New analysis shows that the plug-in vehicle market in the US generally only grows when new hot ticket models are introduced and that new plug-in models tend to reach peak sales levels after two to four full years on the market.
This isn’t that surprising since we are still at the very early stages of plug-in vehicle adoption and new models create excitement but are passed up when new models with more range and features at a lower price hit the market.
US EV Sales Growth Comes Mostly From New Models
In the first half of 2018, 86% of the year over year (YOY) growth in new electric vehicle sales has come from just two models: the Tesla Model 3 and Honda Clarity Plug-in Hybrid Electric Vehicle (PHEV).
If you add in sales of the Toyota Prius Prime which was admittedly not a new vehicle, those 3 models accounted for 98.9% of the YOY sales increase for the first 6 months of the year.
Look back at plug-in vehicle sales for 2017 compared to 2016, we see the same trend. Two models, the Chevrolet Bolt and the Toyota Prius Prime, accounted for 100% of the US plug-in vehicle sales growth. The Bolt landed at US dealers in December of 2016 and the Prius Prime arrived in November of 2016.
In 2016, EV sales increased 42,515 units over 2015 but was an outlier of a year. One EV, the Tesla Model X, which reached the US market in September 2015, (but only sold 214 units in 2015) sold 18,223 units in 2016. Those sales represented 43% of the sales increase from 2015 to 2016. The balance of the sales grown was made up of a hodgepodge of growth from a number of vehicles including the Chevrolet Volt, the Ford Fusion Energi and the Tesla Model S. This anomaly is linked to the fact that there weren’t any other hot ticket plug-in models introduced in late 2015 or early 2016 to steal sales from the existing base of available plug-in vehicles.
If you go back to 2015, sales of plug-in vehicles in the US actually declined by 6,339 units to 116,099 from 122,438 in 2014. The lack of growth was primarily due to the fact that again, there were no new hot ticket plug-in vehicles introduced in late 2014 or early 2015.
In the back half of 2015, 6 new plug-in vehicle models were introduced, 5 of which sold less than 250 units and the BMW X5 xDrive40e sold just 892 units. Similarly, there were no new plug-in vehicles introduced in the last few months of 2014 and those that came to market earlier in 2014 contributed very little to sales growth in 2015.
The data is pretty clear that historical plug-in vehicle sales growth comes primarily from the introduction of a few new strong-selling models early in the year or late in the previous year.
Without a few top-selling (e.g., 1,000-3,000 or more per month on average) plug-in vehicles being introduced or on the rise from a previous year, sales tend to remain basically flat. The implication, at least in the near term, is that most plug-in vehicle models will reach a plateau in sales.
Sales Growth of US Plug-In Models Peaks After 2-4 Full Years on the Market
The chart below shows the 11 plug-in vehicle models that were on sale for at least 3 years from 2011-2017. It clearly sows that all of them had their peak year of sales before 2017. (Note: I’ve combined sales of the Toyota Prius PHV and Prime together, but they are in reality different models.) The Prius Prime is certainly a model to watch in 2019 to see if it breaks this 3 year sales trend.
While a lot could change in the second half of 2018, sales for the first half of the year for both the Chevrolet Bolt and Tesla Model X are currently trending to end up lower than calendar year 2017. The BMW X5 xDrive40e is trending above 2017 sales so far, but it could still end up below its sales numbers in 2016.
In comparison, the regular Toyota Prius hybrid sales peaked in its eighth year in the US market. Since then, sales have bobbed up and down through 2012, but have declined since. In the case of the Prius, the car became synonymous with hybrid technology and was the king of “green signaling” until plug-in vehicles like the Nissan LEAF and Chevrolet Volt started to become the new choice of green car buyers.
What Drives Sales Peaks For Top-Selling Plug-In Vehicles?
The first reason sales of plug-in vehicle models peak after a few years is that in most of the US, plug-in vehicles are still in the innovator and early adopter phases of the adoption curve. This means that all plug-in vehicles are competing for the relatively small percentage of the population that is willing to pay a premium for a plug-in vehicle and take on the plug-in vehicle learning curve.
Currently available new plug-in vehicles remain primarily of interest only to either upper income US consumers or those seeking a green car but willing to accept various trade offs versus a comparable internal combustion vehicle. These scenarios are at the heart of Californian’s leadership in plug-in vehicle sales in the US. Customers in Northern California in particular resonate with the benefits of plug-in vehicles while also landing in an upper-income bracket.
The second factor is competition and advancing technology. With increases in EV range and cheaper batteries, a two-year old EV can easily fall behind new EV models that invariably come with longer range and other new features. For example, sales of the Nissan LEAF has seen a 3-year decline in sales until the new model was released in 2018. With the new design and longer range of the 2018 LEAF, history indicates that we should expect to see sales rebound to levels comparable to what we saw in 2017. Sales might be bolstered even more with rumors of a longer-range battery option coming soon.
What Do These Trends Mean for the Tesla Model 3 and Model Y in the US?
The big question of course is around the Tesla Model 3, which in its first full year on the market in 2018 and is already on track to be the highest-selling EV of all time for a single year. Looking forward, it is also likely that it will exceed 2018 sales volume in 2019 (unless you are a Tesla hater or short, then you will likely disagree). With excitement building in 2019 for the Tesla Model Y CUV, which could start production in 2020 or perhaps 2021, US sales of the Model 3 might reach its peak in 2019 or perhaps 2020 and then recede as the Model Y becomes available.
History does not serve us well as we look for the first plug-in vehicle that achieves stable high volume sales like the Toyota Prius Hybrid over a period of a decade or longer. Though if we had to guess, based on what we know today, our money would be on the Tesla Model Y.
What other plug-in vehicles do you think will become runaway sales leaders year after year in the coming decade?
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