Goldman Sachs’ research report on electric vehicles said that the EV trend is at a turning point, and hybrids and plug-in hybrids are providing tough competition.
Europe, which has driven EV development so far, has shown signs of stability from the beginning of 2024. The Goldman Sachs report said this is due to concerns about three factors: low EV capital costs due to low prices of used EVs, poor visibility on government policy visibility, and a lack of rapid charging stations. These shortages are changing consumer preferences towards hybrid EVs and plug-in hybrid EVs.
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But despite the current slowdown in EVs, the recession scenario still calls for a 21 percent annual growth in EV sales volumes through 2024. The GS report said the three reasons for recession mentioned above make a recession look more realistic. ,
EV sales volumes are expected to decline by 2 percent in 2024 and negative growth is likely to result in oversupply in the EV supply chain.
The Goldman Sachs report said EVs are nearing a turning point in terms of economic feasibility as governments across the world are reducing subsidies, leading to lower initial investment, aggressive pricing strategies adopted by Chinese manufacturers, And running cost benefits, i.e. fuel savings. On the other hand, capital cost on sales is emerging as a new concern reflecting the decline in prices of EV used cars.
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While it’s hard to predict when used EV prices will come down, innovation in batteries remains a hurdle. Currently, batteries account for 30-40 per cent of the cost of an EV. Consumers assume that tomorrow’s batteries will be better than today’s batteries in terms of performance, so used EV prices are unlikely to stabilize any time soon. The recent decline in battery prices is not only due to technologies, but also due to oversupply in China’s EV supply chain.
Furthermore, as EV penetration continues to accelerate, issues of efficient fast charging station infrastructure are emerging as a more tangible problem. Many automakers, such as Nissan and Mitsubishi Motors, have said concerns about driving range and charging infrastructure increase as people return home or move to rural areas.
Goldman Sachs concludes that all of the above reasons have attracted manufacturers and consumers toward hybrid EVs (HEVs) and plug-in hybrid EVs (PHEVs). HEV and PHEV sales are accelerating amid the EV slowdown in the US, with growth outpacing that of EVs over the past several months.
But there has been no declining trend in EV sales in India. The government vehicle portal dashboard shows a surge in EV registrations, especially of 2-wheelers, although 3 and 4-wheelers have seen a slight decline. In January 2024, EV registrations in India stood at 1,44,877, it declined slightly to 1,41,382 in February, but as of March 30, the month’s figures showed a 32% increase to 1,86,143 vehicles.
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But, the Goldman Sachs report suggests that global HEV sales could exceed estimates by 1-2 million vehicles.
Automaker Toyota has officially stated that HEV margins exceed the margins of gasoline engine cars. The report suggests that the additional cost of HEVs is offset by fuel savings and higher used car prices. For the industry, the economic benefits of HEVs are higher margins, comparatively lower capital costs and higher confidence in used car prices.
However, the report notes that if EV costs come down by 2030, the benefits of EVs will come back into focus.
