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An Error In BNEF’s Latest Downbeat Electric Vehicle Outlook

BNEF’s latest EV Outlook released this month is poorly conceived and contains at least one significant error. Let’s help them out.

BNEF’s latest EV Outlook released this month is poorly conceived and contains at least one significant error. Let’s help them out.

In mid-May 2020, Bloomberg New Energy Finance (BNEF) released their latest annual Electric Vehicle Outlook, projecting the speed of the EV transition from 2020 out to 2040. Their headline forecast:

“By 2025, EVs hit 10% of global passenger vehicle sales, rising to 28% in 2030 and 58% in 2040.”

For last year’s 2019 BNEF EV Outlook report, I did a deep dive into why I thought their forecast was overly downbeat. Most of that critique of their approach remains relevant for this year’s updated outlook. However, this year, let’s keep things simple. BNEF’s outlook is already wrong in an important datapoint: its portrayal of the current dynamics of the all-important European EV market.

Simply put, BNEF’s 2020 report forecasts an unreasonably low 3.75% plug-in EV market share for Europe in full year 2020. This is despite the fact that BNEF had to have known (well before publishing their report in mid May) that Europe was already showing 6.5% plug-in market share over the first two months of 2020. Any given month’s sales data is available by the following mid month at the latest, for pretty much all European markets, so BNEF had plenty of time to see those January-through-February results.

BNEF does their own gathering of market data, but the report’s lead author and head of transport analysis, Colin McKerracher, also apparently relies on or at least references CleanTechnica writer Jose Pontes, who runs the reliable EV-Sales blog:

Jose regularly publishes aggregated European market figures before the end of each subsequent month on his EV Sales blog, and also keeps CleanTechnica readers updated on the aggregate European picture as well as individual country reports — with CleanTechnica charts added.

My point is that, even if BNEF only relies on publicly accessible 3rd party aggregated data such as Jose’s, the strong early trend for 2020 was already visible a long time before BNEF’s 2020 outlook report was published in mid May.

This strong 2020 trend emerged before the pandemic crisis’s brake on overall auto sales pushed Europe’s EV share much higher to 9.9% in March, and most recently to an 11% share in April, bringing the year-to-date share to 7.8%. Even allowing that the full April picture may not have been available before BNEF went to press in May, clear evidence of the further uptick in March was available.

Here’s the European forecast from BNEF’s graph, showing their 3.75% Europe 2020 forecast (you can see the original graph and similar ones via BNEF’s page here):

But hang on — are January and February figures reliably correlated with the full year figures? Couldn’t 6.5% be an outlier? They have been reliably correlated over each of the past 5 years (Jose’s data reaches back that far), and BNEF’s professional researchers must surely know this. The full year EV market share percentage in Europe has consistently been higher than the January+February result, in any given year. Back in March, anyone could therefore have confidently forecast that 2020’s result is going to be at least 6.5% for the full year. Crisis results from March showed the number rising further. Yet, in mid May, BNEF still forecast an inexplicably low 3.75% for 2020.

By any measure, the reasonable forecast for 2020 is greater than 6.5% and more likely 7% to 8% at least. This is around twice BNEF’s estimate. This error in basic data collection and inference sets BNEF off on the wrong track for Europe over the next two decades. It is worth remembering that Europe represents around 20% of the global auto market, so this mistake in Europe puts BNEF’s whole global model out also.

Below you can see my idea of a “common sense” but still reasonably conservative European scenario, taking into account this year’s trending ~7.5% share or higher:

Added to the pre-existing hard data about January and February 2020 European results, we have other circumstantial evidence that BNEF could and should have taken into account in their report.

We’ve known for a month or more that the European Union intends to use stimulus money to push forward with the EV transition.

We know that next year’s available EV models will be yet more affordable and more competent than ever before, and available in much higher volumes, especially with VW’s high-volume ID. models coming later in 2020 and Tesla’s Berlin Gigafactory due to come online sometime in 2021, amongst many other launching and ramping EV models.

Some of the Chinese owned brands and joint ventures will be delivering into Europe also (MG, Volvo, BYD, Renault-Dongfang, and more). Further out, into 2022 and 2023, Europe will have more of its own battery manufacturing capacity coming online to speed the transition along.

All of the above facts were in the picture comfortably before BNEF’s mid-May Outlook.

Since mid May, we’ve seen France offer very generous EV incentives for the rest of 2020, and we’re seeing other EU initiatives pushing in the same direction.

Non-Linear Consumer Dynamics

More surprisingly, BNEF do not appear to see any emergent non-linear dynamics in Europe’s EV transition. In other words, they believe that consumer behaviour and growing preference for EVs will be gradual and steady.

We here are CleanTechnica, amongst other EV watchers, regularly highlight non-linear dynamics, most obviously via the Osborne effect. Put simply, once a new technology catches on and is perceived to be growing strongly and improving in price and performance with unstoppable momentum, consumers will either buy in now, or at least hold off on any purchase of the soon-to-be-obsolete technology until they can get a hold of the new technology.

Technology Adoption Curves

This means that in absolute number terms, for the fast-becoming-obsolete technology — in this case combustion vehicles — unit sales will reduce even faster than EV sales grow, and the EV market share percentage will grow even faster than raw numbers of unit sales actually grow. It’s a classic non-linear dynamic.

Other non-linear dynamics are in play, including consumers’ exposure to direct experience of an EV via family, friends, or colleagues (or even taxis). This is a non-linear effect because the fleet of EVs that regular folks are coming into contact with, and its distribution across regions, is growing all the time. From the classic William Gibson observation: “The future is already here, it’s just not very evenly distributed.” Word of mouth and ride-alongs with friends and family is quickly helping spread the message. The message is that EVs are already a superior transport technology compared to 19th century combustion engines.

