
technology developments, it tried ties in economics and trade, It
(06:31):
ties in politics, It ties in job creation and manufacturing
and industrial policy, and kind of each one of these
things is sort of getting flexed in a different way
in every year, So it makes it hard, it makes
it interesting. It also means that every time we finish
publishing it, there's already things that have changed, and there's
things that we wish we could have had time to include.
Speaker 3 (06:49):
But that's just sort of part of the game.
Speaker 4 (06:50):
And that's part of doing it as an annual thing
and not trying to constantly release this over and over
throughout the year, but rather sick once a year we're
going to step back and try and tie it all together.
The rest of the year we're publicishing much more near term,
detailed work, and this is the once a year where
we sort of step back and try and figure out
how it all fits together.
Speaker 1 (07:06):
It's really interesting. You know, what I'm hearing is kind
of this electric vehicle outlook. It is literally a forecast
of the electric vehicle sector. But to what you're saying
is it's like a lens through which you have to
look at everything going on in the world. It kind
of makes sense. I mean we've talked about this before.
I remember I found this chart on what used to
(07:26):
be called Twitter, and it was a map of the
world showing every country's top import really like, so it
was a map showing what was the nature of global trade.
And the most imported physical goods were either cars or oil,
and you know you're looking electric vehicles, which is disrupting
both of those industries. So in a sense, it's not
surprising that it's like you say that it touches on
(07:50):
everything that matters to your report. We were chatting before
we started recording. You know, you've been doing the rounds
promoting this report, and I think you said it was
a list of eleven key takeaways that you'd come up with.
I didn't know if it was a word, was takeaways.
I think you had a better word, But could you
talk us through you know, I think we have time
to talk through all eleven and you know, our clients
can access our reports, and I think we're putting out
(08:12):
a webinar, But what were some of the more important ones?
Speaker 4 (08:15):
Yeah, for sure, and so yeah, when we finished the report,
the report has hundreds of figures, it's a couple hundred pages.
There's all sorts of stuff in there, and each one
of our client we serve a lot of different client
types and different sectors and different roles, so each one,
each person gets a slightly different an organization gets a
slightly different area. It has a slightly different area that
they're going to be the most interested in. So I
would say there's lots in there and people can go
(08:35):
and read it. We try and draw out a few
just that are make good presentation slides and things, and
so some of them I guess, just kind of starting
from the top, is this is going to be another
record breaking year for EV sales. So we're pretty confident
on that. About one in four vehicles sold in the
world this year will be a plug in either battery
electric or plug in hybrid.
Speaker 3 (08:54):
So that's up from about twenty percent last year.
Speaker 4 (08:56):
If we look at the fleet, about four percent, so
one in every twenty five five cars on the road
in the world was electric.
Speaker 1 (09:03):
And was this what you were expecting going into the analysis,
because I know you say it'll be a record Yeah,
I feel like you know, like a lot of BNF
sectors where we're looking at things that are emerging. That's
what we've said every year, but I know there's been
a few headwinds. So were you genuinely surprised at this
finding or were you kind of expecting it?
Speaker 3 (09:20):
I was expecting that.
Speaker 4 (09:20):
I mean, if you work on electric vehicles, especially, you
hear every year about all the reasons why it's going
to fail, and then it goes up between twenty and
sixty percent a year.
Speaker 3 (09:29):
That's been pretty consistent.
Speaker 4 (09:31):
I think what's probably different this year, and that we
do talk a lot about in the report this year,
is that the US market is set to slow down
pretty dramatically, and whatever happens in the US has an
outsized impact on the headlines that you read, because a
lot of the new sources or groups covering things our
English speaking and the US is obviously a pretty dominant
force in a lot of areas. So if you were
to follow the US headlines, it's quite dark. And we
(09:52):
have dramatically reduced our US ev adoption forecast because of
things like the Trump administration rolling back cafe and taking
dismantling arts of the Inflation Reduction Act. And so certainly
that is a very real dynamic, and that is a
I don't want to downplay that. If we're going to
get large scale electrification in the US, we need the
US market to go electric as well. We're not we
(10:12):
don't take a position on whether that should happen, but
just by the very nature of the size of the US,
it's an important part of the global vehicle mix. So
just to give a sense of that, last year in
our outlook, we had about forty eight percent by twenty
thirty of vehicle sales in the US coming.
Speaker 3 (10:26):
With a plug.
Speaker 4 (10:27):
That was again based on really tight fuel economy regulations
under Biden. We had all the money being pumped in
by the Inflation Reduction Act, the support for evs from
tax credits, all these things sort are coming together, plus
California ZEV mandate and the states that follow it. This
year we've dramatically reduced that because many of those have
been rolled back. So now we have it going to
twenty seven percent of sales by twenty thirty having a plug.
Speaker 3 (10:49):
So that's both battery electrics, employment HIGHBRI and so what
was the number forty eight twenty seven?
Speaker 4 (10:55):
Yeah, so pretty sharp, pretty sure drug, and to be honest,
there's actually some downside, further downside risk to that because
the outlook assumes that California does retain its waiver and
the Trump administration has gone after that and as of
now remove that, which is a decision that will get
tied up in the courts and is being tied up
in the courts. And to be honest, this was all
just happening as we were publishing, So our position was
(11:16):
let's keep it in there. But it means that to
that twenty seven percent by twenty thirty, there's still a
fair bit of downside risk because if California loses that
ability to set its standards and that holds up in court,
then we would see that for cast go down even further.
Speaker 2 (11:30):
Did you ki Anamba?
Speaker 4 (11:32):
We haven't yet, but that's kind of the next thing
up is to figure out how much further that goes
down in that case. But just to kind of give
a sense of scale, the US is not a huge
part of the overall TV market today. The biggest market
course is China, and one of the interesting findings, sometimes
one of the most interesting charts. So it came right
at the end and I was thinking, actually China EV
sales this year are going to get pretty close to
(11:53):
US total vehicle sales. So well, let's make a chart
of that, and basically, towards the end of this year,
we think China's EV sales.
Speaker 3 (12:01):
Will surpass US total vehicle sales. That's pretty remarkable.
Speaker 4 (12:05):
So you see this chart where a few years ago
there's just a few hundred thousand evs a year sold
in China, and then now by the end of twenty
twenty five, there will be more evs sold in China
than total cars sold in the US.
Speaker 3 (12:16):
And the Chinese market is still growing quickly. The European
market is also growing quite a bit right now.
Speaker 4 (12:20):
Because there's tightening vehicle CO two regulations. They've backed off
that a bit and averaged out the CO two regulations,
so they don't tighten just in twenty twenty five, but
averaged out from twenty twenty five to twenty twenty seven.
But so it wasn't a very long winded way of saying,
it wasn't a real surprise. It was sort of what
we were expecting that it was going to be a
record year. But certainly there is a lot of regional
variation in that.
Speaker 1 (12:40):
So It's really interesting what you're saying about the difference
between the US and a lot of other markets, and
it does make me wander two things, and I say
this as someone who's currently living in the US, is
is the US missing the boat on the future of
the automotive sector and any aspirations of becoming a vehicle exporter?
So first, I what does this mean for the future
(13:01):
of the US automotive sector?
Speaker 2 (13:03):
And then the other thing I.
Speaker 1 (13:04):
Wonder is, and this is maybe more of a slow
burn how quickly this begins to dig in, But is
the US going to be uniquely exposed to oil prices
in the future because everyone else has more of an
electric fleet and has less dependency. I don't know if
this is something you know you have thoughts on.
Speaker 3 (13:21):
Yeah, definitely.
Speaker 4 (13:21):
In terms of the second question actually around whether the
US is more uniquely exposed to that, the US already
is more uniquely exposed to that because the efficiency of
the vehicle fleet is significantly lower than other parts of
the world and the alternatives are very limited. Right, So
in cert some countries, if the cost of driving goes up,
there's a realistic option for some people to shift to
public transit. Their driving distances aren't as high, and their
(13:44):
efficiency is better, whereas in the US there's very little
to do other than just pay it and maybe complaint
when gasoline prices go up, and understandably so in some cases.
Speaker 3 (13:54):
So I would say that it is already uniquely.
Speaker 4 (13:55):
Exposed when oil prices go up and gasoline prices follow.
But yes, to sort of zoom out a bit from there, yes,
there is a real risk that the US, particularly the
US automakers get left behind in this transition because they
are sort of protected right now.
Speaker 3 (14:07):
So right now in the US, there's one hundred percent
tariff on Chinese EV's or Chinese made EV's.
