Electric Car Sales : A Tale of Hype and Hope

If ever there was a promising enormous revolution in passenger vehicle technologies, surely it must be that offered by electric power.

An electrically powered vehicle offers huge benefits in a number of areas.  It is a more responsive and more fun car to drive – oh yes, and easier to drive as well.  It not only costs much less per mile by using electricity rather than petrol/diesel, it also saves on repair bills and routine maintenance (there are about ten times more things that wear out in a regular vehicle than an electric vehicle).  It is more convenient for people who can simply top up their car each night at home, sparing them the inconvenience of having to detour to a gas station to fill up.  It is more environmentally friendly, whether judged by the smelly unsightly exhaust experienced up close, or the possible harm to the wider environment.  It is quieter.  The electric motors and batteries take up less space than in a regular car, allowing for smaller/lighter vehicles, or same-size vehicles with more space for the passengers and whatever they load into the front and rear trunks.

So why aren’t electric vehicle sales booming?

April sales data has now been released by most battery-electric vehicle (BEV) manufacturers (this site does a great job of collating the data).  But the murky picture this information paints is puzzling and seemingly at odds with public perceptions.

On the one hand, just about every car manufacturer has now publicly converted to the electric vehicle religion.  Many are promising no new internal combustion engine (ICE) vehicles, although when you carefully parse their promises, it seems what they are committing to is little more than allowing new ICE powered cars to have a tiny battery added to them so as to recapture a bit of braking energy and to allow them to boast that their vehicles are now hybrids.  And the undertaking not to release future new models with only ICE power still allows them to continue with current models as long as they choose.

But on the other hand, where is the sweeping groundswell in BEV sales to support all the publicity, hype, and excitement surrounding electric-powered vehicles?

Let’s first look at April sales in isolation.  The first surprise is that, out of the many hundreds (maybe even thousands) of different models of passenger vehicles available in the US, there are only 14 pure BEVs (the bolded entries in the linked table), and even one of those is a bit “impure” (the BMW i3 with range-extender ICE added to it).

If you’re looking for a BEV from Toyota, or Mazda, for example, be prepared to be disappointed.  There aren’t any.  If you want one from Honda, then you’re in a very small minority of Honda buyers – their Clarity BEV sold only 52 units in April.  (Honda sells about 1.5 million vehicles in the US each year.)  Or how about Volvo – a company that promises to release no more purely ICE cars by 2019 (ie next year)?  Never mind the promise, nor the nearness of 2019.  There aren’t any BEVs from Volvo at all, yet – a glaring discrepancy (and politely overlooked in the mainstream media) between their headline grabbing promises and the underlying reality.

Maybe, like me, you’ve been a long time Ford supporter.  Ford makes only one model electric vehicle, its Focus Electric.  But if you’ve not noticed many of them on the streets, that is hardly surprising.  For the first four months of the year, in total, Ford has only sold 363 Focus Electrics – that’s not only a very disappointingly small number, but it is also down on last year, which saw more than twice as many (816) sold in the first four months of 2017.

Ford has about 3,000 dealerships in the US, and for the entire 2017 year, sold 1817 Focus Electrics.  When you consider that some Ford dealerships sold a number of these vehicles, it seems that the average Ford dealership has never sold a single one of Ford’s Focus Electric cars, and less than one in ten dealerships has sold one so far this year.  At Ford, BEV sales are declining, not increasing.  That’s a counter-intuitive phenomenon but not an uncommon one if you study the sales data for many/most of the other makes and models of BEV too.

So perhaps the second surprise isn’t quite so surprising – only five of the 13 or 14 BEV models even managed to claw their way to 1,000 vehicles sold in April.  In sequence, these are the Tesla 3 (3875 sold), Chevy Bolt (1275), Tesla S (1250), Nissan Leaf (1171) and Tesla X (1025).

Here’s an extended month by month analysis of these five models’ sales.

Confused?  Probably!  The reason for the wild variations in sales numbers from month to month are primarily the result of the manufacturers having quarterly panics, and scrambles to make up the numbers in the final month of each quarter, followed by lower than normal sales in the first month of the next quarter, plus of course, a super scramble in every December to get the numbers as high as possible for both the quarter and the entire year.

So if we replace the monthly data with a three-month rolling average (this is not the same as just using quarterly sales) we immediately see significantly smoothing of the anomalous peaks and troughs of each quarter.

We could extend longer, to six months, which gives us even smoother lines on the chart of course.  A more convincing case though could be made for looking at a rolling twelve month period, so as to also factor in not only the quarterly peaks and troughs but the annual ones as well and the general seasonal shifts in overall vehicle sales activities.

Some previously obscured trends now become more clearly apparent.  For example, look at the sales lines for the Tesla S and X models – the S looks to be steadily declining, while the X is struggling to increase by more than a tiny margin.  That is quite at odds with the impression of Tesla as being a rapidly growing company with limitless potential, isn’t it, although note the new rising star appearing on this and the other charts – the Tesla Model 3, which already has an industry-beating three-month sales average.

But looking at the 12 month chart some more, does this strike you as the picture of an industry that is excitedly growing?  The two flagship Tesla models are struggling to maintain numbers, the Leaf numbers have halved, and the Chevrolet Bolt has also flatlined.  This is hard to see on the monthly chart, and far from clear on the 3 month chart, but is much more apparent on the 12 month chart.

