Expectations have been in place that the next decade will be as historically significant as the birth of mass production automobiles — when Henry Ford’s company put the first Model T in production in 1908 and watched it reach the 15 millionth unit 19 years later. But will the 2020s be likely to see these historic shifts fall in place, with the year 2030 typically used in forecasts and emissions reduction goals as the benchmark for adoption? That benchmark could include steadily declining new vehicles sales; electric vehicles becoming more important to automakers and vehicle owners than cars and trucks powered by internal combustion engines; autonomous vehicles clearing regulatory hurdles and starting production; mobility services leading the way in traffic- and smog-congested cities; and younger consumers choosing autonomous, electric, shared ride services over owning their own personal vehicles.
Good questions. Let’s take a look at the first one………
Auto sales forecast: New vehicle sales increased in June in China, the world’s largest auto market, but that came during a 14 month period where 13 of them were in decline. July saw the decline fall back into place. Rising trade tensions and tariffs, a slowdown in China’s booming economy, and implementation of stricter emissions rules, have had their impact. Much of the the June sales boom was fueled by dealers cutting prices way down to clear inventory and prepare for exhaust controls coming to new vehicles. LMC Automotive estimates 2019 will see a second straight annual drop in China. India has seen sales decline at an alarming rate this year, with automakers cutting production and putting plans on hold to increase capacity. Analysts worry that U.S. auto sales reached their historic peak and will continue to see decline this year. Germany’s Center for Automotive Research says that the global auto market is about to take its biggest hit since the financial crisis of 2008, with sales declining by more than four million units at the end of this year.
There are concerns over a global economic slowdown potentially dragging out the current sales decline, yet global sales growth is far from being over. Studies by McKinsey, IHS Markit, Bank of America and Merrill Lynch, and AutoForecast Solutions, predict a return to growth in new vehicle sales worldwide. Should these studies be taken seriously? Yes, as they do tap into auto executive interviews on their product pipelines in the coming years, and opinions expressed by shareholders.
A McKinsey report forecasts global new vehicle sales will return to an increase, but not at the steep rate we’d seen over the past five years. That was at 3.6 percent per year, and it should decline and level out around 2 percent annual growth rate by 2030. Consumers are buying a lot of new vehicles, many times for the first time ever. China, India, Brazil, and a few other countries with emerging economies, are expected to see economic growth return with consumers moving to growing metro regions with strong job demand and more need for transportation beyond metro trains and buses.
The McKinsey study expects that the decline and leveling out will come from macroeconomic factors and the rise of new mobility services such as ride hailing, car sharing, and eventually by automated shared rides.
“New mobility services may result in a decline of private vehicle sales, but this decline is likely to be partially offset by increased sales in shared vehicles that need to be replaced more often due to higher utilization and related wear and tear. The remaining driver of growth in global car sales is the overall positive macroeconomic development, including the rise of the global consumer middle class. As established markets are no longer expanding, growth will continue to rely on emerging economies, particularly China and India,” according to the McKinsey study.
These findings have been echoed in other market reports, with many including electric vehicles in the numbers. A dominant topic of conversation among industry panelists last month at the 54th annual CAR Management Briefing Seminars in Michigan, was the speed in which key markets around the world will adopt EVs and increasing levels of autonomous mobility. Cybersecurity was another key concern, with fear of hackers being able to take over vehicles and shut down the grid, being reiterated by speakers.
AutoForecast Solutions and IHS Markit released studies forecasting overall new vehicle sales growth to continue through at least 2026. Electric vehicles are supposed to replace internal combustion engines in large numbers by 2030, but IHS Markit sees that taking much longer — reaching only 7.6 percent of the total by 2025. Another previous forecast has been set aside, with the young Millennial generation actually buying cars like their parents did and keeping them longer.
Global plug-in vehicle deliveries reached 2.1 million units for 2018, 64 percent higher than for 2017 and 2.4 percent of the world’s overall 86 million units sold last year. The International Energy Agency’s New Policies Scenario expects that by 2030, global EV sales will reach 23 million for that year and the stock of owned EVs will exceed 130 million vehicles (excluding two and three-wheelers). That’s under one forecast analysis including the impact of announced policy ambitions by several governments; the IEA scenario includes another potential outcome where the number shoots up to 43 million and the stock coming to more than 250 million. Either predicted scenario would cut oil demand substantially.