Speaker 4 (14:12):
Even if they're an EV made by a Western automaker
in China, which I think is important because you were
starting to see more and more automakers make their vehicles
in China and then ship them to international markets, so that.
Speaker 3 (14:22):
Means they're not exposed to the full level of competition
that you're starting to see elsewhere.
Speaker 4 (14:26):
And anytime you have a market that is not exposed
to the full global competition, then it is possible that
it sort of evolves down a different evolutionary path. I
think one of the things that was interesting in digging
through this year's EV numbers in different countries is that
the single biggest determinant you could probably look at for
which countries or regions are going fast on EV adoption
which ones are going slower, is the ones that are
(14:47):
open to Chinese automakers are going very fast. Indeed, so
markets like Brazil or Thailand, or Vietnam, Turkey, Mexico, even
the UK. The UK doesn't have the same important tariffs
that the S THEU has on Chinese and the UKs
that has the highest level of EV adoption amongst major
economies outside of China, and all these other ones in
Southeast Asia or Latin America and other places are growing
(15:09):
quite quickly and are now have significantly higher rates of
EV adoption than established, wealthier markets, which kind of inverts
this idea that many people have had for a long
time that electrification starts purely at the top and slowly
works its way down top of the market works its
way down. Instead, what we're seeing is much more sort
of bottom up electrification happening and in many cases now
(15:29):
happening in emerging economies significantly faster than developed markets or
more economically developed markets, particularly those that have large incumbent
auto manufacturing bases, like Japan, the US, or Germany. So
there's some really interesting regional dynamics there. I think the
US is a bit at risk of sort of missing
this global trend and therefore struggling with some competitiveness as
(15:49):
a result. It's worth keeping in mind though, that while
Tesla's sales are faltering, is still a major producer and
has been very innovative up to date and is an
American company. So certainly, I don't think it's a foregone
conclusion that the US and the US automakers are going
to fall further behind on this, but certainly the policies
that are in place right now are pushing things in
that direction.
Speaker 1 (16:09):
Right And you know, in a way, maybe my question
was predicated on the idea that the profit in the
future of this industry is going to be in the
manufacturing of the vehicles, whereas it might be in other
things like the design. You know, I know that if
we think of internal combustion engines, they are complex, and
there's real expertise in certain countries that enables those countries
(16:34):
to be major players in those areas. And I'm assuming
that's where there's quite a bit of margin. If the
majority of the value is shifting towards the battery, maybe
at some point becomes low margin. It might be that
the actual profit is not necessarily in the making of
the vehicle, but in other factors, like you know, I'm
just thinking of the difference between you know, where is
(16:55):
the money made from iPhones? Is it made in the
manufacturing of them, or is it Apple, a US based
company is making all of that money. Is that something
you could see happening and is that maybe the sliver
of hope for some countries that might feel they are
losing out on manufacturing, right.
Speaker 3 (17:10):
It's a tricky question.
Speaker 4 (17:11):
I mean, what I would say is that automakers over
the last one hundred years have changed the way they
operate a lot, particularly around vertical integration. So if you
go back to the first mass manufacturing of cars, say forward,
in the assembly line, there's a lot of vertical integration
at that point because there isn't really a supply chain.
So if you don't have enough rubber, you're setting up
plantations in Brazil kind of thing. And then over the
(17:34):
last fifty years, in particular, the trend has been automakers
divesting more and more of the process of making parts.
So you have these Tier one suppliers and below them
tier two suppliers who are making components, and then the
automakers are more and more assembling vehicles. And so they
are incredibly complex supply chain management organizations that are really
good at that. They're really good at managing all those
(17:54):
delivery of all those supply chains, integration of all that,
assembling the vehicle, marketing the vehicle, getting them out places
in the right time. They're very good at that. But
they have sort of farmed out a lot of the
actual component making of different bits of the car. What's
really interesting right now that you're seeing is kind of
a trend in the other direction. So Tesla was already
doing this a bit, but BYD is the one that's
taken us the furthest So BYD is their view is
(18:16):
sort of, whatever we can make in house, we should,
and so that's making the batteries. Of course, they've been
in the battery making business for a long time. They're
making semiconductors. In some cases, they're actually buying and building
their own car carrying ships that.
Speaker 3 (18:27):
Are delivering these cars around the world.
Speaker 2 (18:29):
Wow.
Speaker 4 (18:29):
Kind of as vertically integrated as you can go all
the way down to the ocean going vessels that are
there delivering to make.
Speaker 2 (18:34):
Their own roads as well special yeah roids.
Speaker 4 (18:37):
Yeah, And so that I think is kind of the
interesting trend is like, Okay, does that signify something else
we're going to see from other automakers.
Speaker 3 (18:44):
Is it a significant competitive advantage over time?
Speaker 4 (18:47):
Right now it looks like it is at the sort
of awn of this electrical age, but it'll be very
interesting to see how others react. We have seen some
moves from some of the others to get into cell
manufacturing or it potentially even take stakes in minds of
critical raw materials. This is kind of like a moment
where something that was settled for a while that you
should farm out as much as you can and buy
from suppliers where you can is now sort of up
(19:08):
in the air. And I think BID is really sort
of pushing the limits here and growing incredibly quickly as
a result around the world. And so that's something certainly
we're watching quite closely this year.
Speaker 1 (19:17):
So that, I mean, that's so fascinating. So Gy, going
all the way back to the start of this conversation,
you've kind of got these eleven key takeaways. The first
one was that we expect sales to increase this year,
and we've unpacked a lot from talking about that, so
we definitely unless we have a podcast for each one
of these eleven pieces, we've probably got time to talk
(19:37):
about one, maybe two. We'll see how we do. But yeah,
what's another of the big takeaways?
Speaker 3 (19:42):
Another one is around range extended electric vehicles. So I
hinted at this.
Speaker 4 (19:46):
These are vehicles where you have an onboard engine, but
it's essentially running as a generator, running in a very
constant cycle and purely being used to charge the battery.
The battery is always powering the wheels, the engine is
never powering the wheels, so there's.
Speaker 3 (19:58):
A very inant unplug in hybrids.
Speaker 4 (19:59):
But again the differences is that it's always the battery
powering the car, and so we did a deep dive
on that this year and there it's quite an interesting
story because it's growing extremely quickly in China.
Speaker 3 (20:09):
It's the fastest growing drive train.
Speaker 4 (20:11):
They almost look a bit more like pure electrics than
they do plug in hybrids because about seventy percent of
all kilometers traveled on these erevs or range extended vs
is in electric mode and some of them have quite
long ranges. So the average range we found of the
ones being sold today is one hundred and seventy kilometers
of all electric range, battery pack size of around thirty
eight kilo hours, So just a.
Speaker 3 (20:30):
Really interesting dynamic there.
Speaker 4 (20:31):
And in China, those are primarily going into larger SUVs
that have been a.
Speaker 3 (20:34):
Bit difficult to fully electrify costs competitively.
Speaker 4 (20:37):
So one of the things we sort of flag is
that we were tracking a lot of automakers who were
planning on launching these over the next few years outside
of China. Can dive forward Stilantis, others, and it'll be
really interesting to see if that is a potential way
to electrify, particularly the full sized pickup truck market in
the US. And I think if there's something that might
sort of open up the US market a bit more,
it could be a solution like that where you still
(20:57):
have all the performance and longer range, but you can
probably do seventy eighty then ninety percent of total driving
in fully electric mode. So that's that's kind of one
that we that we flagged as well, and that I
think you'll hear more on in the next few years.
Speaker 1 (21:10):
And so, I mean I'm a little unfamiliar with the concept.
So's you know, I don't know if this is the
right technical words. It's essentially like a battery electric vehicle
that has a generator inside it as well, that's right.
And how heavy is the generator, like, say, compared to
an internal combustion engine vehicle.
Speaker 4 (21:26):
Yeah, it's a lot smaller than all the apparatus you
need for an engine because you think about the way
an engine works, and in traditional vehicles you need to
be able to directly drive the wheels from that. So
it has to be able to operate in all sorts
of different conditions. If you have a little I don't
know if you've ever seen just a gasoline generator, it's
not quite like that, but it's not too far off
that a little portable one. And so it's just a
much simpler engine, much smaller, much less integration with all
(21:50):
the rest of the vehicle.
Speaker 3 (21:51):
So we had this thesis for.
