Published on February 16th, 2019 | by Tim Dixon
February 16th, 2019 by Tim Dixon
Sales of fossil fuelled vehicles are now on the decline in the world’s three largest auto markets, and being replaced by electric vehicles. Fossil car sales will only decrease from here on out. EVs for the win!
China, The World’s Largest Auto Market
In the world’s largest auto market, China, total light duty vehicle (LDV) sales declined in 2018 relative to 2017. This was the first year-on-year drop since 1992. Yet, in this shrinking overall auto market, EV sales (including BEVs and PHEVs) almost doubled in volume to 1.1 million, from 600,000 in 2017.
According to China’s Association of Automobile Manufacturers (CAAM), total LDV sales in 2018 were down to 28.08 million from 28.88 million in 2017, a drop of 800,000 units, or 2.76%. However, since EV sales increased by some 500,000 units year on year, we can conclude that fossil fuelled LDV sales fell by 1.3 million units, down an even more significant 4.6%.
We can very likely expect China’s EV sales volume to again almost double in 2019, and approach 2 million units. Depending on what happens to combustion vehicle sales, EVs will likely take at least 7–8% market share. It’s very easy to steal market share when your nemesis is declining in absolute terms.
Chinese middle-class consumers (the buyers of most LDVs) are tech-savvy and will drive a further shift away from gas cars to EVs in every year ahead. China’s strong national “new energy vehicle” policy, combined with very aggressive policies at the city and regional levels, will ensure things move in the right direction. If there’s an unexpected uptick in the general economic outlook in China in 2019, there’s an outside possibility that combustion vehicle sales may show signs of hanging on to recent highs. But, essentially, the downward trajectory in their absolute sales in pretty much each consecutive year from now on is a safe bet.
My personal prediction is that EV LDV sales in China will reach at least 50% of market share by 2025, via a combination of positive feedback factors. I’ll elaborate on this more fully in an article coming soon.
Europe, The World’s 2nd-Largest Auto Market
The European auto manufacturers’ association reports a very similar picture (here we are counting the EU plus the European Free Trade Area). Although total LDV sales very slightly increased in 2018 (17.75 million) over 2017 (17.68 million), more than 100% of that increase was from EVs, which had 408,000 sales in 2018, up from 307,000 in 2017 (figures from EV Volumes).
Stated differently, combustion LDV sales decreased from 17.37 million in 2017 to 17.34 million in 2018.
With the 2019 arrival of Tesla’s Model 3 in Europe (that’s just started this past week), other brands still trying to stay in the EV race, and new PHEVs arriving later in the year with much higher all-electric range, EV sales will grow even more strongly in 2019, likely to approaching 600,000 units. It’s almost inevitable that combustion vehicle sales will decline further still.
Like in China, new European regulations are coming that are going to accelerate the shift to EVs. Most European consumers also know that EVs are the future and gasmobiles are the past, and want to be on the right side of history.
The longer-term predictions for EV market share in Europe are more complex than in China, for a variety of reasons, not least of which is the legacy European automakers are not yet all-in on EVs. Although, they are moving (being dragged by reality?) in that direction.
Depending on the broader economy, combustion vehicles may stumble along in 2019, especially if OEMs start offering huge discounts on them towards the end of the year (in preparation for tighter emissions regulations in 2020). But, overall, the picture is one of steady decline in absolute numbers of combustion vehicles sold in Europe from here on out, while they are being replaced by EVs.
USA, The World’s 3rd-Largest Auto Market
Total sales of light vehicles in the USA in 2017 were 17.230 million, and increased fractionally in 2018 to 17.274 million (figures from marklines). EV Volumes estimates 360,000 EV sales in 2018, up from 200,000 in 2017. That means that — taken on their own — combustion vehicle sales fell from 17.03 million in 2017 to 16.91 million in 2018.
Since USA total light vehicle sales have been essentially flat or slightly declining over the past four years, and EVs are now coming online in ever-increasing volumes, it’s hard to see gas vehicle sales going in any direction but south from now on. The total light vehicle market’s marginal growth in 2018 was only made possible by the arrival of the Tesla Model 3 in high volumes.
Again, there’s an outside chance we may see a small up-blip, depending on the economic outlook, but that’s unlikely and the general trend for combustion vehicle sales is inexorably downwards. The reveal of the Tesla Model Y in the coming month or two also ensures that a significant number of folks will entirely avoid a gas vehicle purchase in the next year or so whilst they are waiting for their dream SUV/crossover. Again, this means that EV % market share will grow at a higher rate than the increase in absolute EV sales volume, as the competition withers away.
The Global Picture
Since the three largest auto markets are already seeing falling combustion vehicle sales, is there any hope left for the internal combustion engine?
No. It’s firmly headed for the dustbin of history, and it is going to happen quickly. Most serious auto analysts (see here, and here, and here) think that 2018 may well have been the peak sales year for combustion vehicle sales globally, and the figures we’ve discussed above certainly support the idea.
Combustion engine car sales to hit peak demand in 2018, say analysts https://t.co/Sb5xxPiRrZ
— Financial Times (@FinancialTimes) December 30, 2018
Japan is still indecisive about EVs, though big on hybrids, but will inevitably soon have to give up on its fuel-cell dreams (at least for LDVs) and rush to catch up with EV powertrains.
India will grow to be a significant auto market in the middle of the next decade, but this will be too late to save the combustion engine. India’s LDV sales were some 3.2 million in 2017, growing around 9% from 2016. Both combustion sales and EV sales will continue to grow in India, but any short-term growth in combustion vehicles will be far outpaced by their decline in the 3 largest markets above (almost 20× the volume of India). India’s LDV buying middle class is really starting to buy vehicles at just the time when EVs are taking over from gassers. With many larger Indian cities having serious air quality problems to deal with, regulations will also be pushing in the direction of EVs, and away from polluting gassers. And before the middle of the next decade, EVs will be the less expensive option, even just on sticker price (they already are in many cases on total cost of ownership).
What do you think about the prospects for combustion engine vehicles? Do you agree that we will look back on 2018 as the peak in these three largest markets, or will 2019 reverse the past year’s declines and see them clinging onto sales volume for another year or so? Please share you thoughts and reasoning in the comments.
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