China saw its first drop in recorded EV sales in July. Monthly global sales fell 14 percent with declines in China and North America during that month. Reductions in EV subsidies and a cooling economy impacted the China market. Another top auto market, India, is struggling to get consumers and rickshaw drivers to convert over to EVs and meet goals the government had laid out.
For now (and in another study), the IEA sees oil being king and the US playing a leading role over the next six years. That comes form rapid growth in the shale industry. By 2024, the US will export more oil than Russia and will come close to Saudi Arabia’s exports.
Other advanced fuels, such as renewable natural gas, will offset the advantages stable fuel prices offer petroleum suppliers when it comes to fleets. Affordable gasoline and diesel, and concern over incentives diminishing, are expected to keep EV sales at bay in the US for now with fleets and consumers. Traditional ICE vehicles with good fuel economy, strong crash safety ratings, and a full spectrum of features and connectivity, are leading the way for now. As for new vehicle purchases, it appears that major markets won’t see their numbers go way down over the next decade. It will take longer before alternative modes and energies will be fundamentally and historically altering the industry.
Signs that we’ve crossed the tipping point with climate change: New fires are continuing to start up in the Amazon rain forest, caused by famers, cattle ranchers and other sources. The world’s largest absorber of greenhouse gases may change roles and begin emitting them, according to scientists. There are other indicators of environmental hazards approaching: Australia’s Great Barrier Reef may be seeing the end of its days….. More than 1 in 10 Americans — 34 million people — are living in rapidly heating regions. Seventy-one counties have already hit the benchmark 2-degree Celsius mark………. The Intergovernmental Panel on Climate Change predicts a further rise of between 1.4°C and 5.8°C by the end of the century in oceans. It would take out many species which are already under stress from overfishing and habitat loss; and the oceans are becoming increasingly acidic…… Scientists recently announced that July equaled, if not surpassed, the hottest month in recorded history. The heat wave that wreaked havoc on Europe in late July has now reached Greenland, causing the ice in the region to melt at a rapid pace.
A few interesting news briefs:
- On Friday, China’s Ministry of Industry and Information Technology, announced Tesla is receiving an exemption from a 10-percent purchase tax. It’s part of a broad national policy applying to domestic electric vehicles. Prior to that on August 20, Tesla was included in Shanghai’s Pilot Free Trade Zone, which will also help the EV maker gain a financial advantage in the world’s largest EV market.
- Chinese automaker BYD took third place (behind Qualcomm and MasterCard) on Fortune Magazine’s “Change the World” list 2019, which is the American publication’s annual ranking of companies that are hitting targets to help the planet and tackle society’s unmet needs. BYD’s cited achievements include building a flexible “e-platform” for EV design and construction, competitive pricing that’s helped further commercialize EVs, and the recent deal to jointly develop electric vehicles with Japan’s Toyota that should expand BYD’s global reach.
- The 2019 Hyundai Nexo hydrogen fuel cell electric SUV has earned a TOP SAFETY PICK+ award from the Insurance Institute for Highway Safety (IIHS) for vehicles built after June 2019. The Nexo, which is only available in California, is the first such hydrogen fuel cell vehicle that IIHS has tested for crash safety.
- The Ford Police Interceptor Utility 2020 model is now the first-ever pursuit-rated police utility vehicle with a standard hybrid engine. Agencies in cities such as San Diego, Columbus, Ohio, and Madison, Wisc., have committed to adding hybrids to their law enforcement fleets. So far, these agencies have ordered more than 2,600 units equipped with the standard 3.3-liter hybrid engine.
- Car sharing service Share Now, which was created this year as part of a joint venture between BMW and Daimler, will expand its electric fleet significantly under the agreement with the City of Munich. A total of 200 BMW i3s will be available to Share Now customers on Munich roads by the end of the year.
- From GAM editor’s blog post, called The mysterious vanishing of Americans 40 to 60 — and why we were named Generation X: “The next time you go out and about, take a 365-degree look around you. Millennials (ages 23 to 38 during this year) and GenZers (ages 7 to 22) are out doing things in vast numbers, with Millennials nearly as big in population as Baby Boomers — and GenZers following right behind. But what’s happening to my peers in Generation X? We’re there, but in smaller numbers; and many of us are somewhere else — such as working long hours.”