Speaker 4 (21:52):
A long time that look, plug and hybrids never really
take over because they can never be cheaper than a
combustion vehicle because they still have an internal combustion engine
platform on board. I think erevs challenged that a bit,
because if your main costs are a small generator essentially
and a small fuel tank for that, it's not that
much money, and it's certainly not the full cost of
two totally distinct architectures. These vehicles are built as evs first,
(22:14):
and then you're sort of adding something afterwards, which is
kind of the opposite of what we had with some
of the first evs that came out, which were actually
built as combustion vehicles first, and then you sort of
add made them electric, but on the same kind of
platform or chassis, which is things like the Volkswagen Egle.
So I think it's a really interesting technological solution, and
we're seeing it rise really quickly in places in rural areas,
in places where people don't have home charging options or
(22:36):
where there's just not as much charging infrastructure. So yeah,
I want to watch.
Speaker 1 (22:40):
What I find really fascinating about this is because everything
you've said to me makes sense of the merits of
these vehicles over plug in hybrids, And maybe it's not
an apples to apples comparison, because in a way, a
plug in hybrid is like an internal combustion engine vehicle
with a little battery to help make it more efficient,
whereas this is like an electric car with little generator
(23:00):
to make it more long range. Still, the question that's
ringing in my ears, as you've explained all to this,
is why hasn't this become a thing sooner? Because generators
are not new technologies. Was there anything that has changed
that has enabled this?
Speaker 4 (23:14):
So the short answer is it has happened before. So
the Chevy Vault is essentially a version of this that
was launched in twenty eight ten.
Speaker 3 (23:21):
But I think what's.
Speaker 4 (23:22):
Different now is sort of the For one, when that
vehicle was launched, the battery prices were really high.
Speaker 3 (23:28):
And the supply chain didn't really exist to build that easily.
Speaker 4 (23:31):
Now batteries are cheap and the supply chain is very
very well developed in China. And then also you have
a bunch of startups. So one of the groups that's
pushing it quite hard is a group called Li Auto,
which is one of the fast growing Chinese EV startups.
But who really want to make this work like they're
sort of in with both feet, They're not hedged, and
I think that that makes a difference as well. You
need somebody who's like all in on the technology pushing
as hard as they can, and it's either we're going
(23:52):
to make this work or we're going to go bankrupt.
Speaker 3 (23:54):
That's a powerful motivator.
Speaker 4 (23:55):
Couple that with some cheaper battery costs, and I think
that's part part of the reason why you're seeing it now.
I think there's also some recognition that, again, in these
places where you've got really high levels of ev adoption,
a big chunk of the market.
Speaker 3 (24:07):
Does just go full battery electric.
Speaker 4 (24:08):
And then what you're trying to figure out here is
is there a solution that helps for some of the
other ones that are that are harder to reach, And again,
I think erevs are a potential way.
Speaker 3 (24:16):
To do that.
Speaker 4 (24:17):
We'll have to see how they actually get used and
performance an uptake in other markets first, because I don't
want to oversell it as some sort of heroic technological
solution that's going to rescue things. But it's certainly, like
I said, one, we're keeping an eye on.
Speaker 1 (24:29):
No I mean, and just to sort of almost like
zoom out a bit and not talk about this specific technology.
What I'm kind of taking from this is batteries are
getting cheap enough that you're now seeing companies able to
explore new possibilities and new innovations. I know that like
one of the things that's always been a conversation around
this area, at least with people who like being contrarian
(24:50):
or reading sci fi, is that, you know, our thinking
on electric vehicles is so conservative because we're thinking in
terms of the cars that we know, except with a
battery in them instead. You know there could be different paradigms,
but that maybe haven't yet been explored. So I suppose
my takeaway from this is maybe batteries are getting to
that point where they're cheap enough that is now enabling
new innovation, new startup companies to try new things based
(25:14):
on this premise of cheap batteries without having to be
a vertically integrated battery manufacturer themselves.
Speaker 4 (25:20):
Yeah, and I think I think in an era where
we're just getting started in electrification, you had to bet
on by far the most the safest, most likely to
succeed option, right, And in a world where we sort
of say okay, batteries and electrification are really spreading quickly.
And again, if you're sitting in the US, maybe this
whole conversation sounds a bit crazy because you've seen all
the rollbacks that are happening there, but be really clear,
(25:41):
the rest of the world, particularly Europe, China and a
lot of these emerging markets are going electric quite quickly.
Speaker 3 (25:46):
That is happening.
Speaker 4 (25:47):
It does sort of show that, well, yeah, there may
be a little bit more room for experimentation right now.
So I'll give you another example of a technology that
was sort of seen as dead but is now coming
back is battery swapping. So, for heavy trucks in China,
almost half of electric heavy truck sales, which are rising
quite quickly, About fifteen percent of heavy, medium and heavy
truck sales in China are now electric, but half of
those have a swappable battery and they're used in port
(26:10):
operations or on large mining sites or industrial sites. And
again that was something that was tried a little bit
almost twenty years ago now and failed. But now there's
just a sort of acceptance that electrification is going to
play a big role, and there will probably be different
flavors of electrification that are used to solve different specific problems.
And it may well be that in some sort of
port drayage application or in some sort of mining site
(26:32):
that yeah, you can just swap batteries in and out
and that works well there or similarly, we've seen that
take off quite rapidly for two wheelers. So a battery
that you can physically just lift up and go to
a swap station and swap in and out a battery
that you've signed up to a subscription for with that provider,
and there's a lot of them dotted around the city,
and then it's significantly faster than refueling with petrol because
you're just walking in and literally swapping one.
Speaker 3 (26:53):
Battery out and then driving off.
Speaker 4 (26:55):
So again, I think we are getting to this point
where electrification is and cheap batteries, good quality batteries are
sort of a baseline technology, and then there's a lot
of experimentation, new business models and new products you can
build from that, And I think this kind of gets
at something core is like each year when we sort
of ask ourselves, like do we still believe that this
trend is strong and is robust? The core thing that
(27:16):
we're looking at is our batteries still getting better and cheaper,
And the data is very clear on this. Batteries are
still getting better and cheaper. There's a huge amount of
innovation both in emerging chemistries and also just the existing ones.
So we do a big deep dive on solid state batteries,
on sodium ion batteries, and those are going to play
a role in the future at some point. But even
just within regular with the myon batteries prices drop twenty
(27:37):
percent last year, there's more and more of them that
can do really fast charging, in some cases up to
a megawatch charging, which is getting pretty close to the
point where evs are can be refueled at the same
speed as a gasoline car. Now, the infrastructure is not
there to do it, and not all the vehicles can
do it, and that sort of thing, but the bottom
line is that technology is still getting better and cheaper,
and that's what sort of makes us confident that the
(27:58):
trend continues, even if it has some steps forward and
back and some regional variations. So I think that's a
quite important takeaway and is a big part of the
sort of technoeconomic modeling that we do to build these outlooks.
We're not just sort of saying what do we think happens.
We are running it through some fairly sophisticated models on
how much does it cost to make a car, and
then what does that mean for addressable market in each
(28:19):
given market.
Speaker 1 (28:20):
And you know, just reflecting on everything you're saying. You know,
I said before, it's like cheap batteries have enabled people
to try new things. It's also like, from what I'm
picking up, maybe whereas before, if you were selling electric
cars or other kinds of vehicles, your differentiation was that
your vehicle is electric. That is what it's USP is.
But now what we're seeing is vehicle manufacturers are competing
(28:45):
against other vehicles that are electric and it's not being
electric is no longer a USP in the same way then,
so we're seeing other usps that are built on the
premise of being electric, but it's like it's electric.
Speaker 3 (28:57):
And yeah, and I mean China.
Speaker 4 (28:59):
Fifty percent of vehicles sales now in China come with
the plug, right, So within that there's companies And one
of the more sort of comical oversimplifications I hear is like, oh,
that's just government policy, They're forcing people to do that.
Speaker 3 (29:11):
That's definitely not the case.
Speaker 4 (29:12):
Like the government targets in China are that we're for
twenty percent of sales to be new energy vehicles so plugins.
Speaker 2 (29:18):
So that's two and a half times over that Taiget.