And finally there’s the purchase price tipping point, where EVs are not just better than combustion vehicles and have a more affordable total cost of ownership proposition than combustion vehicles (as they have had for several years already), but are actually cheaper to buy up front too. At this point, which will come to many vehicles in the next 2 to 4 years or so in Europe (depending on market segment), there will be another non-linear change in the market.

This point has already been crossed by the Tesla Model 3 SR+ in its segment (in comparison with comparable sedans from BMW, Audi, etc.) in the US, with logical results, and arguably in Europe (though, shipping and import taxes elevate its European price until the Berlin gigafactory opens). That price parity point has already been passed in Shanghai, China, by the Model 3 (where premium brand sedans from BMW et al. are a much worse value).

Why will this price parity cause a non-linear shift? Medium to long term total cost of ownership advantages of EVs are something that an average consumer might not readily think about. Cheaper upfront sticker prices, on the other hand, are something that everyone understands. Once this happens, the effect on consumer preferences will be non-linear. Arguably, the Tesla Model 3 is already benefiting from this.

These non-linear dynamics can result in EV market share climbing steadily to somewhere between 5% and 10% and then jumping up quickly. Here are some examples from individual European nations that have already demonstrated this pattern:

To supplement the above graph data which ends in 2019, data for cumulative 2020 EV market share so far (to April) are as follows: Norway is at 70%; Iceland somewhere above 35%; Sweden at 27%; and Netherlands at 12%. The Netherlands had a short-peak tax incentive at the end of 2019 which led to a spike. Over a 2 year average, the Netherlands has doubled from 6% in full year 2018 to 12% now. Check out Jose’s articles (and his EV-Sales blog) for more details on all of these trends.

Meanwhile, the two largest European markets — France and Germany — jumped up massively in Jan–Feb 2020. France moved from 2019’s 2.6% to 9.2%, and Germany lurched from 2.9% to 6.7%. These two will do some heavy lifting to carry the European 2020 full year result beyond 7%. Similar results so far in 2020 have occurred in the UK and pretty much every other European market.

BNEF’s Reasoning?

BNEF don’t share their workings out with their audience. They talk about the need for charging infrastructure to grow “as the number of owners with access to home charging saturates.” In my view, this is not going to present a brake on EV adoption, for a couple of reasons.

First off, this is a variation on their 2019 report’s bogeyman, “the cost of home AC charging installations,” claiming a negative influence on the timing of the EV transition. In Europe, getting basic AC charging installed at buildings is relatively quick and inexpensive, since all of the continent is already on 220–240 volt electric supply. This standard socket, with an EV mobile charger, gives enough power to cover daily commutes.

Talk of “home charing saturation” completely misses the point that many of those vehicle owners who don’t have a plug at home, can in many cases alternatively charge at their workplace just as easily. What are the numbers? The proportion of European car owners who neither have regular access to a plug at home nor at work is less than 33%, according to recent modeling by Transport and Environment. Therefore, BNEF’s projected European EV market share of only 34.5% in 2030 cannot reasonably be argued for on the basis of some imagined “saturation limit” of available home-or-work plugs.

Finally, even for these “under 33%” of car owners who will not have easy access to a home or work plug, EVs will nevertheless be practical well before 2030, because the convenience of EV fast charging is quickly approaching that of refilling a gas tank.

As a real-world example, Hyundai-Kia will soon launch their E-GMP EV platform which is capable of adding at least ~300 km of range (70% of its ~500km WLTP total range) in under 20 minutes. Tesla’s Model 3 Long Range and Model Y Long Range vehicles already have this capability today.

The average European commute is 29 km per day. That means an EV owner without other charging options can in principle drop into a DC charging hub along their regular commute and regain more than a week’s driving in just 20 minutes. Or perhaps do a couple of shorter 10 minute sessions twice a week. Like some gas stations, such DC charging hubs can include an express grocery store and a coffee machine. Unlike a gas station, you can leave an EV unattended whilst it is recharging, so effectively you are combining express shopping for some groceries with vehicle recharging.

Is this a distant future? The Tesla Model 3 is on sale in Europe today, and the Model Y sometime in 2021. The Hyundai-Kia E-GMP platform will go on sale in 2021.

Meanwhile, very affordable and mineral-constraint-free LFP batteries (which can happily handle frequent high-power charging) are making a comeback. By the middle of this decade, for the small proportion of folks who have no access to an AC plug at home or work, 1o or 15 minute DC charging at a hub will be feasible, and arguably superior to the gas-refill pattern.

By the end of this decade (when BNEF forecasts just 35% EV market share in Europe), charging will be a complete non-issue, taking ~10 minutes or less for a week’s commute.

For all of these reasons, I’m forecasting at least 75% market share for EVs in Europe by the end of this decade, again more than double the share that BNEF foresees. And this is a deliberately conservative forecast. Over 95% market share would not be particularly shocking. And still I hear some of our audience asking, “Why the remaining 5% gas cars sales? Won’t every vehicle on sale in Europe by 2030 have some kind of battery and plug?”

These are the right kinds of questions to ask. Let’s just hope that BNEF has a fundamental rethink in time for their 2021 report.

Article images from respective brands or author.

 
 
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Max is an anthropologist, social theorist and international political economist, trying to ask questions and encourage critical thinking about social and environmental justice, sustainability and the human condition. He has lived and worked in Europe and Asia, and is currently based in Barcelona. Find Max's book on social theory, follow Max on twitter @Dr_Maximilian and at MaximilianHolland.com, or contact him via LinkedIn.

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