Seven million electric vehicles were sold globally in the first half of 2024, which is 20% growth over the same period in 2023. Only 1.5 million of those sales were in Europe, according to the research firm Rho Motion – which amounts to only 1% growth compared to the same period in 2023. While growth was positive in Italy, France, and the UK where there are strong government EV incentives, EV sales in Germany (the largest passenger car market in Europe) fell by 18% in the second quarter of 2024. EV sales in the United States grew by 10% - which sounds ok, but these statistics include plug-in hybrid vehicles and according to PWC much like in Europe most of the sales growth seen this year can be explained by the growth in hybrid sales, which grew by 28% year on year in the United States. So where did the 20% global growth come from then? Well, mostly from China where

EV sales grew 30% in the first half of 2024 – but once again that figure includes plug-in hybrids – and plug-in hybrids have seen a surge in sales in China, where 60% of the EVs sold by BYD were actually hybrids. Electrical vehicle manufacturers, which are priced for massive growth, don’t appear to be growing – and the problem may be that most car buyers don’t want an electric vehicle. An interesting data point is that the markets where EVs have traditionally done best are showing the sharpest downturn in sales. According to the LA Times, electric vehicle sales growth in California began trending down this time last year and now has turned negative. 1.2% fewer all-electric cars were registered in the state in the second quarter of this year compared to the same quarter last year. Tesla, which is still by far the EV sales leader in California, was hardest hit by this downturn,

with their sales falling by almost a quarter. According to Kelley Blue Book, Tesla sales in the United States overall fell 6.3% for the second quarter of 2024, even as total EV sales climbed 7.3%. Some of this can be explained by increased competition as almost every automaker now has an EV available in the United States, and some of the drop can be explained by a lack of new models out of Tesla – other than the Cybertruck – which sold around 12 thousand units over the period in question. Automakers are responding to this sluggish growth by backing away from their EV targets. Volvo – which is majority owned by Geely – China's third-largest automaker - scrapped its plans last week of going all electric by 2030. Volvo had been the first legacy automaker to make this commitment. Ford had made a similar commitment for Europe – which they have since walked away from. Toyota – who launched their first all-electric

vehicle earlier this year is now reported to be scaling back its planned increase in battery electric vehicle production in line with their long-standing “multi-pathway strategy” of matching powertrain technology to actual public demand. Volkswagen, Nissan, and Hyundai have all announced earlier this year that they would focus on hybrids due to the decline in consumer demand for full electric vehicles in major markets. Dealers who have been stuck with difficult-to-sell EVs say that sluggish sales can partially be blamed on a lack of affordable models, the slow roll-out of charging stations, and terrible resale values on used EVs. To a large extent, electric vehicle sales have been a function of government incentive schemes. Italy provides an interesting example, where the country saw a record for EV sales this June with almost 20,000 EVs sold following the release of the government incentive scheme. The scheme was so popular that it ran out of funds within hours of being released. Despite this,

sales of battery electric vehicles in Italy have fallen by 11% so far this year. The 18% decline in German BEV sales in the first half of 2024 is attributed to the sudden removal of purchase subsidies. The German economy ministry had to halt the seven-year incentive scheme last November when the German government froze major spending pledges focused on green initiatives after a constitutional court ruled that the spending was incompatible with the constitutional debt brake, which restricts annual structural deficits to 0.35% of GDP. Worse yet for EV manufacturers, a recent report from McKinsey shows that many early adopting EV owners now plan on switching back to an internal combustion car on their next purchase. Learning a little every day is one of the most important things you can do, both for personal and professional growth. Today’s sponsor Brilliant dot org helps you build real knowledge in minutes a day—with fun lessons you can do whenever you have