Speaker 4 (29:20):
Yeah. Yeah, so organic consumer demand has clearly taken off
and is just running away with it. That's where all
the cool tech is. And you have groups with a
lot of brand cachet that are developing cars. So once
you get to fifty percent, you have all this competitive dynamics,
different groups competing in different segments, launching vehicles as quickly
as they can, so there's development time for a new
(29:40):
vehicle has been compressed down to sort of eighteen months
instead of three or four years or five years even,
and just really really cutthroat rapid competition. I will say
within China, the level of competition is so intense that
a lot of groups are not profitable, so there may
be some sort of reset that needs to happen there
as well. But certainly it gets at this point that
you have this sort of platform technology that's available now
(30:01):
and people are building and innovating from there, and once
the dust settles, there's a few successful companies that will
come out of that and our world real national champions,
and certainly there's a few of those already in the
form of view ID and CTL, but I think there'd
be a few more names. People start to see that
emerge from that intense competition as well on the global stage.
Speaker 2 (30:20):
So fascinating and really exciting.
Speaker 1 (30:23):
And yeah, for those of listeners who like me, are
based in the US where it feels like a little
bit of a you know what the word is, the
rainy weather for the electric vehicle market, it's really actually
quite refreshing to hear this global perspective, and it's not
just about the numbers. There's actually really exciting stuff going on.
And yeah, as you say, that might create challenges, but
(30:45):
kind of going back to the very top where we're
talking about, you've been doing this outlook year after year,
I'm guessing it keeps it very interesting for you as
the person leading this analysis.
Speaker 3 (30:56):
It definitely does, and you do learn things from it, right,
I mean there.
Speaker 4 (30:59):
Is something about saying, look, we've been doing this for
a decade. We will still be doing this another decade
from now. There's sort of an accountability that comes with
that too. I feel like it's quite easy to run
around and say, oh, it's all going to change and
here's my dramatic forecast, and get a lot of headlines.
But then two years later, three years later, ten years later,
did that hold up? Did it carry any water. Did
(31:19):
it make any sense? Certainly when we started doing this
a few years later, there were all these groups saying
one hundred percent of car sales are going to be
electric by twenty twenty five or twenty thirty, and generate
lots of headlines from that, and then they're never revisited
it and never followed up. And though those groups were
just sort of comically wrong, they didn't understand the market
that they were dealing with. So I think there is
some responsibility and some accountability that.
Speaker 3 (31:39):
Comes from doing it for a long time.
Speaker 4 (31:41):
And also I should just say here, I'm very fortunate
to work with an incredible team of people at Bloomberg
an EF. There's literally dozens of analysts who contribute to
this report, looking at everything from the supply of lithium
to the cost of public charging in Germany, or the
road fuel demand impacts or two wheelers in Vietnam. So
we're really able to draw on a global team of
(32:02):
really sharp people with really extremely precise domain expertise, and
that's what sort of gives it wings and makes it
useful for our clients. I think you can sit and
draw curves and say, look, here's an s curve disruption
is coming. That may or may not be true, but
it's often not especially operationally useful for people. So the
goal that we're starting from is, let's provide things that
(32:23):
are operationally useful as well as digging into what the
big trend is. And I think again, in the ten
years of doing it, it's been a fruitful thing. And
it's also been a real pleasure to work with some
of the same people for ten years every year on
it and be able to tap into their expertise and
see their fingerprints on these improvements that we've made over
the years. To the modeling, or to the depth of coverage,
(32:44):
to the country coverage or the segments and all those
sorts of things.
Speaker 1 (32:47):
Well, that's a really nice note to finish on. And
you know, they always say you should leave people wanting more.
So Colin said, there was eleven main findings.
Speaker 2 (32:56):
Was it main findings? You said, what was the way?
Speaker 4 (32:58):
Yeah, I said, eleven key findings. I think we got
through We convincingly got through three. And there's all sorts
of other ones around oil impacts, about cost of charging,
about what's going on with electric big rigs and trucks,
about solid state batteries and overcapacity, and also about a
little bit about net zero. We didn't talk about much
about net zero this year. More people, we found, and
more of our clients want to want to talk more
(33:18):
about the next five and ten years than the next
thirty and forty or twenty and thirty, I should say,
so we didn't talk as much about net zero, but
there is some stuff in there as well if people
want to know where the scenarios are tracking and how
far on or off course different countries or segments are
as well.
Speaker 2 (33:31):
Got it.
Speaker 1 (33:32):
So we've given you three and there's eight more amazing
conversations out there.
Speaker 2 (33:38):
Colin.
Speaker 1 (33:38):
It's been really enjoyable and interesting as always talking to you,
so Colin, thank you so much for joining us today.
Speaker 3 (33:45):
Thanks Tom.
Speaker 1 (33:53):
Today's episode of Switched On was produced by Cam Gray
with production assistance from Kamala Sholling. Bloomberg NEF is a
service provided by Bloomberg Finance LP and its affiliates.
Speaker 3 (34:04):
This recording does not constitute, nor should it be construed
as investment advice, investment recommendations, or a recommendation as to
an investment or other strategy. Bloomberg A NEIF should not
be considered as information sufficient upon which to base an
investment decision.
Speaker 4 (34:18):
Neither Bloomberg Finance LP nor any of its affiliates makes
any representation or warranty as to the accuracy or completeness
of the information contained in this recording, and
Speaker 3 (34:27):
Any liability as a result of this recording is expressly
disclaimed
This is Tom Rowland's Reese and you're listening to Switched
on the podcast brought to you by BNF. Today we're
discussing BNF's Electric Vehicle Outlook, our annual flagship report, analyzing
how electrification will impact road transport between now and twenty fifty.
Speaker 2 (00:14):
In the very near.
Speaker 1 (00:15):
Term, electric vehicle sales are set for yet another record
breaking year. That's a big deal, especially since headlines have
focused on how the US is slashing support for evs.
But the EV story isn't just about the US. It's
a global story and the number of countries getting into
the EV game is growing. The biggest player is China,
which continues to lead the EV adoption pack. Over fifty
percent of new passenger vehicle cells in China this year
(00:36):
are set to come with a plug. China is also
a star when it comes to sales of range extender evs,
which are now the fastest growing drivetrain in the world.
Even outside of its own borders, China is making a splash.
The market for electric vehicles was once considered top down,
with developed economies moving first, but Chinese automakers have been
targeting developing economies hard As a result. Thailand now has
a higher passenger EV adoption rate than the US, and
(00:58):
Brazil's adoption rate is higher than Japants. To learn more
about this global EV story, I'm joined by bnif's head
of Clean Transport, Colin Mcherica, to discuss the Electric Vehicle
Outlook twenty twenty five, which bn EF clients can find
at BNF go on the Bloomberg terminal or on BNF
dot com. All right, let's get to talking about the
Outlook for electric vehicles with Colin. Colin, thank you for
(01:27):
joining the podcast today.
Speaker 3 (01:29):
Pleasure to be here. Nice to speak to you. Tom.
Speaker 1 (01:31):
We're here to talk about what we at BNF call EVO,
which stands for our Electric Vehicle Outlook. You've been doing
this for a really long time, so can you tell
us a little bit about the history of it and
what is new Because we do this again and again
every year, presumably we don't need to just update our
numbers every year. I'm assuming that we do new and
cool things and that's what keeps us going because that's
(01:51):
how it is at BNF. We always have to do
something new.
Speaker 3 (01:54):
Yeah, definitely, So I've been doing this. I was sort
of tallying it.
Speaker 4 (01:57):
This is actually the tenth year that I've run this report,
and obviously a lot has changed since then, and I
would say sometimes it feels now like everybody and their
dog has a forecast for how this type of stuff
is going to evolve. I think back in twenty fifteen sixteen,
when we were doing the first one, there was kind
of a few oil companies plus Opek, who are putting
out long term outlooks, and their view was very down
(02:18):
on anything to do with electrification and basically saying liquid
fuels or what's going to power the world's mobility mix indefinitely,
and none of them saw any significant role reviews, and
we sort of thought, look, we've been looking at this
battery cost curve stuff for a while.
Speaker 3 (02:29):
We think we're on the cusp of something about to change.
