While Europe is seeing a huge increase in year over year (YOY) sales of electric vehicles (fully electric vehicles and plug-in hybrids) and is expected to reach 10% share of new vehicle sales in 2020 and 15% in 2021, the US is seeing rather low electric vehicle (EV) sales growth in comparison.
In my latest EVAdoption analysis, I’m projecting an increase in YOY EV sales in the US of 70% in 2021 versus 2020, with sales increasing to 585,375 in 2021 from 345,285 in 2020. 2020 auto and EV sales, of course, have been greatly affected by COVID-19, but sales are rebounding strongly in the second half of the year. Beyond the impact of COVID-19, several potential solid-selling models either didn’t come to market or will in very low volumes. These include the Toyota RAV4 Prime and Ford Escape PHEV.
Even with this potential 70% YOY jump in sales, the EV share of new vehicle sales will still only reach 3.55%. This 2021 growth would be a 54% increase in sales share over the 2.3% I’m projecting for 2020. My sales share calculation is based on overall light vehicle sales of 15 million in 2020 and 16.5 million in 2021. There has been no clear consensus among auto industry analysts on overall 2020 sales, with some forecasting sales of under 13 million a few months ago, but recently updating to the high 14 million range. So I’m taking an optimistic view and pegging sales around 15 million.
In analysis I’ve conducted in the past, the vast majority of US EV sales growth in a given year has come from the introduction of new EV models in the current year or late in the previous year. And in fact, most EV models reached peak sales typically in the third year in the US market, the net result being that EV sales growth in the US is fundamentally dependent on the introduction of either several new EV models or a few higher-volume sellers as we saw in 2018 with the Tesla Model 3. Significant growth is, however, not coming from an increase in sales of existing EV models.
In the chart below, you can see in my 2021 EV sales forecast that ~26% of EV sales will come from new models available to US consumers throughout 2021 or beginning in Q4 of 2020. With my 2020 forecast of 345,285, this would mean that 63% of the YOY growth in 2021 will be attributed to these “new” EV models. Ninety-three percent of the 2021 increase in YOY sales will come from a combination of the sales of these 22 “new” EVs and the increase in sales of the Tesla Model Y versus 2020.
European EV Sales Versus the US
There are several differences between the US and European market for EVs, but the main difference currently is the EU emissions mandate that may result in penalties of 1 to 2 billion euros per year for several automakers that don’t meet fleet emissions targets. The mandate has forced automakers to produce EVs at a much greater volume and to prioritize them for European markets, while sending fewer units to the US. The result in 2020 has been European consumers buying EVs at 3–4 times the level they did in 2019.
In the US, by comparison, there are no federal mandates and there continues to be a lack of competitive models in both variety and volume. Fortunately, though, a large number of new EVs are coming to market in 2021 that should provide a significant boost in sales in the US.
Tesla of course continues to dominate US EV sales, with a projected 65% of all new EV (both BEV and PHEV) sales for 2020, and 84% when looking just at BEV sales.
2021: The Start of Consistent YOY EV Sales Growth in the US?
The last few years of EV sales in the US can easily be described as a roller coaster ride, driven fundamentally by the success of the Tesla Model 3. In 2018 and 2019, the Model 3 accounted for well more than 4 out of every 10 EVs (BEV and PHEV) in the US. But the introduction of the Tesla Model Y and more than 20 new EV models will dramatically reduce US EV sales reliance on the Model 3. I’m forecasting that Tesla will, however, still account for 54% of US EV sales, but that’s down from the 65% in 2020.
In 2021, there are three key factors that will drive a return to EV sales growth like we saw in 2018. These are:
Model Y production scales up: The Tesla Model Y will easily be the number one selling EV in the US in 2021, leaving everything else in the dust, possibly even its Tesla sister vehicle the Model 3. Keys will be Tesla continuing to scale up production at the Fremont factory, enticing buyers to spend much more for the Y over the 3, and seeing minimal impact from alternatives such as the Volkswagen ID.4, Ford Mustang Mach-E, Volvo XC40 Recharge, RAV4 Prime, Escape PHEV, Kia “CV,” Hyundai IONIQ 5, Chevrolet Bolt EUV, Nissan Ariya, and other new EVs coming to market.
Many of these crossovers/SUVs will arrive in late 2021, or as we have often seen with EVs, production may be delayed, in this case into 2022. Several of these EVs will also be produced in relatively low volume, or possible suffer from supply-chain issues — but with nearly two dozen new EVs coming to market, each one may pull a few thousand buyers away from “would have been” Tesla Model 3 and Y buyers.
Improving economy and relatively low interest rates: 2021 could see a stagnant economy or we could see an improving economy with businesses opening back up from COVID-19 shelter-in-place orders and hopefully millions of workers returning to work as businesses reopen from the pandemic. Auto loan interest rates are also at recent lows, which could spur more consumers, who next year may be more confident in their employment status to take the plunge on a new car.
Additionally, home loan interest rates have been at historical lows recently. Though, they are now rising slightly to just above 3% for a 30-year fixed mortgage. Rates are forecasted to rise slightly to about 3.25% in Q1 of 2021, but many homeowners are refinancing their homes or taking out equity loans or lines of credit. This trend and some extra cash in the bank can lead to higher confidence among consumers, resulting in more of them taking the leap on a new car or truck — possibly even an electric one.
Two dozen new EV models: By my estimate, nearly two dozen (22) new BEVs and PHEVs will become available in the US in either late 2020 or throughout 2021. Hopefully the Toyota RAV4 Prime, which has been delayed due to “supply chain” issues, and the Ford Escape PHEV, delayed due to battery fire issues with the Kuga PHEV in Europe, will see strong sales in 2021. If all goes well, we should also see decent sales of the Ford Mustang Mach-E, Volvo XC40 Recharge, Polestar 2, Audi Sportback, Lucid Air Dream, and of course the Volkswagen ID.4. I don’t expect any of these models to sell in very high volume, but when their sales are combined across the sector, it should drive significant growth in 2021 sales.
While lots of factors could emerge in the next 14 months to negatively impact EV sales next year, I believe 2021 will be the beginning of more consistent and upward growth in EV sales in the US.