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get 20% off an annual premium subscription. According to market research from McKinsey, 46% of American electric vehicle owners claimed they were likely to switch back to conventional vehicles with their next purchase. Looking at the chart from McKinsey – it would appear that the urge to switch back to ICE vehicles seems to be greatest in countries like Australia, the United States, and Brazil, where car owners are more likely to take longer car journeys. Looking at the reasons that EV owners gave for wanting to switch back to combustion vehicles, they mostly seem to relate to difficulties charging, with only 13 percent saying that they didn’t like the driving experience. The McKinsey data is backed up with real-world data from Edmunds, who found that in the last quarter, almost 40% of EVs that were traded in at a dealership were used to purchase or lease a new ICE vehicle. A huge issue for early EV adopters has been the extreme depreciation they have experienced with

their cars. I made a video a while ago about the terrible resale prices of used EVs, and the situation seems to have only gotten worse. CarWow analyzed the resale value of one-year-old low mileage EVs today and compared it to the price of a one-year-old low mileage EV at the same time last year. So, comparing one-year-old cars to one-year-old cars one year apart, you might expect the prices to be somewhat stable. They found that many were down between 25 and 30% over that period. An example would be the Audi e-tron, where comparable used cars were worth 27% less in 2024 than in 2023. They compared that to the Audi A7 Diesel, which was down only 2.7% over the same period. Now, used cars in general had been a bit pumped up in 2023, as due to supply issues, it was still difficult to buy a used car back then.

but the electric cars they looked at had fallen in value significantly more than equivalent petrol and diesel cars, meaning that if you had stepped in and bought – what looked like - a cheap used EV last year – you still took a further massive depreciation hit on it – as buyers are even more wary of them today than they were a year ago. In the video I made about the terrible resale values of EVs one of the top comments was that in the same way you wouldn’t buy a used laptop or a used mobile phone – you wouldn’t buy a used EV. When the majority of the value of a product is in its battery – no one wants to buy it second hand. Maybe that will change over time – but that appears to be the situation today. A study by the Energy Policy Institute at the University of Chicago found that 77 percent of survey respondents cited a lack of charging stations as a reason for not buying an EV, second only to the high upfront cost.

Other reasons that people dislike buying EVs is that they are expensive to insure – as insurance companies write them off after small accidents for fear that the battery has been damaged. Car buyers also worry about the fire risk of charging an EV in their garage. All of the research that I have found shows that EVs don’t pose any more of a fire risk than petrol vehicles do – but there is the issue that once they do catch fire they are very difficult to extinguish. Last month an electric semi which caught fire in California was all over the news as it burned for several hours causing a full closure of the freeway. The highway patrol said the crash had created a hazardous materials situation due to the toxic fumes released from the burning battery. I’m told that electric semis are mostly used to transport potato chips – which are probably quite flammable too. News like this does not help to sell EVs – whether they are a fire risk or not. The recent news about Israel remotely exploding

pagers, walkie-talkies, and mobile phones used by Hezbollah in Lebanon will do nothing to reduce this fear either. At present, it’s unclear if these were specially manufactured devices that contained explosives – or if the batteries themselves detonated. A friend said to me after reading about the attacks – if this is to be the future of warfare – you really don’t want an EV parked in your garage overnight and a phone charging next to your bed in the event of a new conflict. In a recent podcast, Doug Demuro argued that electric vehicles are desired by a good percentage of the population, but not the percentage of the population that people thought wanted them a few years ago. According to the McKinsey report, EV buyers tend to be wealthy urban dwellers who are significantly younger than the average car buyer. Importantly, 84% of the people who said they would consider buying an EV also said that they would be able to charge the car at home. Less than half

of Americans have access to an off-street parking spot, and not every off-street parking spot has access to electricity – making home charging impractical for a large percentage of the population. While I recognize that home charging is really practical for many people, some sort of charging solution will be needed before we are likely to see mass adoption. Especially when we know that fast chargers are bad for batteries and they are difficult to get access to in big cities where a lot of potential buyers exist. The car companies like Volvo and Ford who made these big commitments to transition to 100% EV production – did so based on strong government incentives rather than customer demand. It could be argued that their missteps are a great example of what happens when a company listens to government planners rather than their own customers. A lot of the big commitments were made after car company executives saw the run-up in Tesla’s stock price in 2021 when EV mania was at a peak.