Speaker 4 (02:32):
So when we try and do things at BNF, we're
always trying to do things with what's useful for our
clients and as well try and inform a public debate
as well. But at the first instance, be useful to
our clients and provide data to that's helpful. And so
whenever you get into long term stuff, you always have
to be a bit careful because I have a sort
of thesis that the further you go out in time,
the fewer people that is operationally useful for. So if
(02:54):
you go all the way out to twenty forty and
spend a lot of time talking about twenty forty and fifty,
you just kind of lose people some people along the way. Now,
it's not to say there aren't useful and interesting things
to talk about those long term parts, but you have
to balance it with some near term things that are
going on. So that's kind of what gets out. Your
other question is about what do we do that's beyond
just updating this outlook every year, because we have our
models and we have our adoption outlook that follows two
(03:17):
different scenarios and all this sort of stuff, and that
gets updated with the latest data. But then we do
try and say, okay, how can we keep making this
better every year? And after ten years you just keep
incrementally improving things, and sometimes that's new countries added. This year,
we've done a bunch of things. We've added a new
drive train, so there's something called range extended electric vehicles
that are included in there, and we've done more on
terrace and trade. How that's impacting things looked at some
(03:38):
of the regional dynamics for things like flex fuel vehicles
in Brazil or compressed natural gas vehicles in India, and
and you have to do a lot of work on
batteries and the supply chain, so there's a whole new
forecast there for solid state batteries, looking at electrolyte chemistry
as well as updating our anode and bathout chemistry forecasts.
And then also looking at all the battery plants that
(03:59):
are coming online over capacity issues that are sort of
not just looming but actually here in that market. And
then lastly the three other things we've done this year.
Each year we do three what we call thematic highlights,
so those are sort of special standalone chapters that look
at a growing or topical issue around emobility around the world.
So this year's were the commercialization of solid state batteries,
(04:19):
the rising cost of ev charging, and a special deep
dive on Brazil looking at alternative ways that Brazil's ethanol
could be used in a scenario where electrification displaces a
lot of ethanol use in road transport.
Speaker 1 (04:31):
It sounds like you've gone above and beyond, because before
you got even to talk about those thematic highlights. I
was thinking, Wow, this is already a really complex year,
particularly with all the tariffs coming in and maybe changing
the picture, as you say, especially if we're trying to
make sure we talk about things that are relevant for
the next few years. I mean, was it more of
a headache doing EVO this year than in previous years.
Speaker 4 (04:55):
So one of the things I've found after a decade,
it's ten years now working for me work on auto,
automotive related topics and transport related topics, and twenty years
now working in clean energy overall.
Speaker 3 (05:05):
I started in May two.
Speaker 4 (05:06):
Thousand and five, and particularly on the auto stuff, I've
just kind of realized it's something every year, it's always
something different, but there's always something that kind of is
a big spanner in the works for what you might
think of as this business as usual that never seems
to go back to usual in the auto sector. And
so for a while that was COVID and okay, look,
how do you how many cars are people going to buy?
(05:26):
What if people aren't moving around as much, what does
it do to energy demand? And keep in mind that
we're not just looking at how many cars get sold,
We're looking at this work is what informs all of
our things around the road, fuel demand outlook and how
much gasoline and diesel are going to be consumed and
all these other things as well. So we're definitely not
just looking at cars and trucks sold. We're looking at movement,
and we're actually at the basis level starting with literally
how much do people and goods move around the world,
(05:48):
So that's in freight ten kilometers and trillions of passenger
kilometers traveled, and how is the mix of that changing.
So with those sort of big, really big picture things
in mind, and the auto industry is about a two
and a half trillion dollar annual revenue industry, they're kind
of affected by everything. So one year it's COVID, the
next year it's a semiconductor shortage, the year after that
it's tariffs and trade drama. There's kind of always something,
(06:10):
and to be honest, that's sort of what keeps it interesting.
You could sort of look at that and sigh and say, oh,
why can't we have a normal year, But another way
to look at it would be like, wow, we get
to work on some of these topics where the biggest
things in the world are relevant and are directly impactful,
and I think automotive is a pretty fascinating lens to
look at the world through because it does tie in
technology developments, it tried ties in economics and trade, It
(06:31):
ties in politics, It ties in job creation and manufacturing
and industrial policy, and kind of each one of these
things is sort of getting flexed in a different way
in every year, So it makes it hard, it makes
it interesting. It also means that every time we finish
publishing it, there's already things that have changed, and there's
things that we wish we could have had time to include.
Speaker 3 (06:49):
But that's just sort of part of the game.
Speaker 4 (06:50):
And that's part of doing it as an annual thing
and not trying to constantly release this over and over
throughout the year, but rather sick once a year we're
going to step back and try and tie it all together.
The rest of the year we're publicishing much more near term,
detailed work, and this is the once a year where
we sort of step back and try and figure out
how it all fits together.
Speaker 1 (07:06):
It's really interesting. You know, what I'm hearing is kind
of this electric vehicle outlook. It is literally a forecast
of the electric vehicle sector. But to what you're saying
is it's like a lens through which you have to
look at everything going on in the world. It kind
of makes sense. I mean we've talked about this before.
I remember I found this chart on what used to
(07:26):
be called Twitter, and it was a map of the
world showing every country's top import really like, so it
was a map showing what was the nature of global trade.
And the most imported physical goods were either cars or oil,
and you know you're looking electric vehicles, which is disrupting
both of those industries. So in a sense, it's not
surprising that it's like you say that it touches on
(07:50):
everything that matters to your report. We were chatting before
we started recording. You know, you've been doing the rounds
promoting this report, and I think you said it was
a list of eleven key takeaways that you'd come up with.
I didn't know if it was a word, was takeaways.
I think you had a better word, But could you
talk us through you know, I think we have time
to talk through all eleven and you know, our clients
can access our reports, and I think we're putting out
(08:12):
a webinar, But what were some of the more important ones?
Speaker 4 (08:15):
Yeah, for sure, and so yeah, when we finished the report,
the report has hundreds of figures, it's a couple hundred pages.
There's all sorts of stuff in there, and each one
of our client we serve a lot of different client
types and different sectors and different roles, so each one,
each person gets a slightly different an organization gets a
slightly different area. It has a slightly different area that
they're going to be the most interested in. So I
would say there's lots in there and people can go
(08:35):
and read it. We try and draw out a few
just that are make good presentation slides and things, and
so some of them I guess, just kind of starting
from the top, is this is going to be another
record breaking year for EV sales. So we're pretty confident
on that. About one in four vehicles sold in the
world this year will be a plug in either battery
electric or plug in hybrid.
Speaker 3 (08:54):
So that's up from about twenty percent last year.
Speaker 4 (08:56):
If we look at the fleet, about four percent, so
one in every twenty five five cars on the road
in the world was electric.
Speaker 1 (09:03):
And was this what you were expecting going into the analysis,
because I know you say it'll be a record Yeah,
I feel like you know, like a lot of BNF
sectors where we're looking at things that are emerging. That's
what we've said every year, but I know there's been
a few headwinds. So were you genuinely surprised at this
finding or were you kind of expecting it?
Speaker 3 (09:20):
I was expecting that.
Speaker 4 (09:20):
I mean, if you work on electric vehicles, especially, you
hear every year about all the reasons why it's going
to fail, and then it goes up between twenty and
sixty percent a year.
Speaker 3 (09:29):
That's been pretty consistent.
Speaker 4 (09:31):
I think what's probably different this year, and that we
do talk a lot about in the report this year,
is that the US market is set to slow down
pretty dramatically, and whatever happens in the US has an
outsized impact on the headlines that you read, because a
lot of the new sources or groups covering things our
English speaking and the US is obviously a pretty dominant
force in a lot of areas. So if you were
to follow the US headlines, it's quite dark. And we
(09:52):
have dramatically reduced our US ev adoption forecast because of
things like the Trump administration rolling back cafe and taking
dismantling arts of the Inflation Reduction Act. And so certainly
that is a very real dynamic, and that is a
I don't want to downplay that. If we're going to
get large scale electrification in the US, we need the
US market to go electric as well. We're not we
(10:12):
don't take a position on whether that should happen, but
just by the very nature of the size of the US,
it's an important part of the global vehicle mix. So
just to give a sense of that, last year in
our outlook, we had about forty eight percent by twenty
thirty of vehicle sales in the US coming.
Speaker 3 (10:26):
With a plug.
Speaker 4 (10:27):
That was again based on really tight fuel economy regulations
under Biden. We had all the money being pumped in
by the Inflation Reduction Act, the support for evs from
tax credits, all these things sort are coming together, plus
California ZEV mandate and the states that follow it. This
year we've dramatically reduced that because many of those have
been rolled back. So now we have it going to
twenty seven percent of sales by twenty thirty having a plug.
Speaker 3 (10:49):
So that's both battery electrics, employment HIGHBRI and so what
was the number forty eight twenty seven?
