Some people celebrate New Years, birthdays, July 4th… at Repower Group, we celebrate the day that the ‘BNEF Long-Term Electric Vehicle Outlook’ report is published. That was Monday.
An INCREDIBLE amount has happened in this market in the last 12 months. As such, Bloomberg New Energy Finance (BNEF) believes that the market is on a similar pace of change as they’d projected last year. We disagree.
We believe that EV penetration will be materially faster than modeled by BNEF analysts – especially for some key market segments. Below Exhibit 1, find the top 5 reasons why.
Exhibit 1: Electric Vehicle (EV) Penetration Projection - Fleet vs Overall
Why BNEF is wrong...
Reason 1. Saturation Point
The curve's saturation point is far too low. If EVs are less expensive, higher performance, and more widely available, for what reason are consumers or businesses going to continue purchasing a combustion engine vehicle? Some reasons I can think of:
Last time I checked, there are only 40 drivers in the Daytona 500 and the US has been at 100% household electricity access for decades. Market inertia could materially impact pace of change, but it’s barrier to change that naturally disappears.
Prediction: saturation point of the penetration curve above 90%
Reason 2. "Combustion engines are disgusting"
Many of the shifts in automobile purchasing patterns and public sentiment have come from intense marketing and lobbying by the auto industry. What do you think is going to happen after they collectively invest hundreds of billion of dollars in electric vehicles and are under intense pressure to sell more of them?
It doesn't hurt the cause that they are, in fact, disgusting.
Prediction: Auto manufacturers are going to teach us to resent the combustion engine, just as they taught us to love it.
Reason 3. Legislation
It’s probably prudent for BNEF to not anticipate the impact of legislation given that it could be positive or negative. That said, for the same auto industry pressure above and the US’s need to remain globally competitive (Asian and European car makers are running far ahead of ours…), there’s a good reason to believe there will be legislative support for the electric vehicle ecosystem.
Prediction: legislative support for EV adoption will be extended far beyond the today’s tax credit (up to $7,500 personal tax credit for EV buyers for the first 200k units sold by a manufacturer)
Reason 4. Accelerated Fleet Adoption
~5-10% of total vehicles on the road are in commercial or municipal fleets. Given the reasonable likelihood that these fleets will have step change EV adoption, as already evidenced by buses, they’ll pull the total penetration curve further left than they’re being given credit for. This is further amplified by the fact that fleets of many kinds (i.e. distribution, mobility services, car sharing) are growing.
Electric vehicles are gaining traction with fleets because of their lower total cost of ownership (more here). Once fleet operators are comfortable with the changes in operations when running electric vehicles, economics will drive the market to rapidly shift. The orange line shows BNEF’s tempered pace… no way.
Repower Group Fleet EV Adoption Projection vs BNEF eBus Projection
To be fair, BNEF does purport that “after 2030, over 75% of annual shared mobility vehicle sales and kilometers driven will be fully electric.”
Prediction: we think we’ll hit that 75% marker earlier, and it will happen for many fleets (i.e. garbage trucks, last mile delivery, ambulance, transit, utility vehicles, etc.), not just smart shared taxis.
Reason 5. Accelerated Shift to Renewable Energy
Charging vehicles will continue to get cleaner and cheaper. At the same time that the upheaval of the auto market is happening, the energy market is undergoing a massive shift towards the adoption of renewable energy. Solar and wind energy are cheaper than ever and rapidly replacing coal and natural gas power plants. We are still in the early innings of that game. The impact of this is 1) lower well to wheel emissions and 2) cheaper energy to charge vehicles. Today, renewable energy powers about 15% of our grid... experts project that number to grow leaps and bounds.
Prediction: by 2025, 33% of power for vehicle charging will come from renewable energy.
We’re pretty sure about #5 because we’re already helping to help make it happen. If you want to know more – send us a note at firstname.lastname@example.org.