Ford announced in 2022 that it would boost spending on EVs to $50 billion through 2026 and create a new EV division. Ford possibly felt that they could rely on government tax breaks to boost demand in the United States, where buyers were eligible to receive up to $7,500 in tax credits when buying a new EV. Despite the tax incentive, Americans are not adopting EVs anywhere nearly as quickly as analysts projected in 2021. One of the issues is the American preference for light trucks and SUVs. Ford CEO Jim Farley recently explained on an earnings call that smaller and more affordable vehicles are the best way to go with EVs in volume. He explained that the math is completely different for EVs than for ICE cars. He said, “In ICE, the business we have been in for 120 years, the bigger the vehicle, the higher the margin, but it is exactly the opposite for electric. The larger the vehicle,

the bigger the battery you need, which puts more pressure on margins because customers will not pay a premium for those larger batteries.” Ford announced this summer that it would retool a plant in Canada to produce large pickup trucks rather than the electric SUVs it had previously planned to build at that location. Around the same time, GM said that they expected to make significantly fewer battery-powered cars and trucks this year than they had previously forecast. Some of the decline in interest in electric vehicles is possibly driven by a much slower rollout of charging infrastructure than EV bulls were predicting, combined with overhyped expectations for battery improvements. US auto manufacturers' hesitation about building more electric vehicles comes at a politically uncertain time for the industry as incentives could change significantly if Donald Trump wins the election in November, given that he has pledged to undo many of Biden’s green policies, including those that promote the transition to battery-powered cars.

Elon Musk does appear to have befriended Trump – possibly with the goal of striking some sort of deal – but the probabilities of that happening are impossible to predict. Electric vehicles themselves seem to carry all sorts of political baggage, in particular in the United States where they are often promoted by those who see them as a virtuous product that will save humanity from climate change and opposed by people who resent the tax breaks they get for their wealthy owners, the special parking spots they get and the feeling that the vehicles are being forced on society by government regulation. People who believe in free markets are offended by the amount of government support EV manufacturers have received through direct subsidies and carbon credits. With demand for EVs dropping off in Europe, hybrid sales have been rising and are up about 22% for the first seven months of the year. The market share for plug-in hybrids, which operate like true EVs for a limited range before swapping

over to a combustion engine/battery combination, has however declined year on year in Europe. Plug-in hybrids tend to be more expensive than traditional hybrids which have smaller batteries. Hybrid sales have grown by 31% year over year in the United States and made up 8.6% of the total light-duty market in the first quarter which increased to 9.6% in the second quarter. Plug-in hybrid sales in the United States grew slightly from 1.7% to 2.0% of the total light-duty market year over year. According to Investors Business Daily, Toyota, Honda and Ford are the market leaders in hybrid sales – in that order. According to PWC, the Tesla model Y is the top selling full electric vehicle in Europe, China and the United States. While Tesla still holds the number one spot in the United States it no longer sells the majority of EV’s as it used to. This was to be expected over time as

more and more competition came online. Tesla’s market share comes in at 49% of the total EV market in the second quarter as sales shifted to legacy brands like Ford, GM, Hyundai, and Kia. According to the FT, foreign brands used to make up 64% of auto sales in China in 2020. That has declined to 37% in the first seven months of this year. US brands are down more than 23 percent so far, and Japanese, Korean, and German carmakers have also suffered double-digit declines. Sales of Chinese brands, on the other hand, are up nearly 22 percent, with Chinese companies dominating sales in the Chinese EV market – which is the biggest EV market in the world. Tesla’s share of Chinese EV sales fell to 6.5 percent in the first seven months of the year from almost 9 percent a year ago. As Tesla’s sales have fallen in China,

BYD’s sales have grown, partially driven by Chinese demand for hybrids which work out to be more practical and benefit from generous EV subsidies provided by the Chinese government. Anecdotally, a few weeks ago I saw firsthand how uninterested people have become in EVs when waiting at an airport rental counter for a car. The car rental employees were struggling to clean and refuel the returned cars to hand them over to new customers and a bit of a line of irate customers had built up, who had paid for contactless rental where they were supposed to not need to stop at the rental counter. When an employee announced does anyone want an electric vehicle – the entire line took a step backwards in horror. They may have been tired from long flights, but they didn’t want the hassle of an EV messing up their vacation or business trip. A few years ago I think people would have been more enthusiastic.