Speaker 4 (10:55):
Yeah, so pretty sharp, pretty sure drug, and to be honest,
there's actually some downside, further downside risk to that because
the outlook assumes that California does retain its waiver and
the Trump administration has gone after that and as of
now remove that, which is a decision that will get
tied up in the courts and is being tied up
in the courts. And to be honest, this was all
just happening as we were publishing, So our position was
(11:16):
let's keep it in there. But it means that to
that twenty seven percent by twenty thirty, there's still a
fair bit of downside risk because if California loses that
ability to set its standards and that holds up in court,
then we would see that for cast go down even further.
Speaker 2 (11:30):
Did you ki Anamba?
Speaker 4 (11:32):
We haven't yet, but that's kind of the next thing
up is to figure out how much further that goes
down in that case. But just to kind of give
a sense of scale, the US is not a huge
part of the overall TV market today. The biggest market
course is China, and one of the interesting findings, sometimes
one of the most interesting charts. So it came right
at the end and I was thinking, actually China EV
sales this year are going to get pretty close to
(11:53):
US total vehicle sales. So well, let's make a chart
of that, and basically, towards the end of this year,
we think China's EV sales.
Speaker 3 (12:01):
Will surpass US total vehicle sales. That's pretty remarkable.
Speaker 4 (12:05):
So you see this chart where a few years ago
there's just a few hundred thousand evs a year sold
in China, and then now by the end of twenty
twenty five, there will be more evs sold in China
than total cars sold in the US.
Speaker 3 (12:16):
And the Chinese market is still growing quickly. The European
market is also growing quite a bit right now.
Speaker 4 (12:20):
Because there's tightening vehicle CO two regulations. They've backed off
that a bit and averaged out the CO two regulations,
so they don't tighten just in twenty twenty five, but
averaged out from twenty twenty five to twenty twenty seven.
But so it wasn't a very long winded way of saying,
it wasn't a real surprise. It was sort of what
we were expecting that it was going to be a
record year. But certainly there is a lot of regional
variation in that.
Speaker 1 (12:40):
So It's really interesting what you're saying about the difference
between the US and a lot of other markets, and
it does make me wander two things, and I say
this as someone who's currently living in the US, is
is the US missing the boat on the future of
the automotive sector and any aspirations of becoming a vehicle exporter?
So first, I what does this mean for the future
(13:01):
of the US automotive sector?
Speaker 2 (13:03):
And then the other thing I.
Speaker 1 (13:04):
Wonder is, and this is maybe more of a slow
burn how quickly this begins to dig in, But is
the US going to be uniquely exposed to oil prices
in the future because everyone else has more of an
electric fleet and has less dependency. I don't know if
this is something you know you have thoughts on.
Speaker 3 (13:21):
Yeah, definitely.
Speaker 4 (13:21):
In terms of the second question actually around whether the
US is more uniquely exposed to that, the US already
is more uniquely exposed to that because the efficiency of
the vehicle fleet is significantly lower than other parts of
the world and the alternatives are very limited. Right, So
in cert some countries, if the cost of driving goes up,
there's a realistic option for some people to shift to
public transit. Their driving distances aren't as high, and their
(13:44):
efficiency is better, whereas in the US there's very little
to do other than just pay it and maybe complaint
when gasoline prices go up, and understandably so in some cases.
Speaker 3 (13:54):
So I would say that it is already uniquely.
Speaker 4 (13:55):
Exposed when oil prices go up and gasoline prices follow.
But yes, to sort of zoom out a bit from there, yes,
there is a real risk that the US, particularly the
US automakers get left behind in this transition because they
are sort of protected right now.
Speaker 3 (14:07):
So right now in the US, there's one hundred percent
tariff on Chinese EV's or Chinese made EV's.
Speaker 4 (14:12):
Even if they're an EV made by a Western automaker
in China, which I think is important because you were
starting to see more and more automakers make their vehicles
in China and then ship them to international markets, so that.
Speaker 3 (14:22):
Means they're not exposed to the full level of competition
that you're starting to see elsewhere.
Speaker 4 (14:26):
And anytime you have a market that is not exposed
to the full global competition, then it is possible that
it sort of evolves down a different evolutionary path. I
think one of the things that was interesting in digging
through this year's EV numbers in different countries is that
the single biggest determinant you could probably look at for
which countries or regions are going fast on EV adoption
which ones are going slower, is the ones that are
(14:47):
open to Chinese automakers are going very fast. Indeed, so
markets like Brazil or Thailand, or Vietnam, Turkey, Mexico, even
the UK. The UK doesn't have the same important tariffs
that the S THEU has on Chinese and the UKs
that has the highest level of EV adoption amongst major
economies outside of China, and all these other ones in
Southeast Asia or Latin America and other places are growing
(15:09):
quite quickly and are now have significantly higher rates of
EV adoption than established, wealthier markets, which kind of inverts
this idea that many people have had for a long
time that electrification starts purely at the top and slowly
works its way down top of the market works its
way down. Instead, what we're seeing is much more sort
of bottom up electrification happening and in many cases now
(15:29):
happening in emerging economies significantly faster than developed markets or
more economically developed markets, particularly those that have large incumbent
auto manufacturing bases, like Japan, the US, or Germany. So
there's some really interesting regional dynamics there. I think the
US is a bit at risk of sort of missing
this global trend and therefore struggling with some competitiveness as
(15:49):
a result. It's worth keeping in mind though, that while
Tesla's sales are faltering, is still a major producer and
has been very innovative up to date and is an
American company. So certainly, I don't think it's a foregone
conclusion that the US and the US automakers are going
to fall further behind on this, but certainly the policies
that are in place right now are pushing things in
that direction.
Speaker 1 (16:09):
Right And you know, in a way, maybe my question
was predicated on the idea that the profit in the
future of this industry is going to be in the
manufacturing of the vehicles, whereas it might be in other
things like the design. You know, I know that if
we think of internal combustion engines, they are complex, and
there's real expertise in certain countries that enables those countries
(16:34):
to be major players in those areas. And I'm assuming
that's where there's quite a bit of margin. If the
majority of the value is shifting towards the battery, maybe
at some point becomes low margin. It might be that
the actual profit is not necessarily in the making of
the vehicle, but in other factors, like you know, I'm
just thinking of the difference between you know, where is
(16:55):
the money made from iPhones? Is it made in the
manufacturing of them, or is it Apple, a US based
company is making all of that money. Is that something
you could see happening and is that maybe the sliver
of hope for some countries that might feel they are
losing out on manufacturing, right.
Speaker 3 (17:10):
It's a tricky question.
Speaker 4 (17:11):
I mean, what I would say is that automakers over
the last one hundred years have changed the way they
operate a lot, particularly around vertical integration. So if you
go back to the first mass manufacturing of cars, say forward,
in the assembly line, there's a lot of vertical integration
at that point because there isn't really a supply chain.
So if you don't have enough rubber, you're setting up
plantations in Brazil kind of thing. And then over the
(17:34):
last fifty years, in particular, the trend has been automakers
divesting more and more of the process of making parts.
So you have these Tier one suppliers and below them
tier two suppliers who are making components, and then the
automakers are more and more assembling vehicles. And so they
are incredibly complex supply chain management organizations that are really
good at that. They're really good at managing all those
(17:54):
delivery of all those supply chains, integration of all that,
assembling the vehicle, marketing the vehicle, getting them out places
in the right time. They're very good at that. But
they have sort of farmed out a lot of the
actual component making of different bits of the car. What's
really interesting right now that you're seeing is kind of
a trend in the other direction. So Tesla was already
doing this a bit, but BYD is the one that's
taken us the furthest So BYD is their view is
(18:16):
sort of, whatever we can make in house, we should,
and so that's making the batteries. Of course, they've been
in the battery making business for a long time. They're
making semiconductors. In some cases, they're actually buying and building
their own car carrying ships that.
Speaker 3 (18:27):
Are delivering these cars around the world.
Speaker 2 (18:29):
Wow.
Speaker 4 (18:29):
Kind of as vertically integrated as you can go all
the way down to the ocean going vessels that are
there delivering to make.
Speaker 2 (18:34):
Their own roads as well special yeah roids.
Speaker 4 (18:37):
Yeah, And so that I think is kind of the
interesting trend is like, Okay, does that signify something else
we're going to see from other automakers.
Speaker 3 (18:44):
Is it a significant competitive advantage over time?
Speaker 4 (18:47):
Right now it looks like it is at the sort
of awn of this electrical age, but it'll be very
interesting to see how others react. We have seen some
moves from some of the others to get into cell
manufacturing or it potentially even take stakes in minds of
critical raw materials. This is kind of like a moment
where something that was settled for a while that you
should farm out as much as you can and buy
from suppliers where you can is now sort of up
(19:08):
in the air. And I think BID is really sort
of pushing the limits here and growing incredibly quickly as
a result around the world. And so that's something certainly
we're watching quite closely this year.
