FYI: The anticipated rebound in EV sales is expected around 2027, with collaborations among global automakers and Chinese manufacturers being pivotal.
EV Market Slowdown: A Temporary Dip Before the Next Boom
The explosive growth of electric vehicles (EVs) in recent years has momentarily decelerated, particularly in markets like the United States. According to a fresh analysis from Morgan Stanley, this slowdown is expected to persist for another 12-18 months. However, starting around 2027, EV sales are predicted to regain momentum. The key to this resurgence lies in strategic partnerships between major automakers and EV-specific firms, as well as collaboration with Chinese manufacturers.
Evolution of EV Sales
After witnessing years of enthusiastic growth and tremendous optimism, the EV market has encountered some hurdles. Major players such as Toyota, Ford, and Volvo have recently scaled back their ambitious electric agenda due to inconsistent consumer demand. Yet, this is not uncommon in the lifecycle of new technology adoption. While the timeline might experience fluctuations, the overarching trend remains upward.
Morgan Stanley’s latest projections suggest that, although the growth rate of EV sales has slowed, the total sales numbers continue to paint a progressively optimistic picture. Specifically, between 2024 and 2026, EV sale percentages of global car sales are forecasted to rise from 14% to 17%—a slight reduction from previous predictions. By 2030, this figure is expected to climb to 32%, though this is 8% lower than earlier projections.
Factors Contributing to the Slowdown
Several factors contribute to this temporary deceleration in EV growth:
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Affordability and Tariffs: In regions like the U.S. and Europe, the higher cost of EVs compared to combustion-engine cars (by about 20-30%) remains a significant barrier. Additionally, tariffs on Chinese EV makers further restrict market expansion.
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Interest Rates: The current high-interest rates globally are making it more challenging for consumers to finance new EV purchases.
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Automaker Investments: Many automakers, confronted with unprofitable EV investments and lacking economies of scale, are refocusing efforts on combustion vehicles.
- Rise of Hybrids and PHEVs: An increasing preference for hybrid and plug-in hybrid electric vehicles (PHEVs) has also affected EV sales. These vehicles, being generally more affordable and user-friendly, appear to be capturing a significant share of the market. Morgan Stanley foresees PHEVs accounting for 14% of the global vehicle market by 2030, up from previous estimates.
Paths to Revival: Collaborations and Innovations
So, what’s the roadmap for a robust EV comeback? Morgan Stanley analysts highlight several strategies that can reignite interest in electric vehicles:
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Improved Charging Infrastructure: Expanding and enhancing the EV charging network to instill confidence among potential buyers.
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Lower Vehicle Prices: Strategies to reduce manufacturing costs and hence lower retail prices.
- Diverse EV Options: Broadening the range of available EV models to cater to varied consumer preferences.
However, a unique perspective from the Morgan Stanley team emphasizes the significance of collaborative ventures. Partnerships between legacy automotive giants and emergent EV-specific firms, along with collaboration with Chinese manufacturers admired for their advanced technology and cost efficiencies, are seen as vital.
Recent Collaborations
Several collaborations are already paving the way:
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Volkswagen Group and Rivian: Volkswagen recently partnered with Rivian, capitalizing on the startup’s cutting-edge vehicle software and electric architectures.
- Stellantis and Leap: Demonstrating increased synergy that could rejuvenate interest in global EV adoption.
Moreover, the analysts argue that cooperation with China’s robust EV ecosystem is not just beneficial but essential. Despite geopolitical tensions and proposed tariff barriers, combining Chinese manufacturing prowess with Western technological and financial resources could be a game-changer.
Conclusion
The EV market may be hitting a temporary snag, but the future remains bright. Analysts anticipate a resurgence beginning in 2027, driven by collaborative efforts between traditional automakers, EV firms, and Chinese manufacturers. To keep pace with these dynamic market shifts, stakeholders must focus on strategic partnerships, cost management, and consumer confidence to harness the full potential of electric vehicle technology.
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William Kouch, Editor of Automotive.fyi