My sister, who actually owns an EV and knows their pros and cons and is familiar with dealing with charging stations, got stuck with a rental EV from Hertz this summer when on vacation in the United States with her three small children. She was driving from New York to Cape Cod at night and expressed skepticism to the Hertz employee that the car would make it. They assured her that it would – and of course it did not. She found herself searching for charging stations in the middle of the night only to find that the plug that came with her car was not compatible with the first charging station she found. The next charging station she found was out of order. Stranded in the middle of the night with three small children, she parked the EV at a police station where they let her plug it in to a regular outlet, and she took an Uber the rest of the way. The next day, when she was able to collect the car and return it to Hertz, they hit her with

a $175 dollar fee for returning it with a low battery – she was unable to fit the five-hour charging time into her schedule. What should have been a six-hour drive costing $140 dollars turned into a 19-hour nightmare that cost $400 dollars – obviously - really shameful customer service from Hertz – but stories like this explain people's reluctance to pay a premium for cars that are often a downgrade in terms of practicality. So, are EVs terrible products – no they are not - they may make terrible rental cars - but they really work for commuters who can charge them at home where charging is often cheaper than filling up with gas – and it can be done while you sleep. They improve the air quality in congested cities, they have phenomenal acceleration, and they are very quiet. But like every other product, they involve compromises. According to Kelly Blue Book, the average price of a new EV sold in the United States this year

was 57 thousand dollars. The average hybrid was 15 thousand dollars cheaper at $42 thousand dollars, and the average petrol car cost half the price of the average EV at $27 thousand dollars new. Now these numbers are likely skewed by people buying more luxurious EVs on average than regular cars. It appears that sales growth expectations from both auto manufacturers and investors were a bit optimistic over the last few years. The latest numbers from the ACEA show that August Electric Vehicle sales in Europe were down 36 percent year on year despite all the green subsidies in place. Hybrid sales growth slowed too but are still up 8.3% year on year. Even Tesla, the leading EV manufacturer, has changed its plans because it no longer expects the kind of sales growth it has seen in the past. The company has slowed plans to build a factory in Mexico and canceled a meeting with the Indian prime minister to discuss a new plant in India. The one bright spot – for those interested in

buying an EV is that there appear to be amazing lease deals available in the United States. Ed Bolian of the VinWiki YouTube channel – who didn’t particularly want an EV – described how he managed to lease a new Audi E-tron RS – a $150 thousand dollar vehicle – for only $250 per month, “plus the fees and taxes and things like that.” This is cheaper than a lease on an Audi A3 – the company’s cheapest model. I’ll put a link to his video in the description. The fact that unsold EVs are stacking up on dealer lots, combined with changes in the rules for the US federal EV tax credit - which favors leasing over buying electric vehicles - means that some leases were available this summer for as little as $20 a month after EV tax credits and special state incentives. As Bloomberg points out - that’s less than the cost of a tank of gas.

Joe Biden’s Inflation Reduction Act restricted tax breaks for EV buyers if a car cost more than $55,000 dollars, or a truck cost more than $80,000. The tax break doesn’t apply to cars not assembled in the US or to cars that use Chinese materials in their batteries. It also capped the incomes of buyers who could apply for tax credits. The act left a loophole where leased EVs were classified as commercial vehicles, which would qualify for the full tax credit, even if they don’t meet the battery and parts sourcing requirements. With this credit, dealerships can bundle the $7,500 tax credit savings into the lease financing cost, lowering consumers’ monthly payments. The expected residual value of a leased vehicle is a factor in the lease calculation, and it would appear that dealers are assuming these cars will not depreciate as much as they actually do depreciate, as in a typical lease,

if the car is worth less than the expected residual value at the end of the lease, you can turn it in without any extra fees. We might eventually move to an EV future – but based on recent trends it does not appear that this will happen at the pace many were projecting a few years ago. It does appear that governments around the world do want to make this happen – even if they are walking back the dates. If you enjoyed this video you should watch my video on Chinese EV exports next. Don’t forget to check out our sponsor Brilliant.org using the link in the description. See you in the next video – bye.

Is the EV Revolution Dead?

Patrick Boyle is a hedge fund manager, a university professor and a former investment banker. 

This channel is all about quantitative finance. By subscribing you will see videos explaining what is happening in markets right now, you will learn about financial derivatives, corporate finance and how traders use quantitative tools like statistics. You will see interviews with some of the most interesting people in the financial industry.  In addition, you will see some longer form documentaries on the history of financial markets.

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