Speaker 1 (19:17):
So that, I mean, that's so fascinating. So Gy, going
all the way back to the start of this conversation,
you've kind of got these eleven key takeaways. The first
one was that we expect sales to increase this year,
and we've unpacked a lot from talking about that, so
we definitely unless we have a podcast for each one
of these eleven pieces, we've probably got time to talk
(19:37):
about one, maybe two. We'll see how we do. But yeah,
what's another of the big takeaways?
Speaker 3 (19:42):
Another one is around range extended electric vehicles. So I
hinted at this.
Speaker 4 (19:46):
These are vehicles where you have an onboard engine, but
it's essentially running as a generator, running in a very
constant cycle and purely being used to charge the battery.
The battery is always powering the wheels, the engine is
never powering the wheels, so there's.
Speaker 3 (19:58):
A very inant unplug in hybrids.
Speaker 4 (19:59):
But again the differences is that it's always the battery
powering the car, and so we did a deep dive
on that this year and there it's quite an interesting
story because it's growing extremely quickly in China.
Speaker 3 (20:09):
It's the fastest growing drive train.
Speaker 4 (20:11):
They almost look a bit more like pure electrics than
they do plug in hybrids because about seventy percent of
all kilometers traveled on these erevs or range extended vs
is in electric mode and some of them have quite
long ranges. So the average range we found of the
ones being sold today is one hundred and seventy kilometers
of all electric range, battery pack size of around thirty
eight kilo hours, So just a.
Speaker 3 (20:30):
Really interesting dynamic there.
Speaker 4 (20:31):
And in China, those are primarily going into larger SUVs
that have been a.
Speaker 3 (20:34):
Bit difficult to fully electrify costs competitively.
Speaker 4 (20:37):
So one of the things we sort of flag is
that we were tracking a lot of automakers who were
planning on launching these over the next few years outside
of China. Can dive forward Stilantis, others, and it'll be
really interesting to see if that is a potential way
to electrify, particularly the full sized pickup truck market in
the US. And I think if there's something that might
sort of open up the US market a bit more,
it could be a solution like that where you still
(20:57):
have all the performance and longer range, but you can
probably do seventy eighty then ninety percent of total driving
in fully electric mode. So that's that's kind of one
that we that we flagged as well, and that I
think you'll hear more on in the next few years.
Speaker 1 (21:10):
And so, I mean I'm a little unfamiliar with the concept.
So's you know, I don't know if this is the
right technical words. It's essentially like a battery electric vehicle
that has a generator inside it as well, that's right.
And how heavy is the generator, like, say, compared to
an internal combustion engine vehicle.
Speaker 4 (21:26):
Yeah, it's a lot smaller than all the apparatus you
need for an engine because you think about the way
an engine works, and in traditional vehicles you need to
be able to directly drive the wheels from that. So
it has to be able to operate in all sorts
of different conditions. If you have a little I don't
know if you've ever seen just a gasoline generator, it's
not quite like that, but it's not too far off
that a little portable one. And so it's just a
much simpler engine, much smaller, much less integration with all
(21:50):
the rest of the vehicle.
Speaker 3 (21:51):
So we had this thesis for.
Speaker 4 (21:52):
A long time that look, plug and hybrids never really
take over because they can never be cheaper than a
combustion vehicle because they still have an internal combustion engine
platform on board. I think erevs challenged that a bit,
because if your main costs are a small generator essentially
and a small fuel tank for that, it's not that
much money, and it's certainly not the full cost of
two totally distinct architectures. These vehicles are built as evs first,
(22:14):
and then you're sort of adding something afterwards, which is
kind of the opposite of what we had with some
of the first evs that came out, which were actually
built as combustion vehicles first, and then you sort of
add made them electric, but on the same kind of
platform or chassis, which is things like the Volkswagen Egle.
So I think it's a really interesting technological solution, and
we're seeing it rise really quickly in places in rural areas,
in places where people don't have home charging options or
(22:36):
where there's just not as much charging infrastructure. So yeah,
I want to watch.
Speaker 1 (22:40):
What I find really fascinating about this is because everything
you've said to me makes sense of the merits of
these vehicles over plug in hybrids, And maybe it's not
an apples to apples comparison, because in a way, a
plug in hybrid is like an internal combustion engine vehicle
with a little battery to help make it more efficient,
whereas this is like an electric car with little generator
(23:00):
to make it more long range. Still, the question that's
ringing in my ears, as you've explained all to this,
is why hasn't this become a thing sooner? Because generators
are not new technologies. Was there anything that has changed
that has enabled this?
Speaker 4 (23:14):
So the short answer is it has happened before. So
the Chevy Vault is essentially a version of this that
was launched in twenty eight ten.
Speaker 3 (23:21):
But I think what's.
Speaker 4 (23:22):
Different now is sort of the For one, when that
vehicle was launched, the battery prices were really high.
Speaker 3 (23:28):
And the supply chain didn't really exist to build that easily.
Speaker 4 (23:31):
Now batteries are cheap and the supply chain is very
very well developed in China. And then also you have
a bunch of startups. So one of the groups that's
pushing it quite hard is a group called Li Auto,
which is one of the fast growing Chinese EV startups.
But who really want to make this work like they're
sort of in with both feet, They're not hedged, and
I think that that makes a difference as well. You
need somebody who's like all in on the technology pushing
as hard as they can, and it's either we're going
(23:52):
to make this work or we're going to go bankrupt.
Speaker 3 (23:54):
That's a powerful motivator.
Speaker 4 (23:55):
Couple that with some cheaper battery costs, and I think
that's part part of the reason why you're seeing it now.
I think there's also some recognition that, again, in these
places where you've got really high levels of ev adoption,
a big chunk of the market.
Speaker 3 (24:07):
Does just go full battery electric.
Speaker 4 (24:08):
And then what you're trying to figure out here is
is there a solution that helps for some of the
other ones that are that are harder to reach, And again,
I think erevs are a potential way.
Speaker 3 (24:16):
To do that.
Speaker 4 (24:17):
We'll have to see how they actually get used and
performance an uptake in other markets first, because I don't
want to oversell it as some sort of heroic technological
solution that's going to rescue things. But it's certainly, like
I said, one, we're keeping an eye on.
Speaker 1 (24:29):
No I mean, and just to sort of almost like
zoom out a bit and not talk about this specific technology.
What I'm kind of taking from this is batteries are
getting cheap enough that you're now seeing companies able to
explore new possibilities and new innovations. I know that like
one of the things that's always been a conversation around
this area, at least with people who like being contrarian
(24:50):
or reading sci fi, is that, you know, our thinking
on electric vehicles is so conservative because we're thinking in
terms of the cars that we know, except with a
battery in them instead. You know there could be different paradigms,
but that maybe haven't yet been explored. So I suppose
my takeaway from this is maybe batteries are getting to
that point where they're cheap enough that is now enabling
new innovation, new startup companies to try new things based
(25:14):
on this premise of cheap batteries without having to be
a vertically integrated battery manufacturer themselves.
Speaker 4 (25:20):
Yeah, and I think I think in an era where
we're just getting started in electrification, you had to bet
on by far the most the safest, most likely to
succeed option, right, And in a world where we sort
of say okay, batteries and electrification are really spreading quickly.
And again, if you're sitting in the US, maybe this
whole conversation sounds a bit crazy because you've seen all
the rollbacks that are happening there, but be really clear,
(25:41):
the rest of the world, particularly Europe, China and a
lot of these emerging markets are going electric quite quickly.
Speaker 3 (25:46):
That is happening.
Speaker 4 (25:47):
It does sort of show that, well, yeah, there may
be a little bit more room for experimentation right now.
So I'll give you another example of a technology that
was sort of seen as dead but is now coming
back is battery swapping. So, for heavy trucks in China,
almost half of electric heavy truck sales, which are rising
quite quickly, About fifteen percent of heavy, medium and heavy
truck sales in China are now electric, but half of
those have a swappable battery and they're used in port
(26:10):
operations or on large mining sites or industrial sites. And
again that was something that was tried a little bit
almost twenty years ago now and failed. But now there's
just a sort of acceptance that electrification is going to
play a big role, and there will probably be different
flavors of electrification that are used to solve different specific problems.
And it may well be that in some sort of
port drayage application or in some sort of mining site
(26:32):
that yeah, you can just swap batteries in and out
and that works well there or similarly, we've seen that
take off quite rapidly for two wheelers. So a battery
that you can physically just lift up and go to
a swap station and swap in and out a battery
that you've signed up to a subscription for with that provider,
and there's a lot of them dotted around the city,
and then it's significantly faster than refueling with petrol because
you're just walking in and literally swapping one.
Speaker 3 (26:53):
Battery out and then driving off.
Speaker 4 (26:55):
So again, I think we are getting to this point
where electrification is and cheap batteries, good quality batteries are
sort of a baseline technology, and then there's a lot
of experimentation, new business models and new products you can
build from that, And I think this kind of gets
at something core is like each year when we sort
of ask ourselves, like do we still believe that this
trend is strong and is robust? The core thing that
(27:16):
we're looking at is our batteries still getting better and cheaper,
And the data is very clear on this. Batteries are
still getting better and cheaper. There's a huge amount of
innovation both in emerging chemistries and also just the existing ones.
So we do a big deep dive on solid state batteries,
on sodium ion batteries, and those are going to play
a role in the future at some point. But even
just within regular with the myon batteries prices drop twenty
(27:37):
percent last year, there's more and more of them that
can do really fast charging, in some cases up to
a megawatch charging, which is getting pretty close to the
point where evs are can be refueled at the same
speed as a gasoline car. Now, the infrastructure is not
there to do it, and not all the vehicles can
do it, and that sort of thing, but the bottom
line is that technology is still getting better and cheaper,
and that's what sort of makes us confident that the
(27:58):
trend continues, even if it has some steps forward and
back and some regional variations. So I think that's a
quite important takeaway and is a big part of the
sort of technoeconomic modeling that we do to build these outlooks.
We're not just sort of saying what do we think happens.
We are running it through some fairly sophisticated models on
how much does it cost to make a car, and
then what does that mean for addressable market in each
(28:19):
given market.
Speaker 1 (28:20):
And you know, just reflecting on everything you're saying. You know,
I said before, it's like cheap batteries have enabled people
to try new things. It's also like, from what I'm
picking up, maybe whereas before, if you were selling electric
cars or other kinds of vehicles, your differentiation was that
your vehicle is electric. That is what it's USP is.
But now what we're seeing is vehicle manufacturers are competing
(28:45):
against other vehicles that are electric and it's not being
electric is no longer a USP in the same way then,
so we're seeing other usps that are built on the
premise of being electric, but it's like it's electric.
Speaker 3 (28:57):
And yeah, and I mean China.
Speaker 4 (28:59):
Fifty percent of vehicles sales now in China come with
the plug, right, So within that there's companies And one
of the more sort of comical oversimplifications I hear is like, oh,
that's just government policy, They're forcing people to do that.
Speaker 3 (29:11):
That's definitely not the case.
Speaker 4 (29:12):
Like the government targets in China are that we're for
twenty percent of sales to be new energy vehicles so plugins.
Speaker 2 (29:18):
So that's two and a half times over that Taiget.
Speaker 4 (29:20):
Yeah. Yeah, so organic consumer demand has clearly taken off
and is just running away with it. That's where all
the cool tech is. And you have groups with a
lot of brand cachet that are developing cars. So once
you get to fifty percent, you have all this competitive dynamics,
different groups competing in different segments, launching vehicles as quickly
as they can, so there's development time for a new
(29:40):
vehicle has been compressed down to sort of eighteen months
instead of three or four years or five years even,
and just really really cutthroat rapid competition. I will say
within China, the level of competition is so intense that
a lot of groups are not profitable, so there may
be some sort of reset that needs to happen there
as well. But certainly it gets at this point that
you have this sort of platform technology that's available now
(30:01):
and people are building and innovating from there, and once
the dust settles, there's a few successful companies that will
come out of that and our world real national champions,
and certainly there's a few of those already in the
form of view ID and CTL, but I think there'd
be a few more names. People start to see that
emerge from that intense competition as well on the global stage.
Speaker 2 (30:20):
So fascinating and really exciting.
Speaker 1 (30:23):
And yeah, for those of listeners who like me, are
based in the US where it feels like a little
bit of a you know what the word is, the
rainy weather for the electric vehicle market, it's really actually
quite refreshing to hear this global perspective, and it's not
just about the numbers. There's actually really exciting stuff going on.
And yeah, as you say, that might create challenges, but
(30:45):
kind of going back to the very top where we're
talking about, you've been doing this outlook year after year,
I'm guessing it keeps it very interesting for you as
the person leading this analysis.
Speaker 3 (30:56):
It definitely does, and you do learn things from it, right,
I mean there.
Speaker 4 (30:59):
Is something about saying, look, we've been doing this for
a decade. We will still be doing this another decade
from now. There's sort of an accountability that comes with
that too. I feel like it's quite easy to run
around and say, oh, it's all going to change and
here's my dramatic forecast, and get a lot of headlines.
But then two years later, three years later, ten years later,
did that hold up? Did it carry any water. Did
(31:19):
it make any sense? Certainly when we started doing this
a few years later, there were all these groups saying
one hundred percent of car sales are going to be
electric by twenty twenty five or twenty thirty, and generate
lots of headlines from that, and then they're never revisited
it and never followed up. And though those groups were
just sort of comically wrong, they didn't understand the market
that they were dealing with. So I think there is
some responsibility and some accountability that.
Speaker 3 (31:39):
Comes from doing it for a long time.
Speaker 4 (31:41):
And also I should just say here, I'm very fortunate
to work with an incredible team of people at Bloomberg
an EF. There's literally dozens of analysts who contribute to
this report, looking at everything from the supply of lithium
to the cost of public charging in Germany, or the
road fuel demand impacts or two wheelers in Vietnam. So
we're really able to draw on a global team of
(32:02):
really sharp people with really extremely precise domain expertise, and
that's what sort of gives it wings and makes it
useful for our clients. I think you can sit and
draw curves and say, look, here's an s curve disruption
is coming. That may or may not be true, but
it's often not especially operationally useful for people. So the
goal that we're starting from is, let's provide things that
(32:23):
are operationally useful as well as digging into what the
big trend is. And I think again, in the ten
years of doing it, it's been a fruitful thing. And
it's also been a real pleasure to work with some
of the same people for ten years every year on
it and be able to tap into their expertise and
see their fingerprints on these improvements that we've made over
the years. To the modeling, or to the depth of coverage,
(32:44):
to the country coverage or the segments and all those
sorts of things.
Speaker 1 (32:47):
Well, that's a really nice note to finish on. And
you know, they always say you should leave people wanting more.
So Colin said, there was eleven main findings.
Speaker 2 (32:56):
Was it main findings? You said, what was the way?
Speaker 4 (32:58):
Yeah, I said, eleven key findings. I think we got
through We convincingly got through three. And there's all sorts
of other ones around oil impacts, about cost of charging,
about what's going on with electric big rigs and trucks,
about solid state batteries and overcapacity, and also about a
little bit about net zero. We didn't talk about much
about net zero this year. More people, we found, and
more of our clients want to want to talk more
(33:18):
about the next five and ten years than the next
thirty and forty or twenty and thirty, I should say,
so we didn't talk as much about net zero, but
there is some stuff in there as well if people
want to know where the scenarios are tracking and how
far on or off course different countries or segments are
as well.
Speaker 2 (33:31):
Got it.
Speaker 1 (33:32):
So we've given you three and there's eight more amazing
conversations out there.
Speaker 2 (33:38):
Colin.
Speaker 1 (33:38):
It's been really enjoyable and interesting as always talking to you,
so Colin, thank you so much for joining us today.
Speaker 3 (33:45):
Thanks Tom.
Speaker 1 (33:53):
Today's episode of Switched On was produced by Cam Gray
with production assistance from Kamala Sholling. Bloomberg NEF is a
service provided by Bloomberg Finance LP and its affiliates.
Speaker 3 (34:04):
This recording does not constitute, nor should it be construed
as investment advice, investment recommendations, or a recommendation as to
an investment or other strategy. Bloomberg A NEIF should not
be considered as information sufficient upon which to base an
investment decision.
Speaker 4 (34:18):
Neither Bloomberg Finance LP nor any of its affiliates makes
any representation or warranty as to the accuracy or completeness
of the information contained in this recording, and
Speaker 3 (34:27):
Any liability as a result of this recording is expressly
disclaimed
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