The only growth is in the Tesla Model 3, and even that growth is a bit hard to quantify, because this doesn’t reflect new sales, rather it is Tesla starting to work through its backlog of orders collected almost exactly two years ago.

Analysis

If this is a revolution, it sure is a very calm one.  It is also a very slow one.  Headlines promise an exciting future – “China has 300 electric startups ready to take on Tesla”.  More directly and more specifically, there’s a large number of moderately high-end electric cars promised from European car manufacturers that are invariably categorized as Tesla-killers (for example, this article from 3 May), but they always seem due to be released ‘next year’.  When will ‘next year’ actually become ‘available now’?  Even the lovely and long-anticipated Jaguar i-Pace is still not due to appear in the US until some time in the second half of this year.

There is also the fact that most of these “Tesla-killers” seem more designed to compete with the high-end Models S and X, not the less expensive Model 3.  That might be a problem, because once one strips out the hype, one has to wonder about the size of the market for such vehicles.  The Tesla S and X are struggling to keep their sales numbers level, if anything it seems the Model S has been in a two-year gradual decline and showing no apparent signs of any resurgence in growth (especially when you consider overall growth of passenger vehicle sales in the US).

But this weakness is not confined to the high-end of the market.  The Bolt and Leaf also are struggling to sell as many vehicles in April this year as they did in April last year.  It is only the Tesla 3 that is showing signs of life, and even that is a slightly artificial indicator, because its sales are to people who ordered them two or more years ago, it is not a reflection on an ongoing current level of interest.

Indeed, as best we can tell, it seems that Tesla’s backlog of Model 3 orders may be dropping faster than their deliveries, which means either (or both) that there are fewer new orders for Model 3s than there are monthly deliveries, and/or that people are cancelling their pre-existing orders.  Sadly, Tesla doesn’t share this information, but whatever the exact numbers and reasons, it can hardly be considered a positive indicator.

Is the Bottleneck Production or Demand?

The market has been fixated on the never-ending saga of Tesla’s inability to meet its promises and to ramp up its production rate to the promised 10,000 Model 3 cars every week, but perhaps there’s a bigger issue that also needs to be considered.  Is there enough demand to support this rate of manufacturing?  If the current rate of 1,000 Model 3 vehicles a week is causing the backlog to slowly taper off, then other than an understandable desire to clear out the backlog, what is the future ongoing sustainable level of Model 3 sales?

Why are the other various model BEVs also not selling better than they are?  Both Chevrolet and Nissan are blaming their poor sales figures as due to production constraints, the difficulty of ramping up production numbers, and demand elsewhere in the world for their cars.  If those excuses sound familiar, they should – Tesla have been dining out on those excuses for years and years.

We have always struggled to accept Tesla’s use of these excuses, and we find it even harder to accept GM and Nissan’s recycling of similar stories.  Both are enormous car manufacturers, and have experience in planning and projecting and predicting market demand.  Each of them can plan for and sell over 50,000 copies of an ICE vehicle each month, and over a quarter million vehicles a month in total (in the US market alone).  But somehow, they stumble and are unable to produce and sell more than 1,000 BEVs a month in the US?  How?  Why?  When will they increase their production, and to what level that they believe adequately allows demand to be satisfied?

It Isn’t Just About the Money

There is a cost premium associated when buying an electric-powered vehicle.  Such vehicles offer much lower running costs, but the saving in running costs is seldom balanced by the extra upfront costs of buying such vehicles in the first place.

On the other hand, most people seldom choose to buy any type of vehicle based only on cost – if that was the case, premium auto companies would sell very few vehicles, and all model vehicles would sell mainly entry-level models rather than the generally more popular loaded and fully loaded versions.

So the extra cost to buy an electric-powered vehicle does not seem to be a deal-breaking issue, especially when it is offset by a better driving experience, less time and hassle and money spent on regular repairs and maintenance, much less money spent on electricity than gas, and the convenience of charging at home and seldom/never needing to stop at a gas station.

It is also not clear exactly how much the cost premium truly is for an electric-powered vehicle, and neither are we seeing much price sensitivity at present.  If it was all about price, we’d expect the lower priced BEVs to be the best-selling.  This is not the case.

The average new vehicle is selling for around $36,000 in the US (see information for January and March sales).  A new Nissan Leaf has a sticker price of as little as $22,500 (after the $7500 federal tax rebate).  A new Chevy Bolt has a sticker price of as little as $29,100 (after the rebate).  These are far from prohibitively high costs to choose a state of the art BEV.

Remember also that the high-end Tesla vehicles (costing more than four times as much – sometimes more than $100,000) continue to outsell the low-end Leaf and Bolt models.  And the very popular Model 3, now the best-selling of all electric vehicles, is currently being sold at prices probably in the mid $40,000s (after the federal tax rebate).  There’s no evidence to suggest that ‘high price’ is holding back BEV sales.

Conclusions, If Any

It seems that political correctness requires everyone to claim to love “clean, green” BEV technology, and certainly car manufacturers are loudly ‘virtue-signaling’ their ‘commitment’ to electric-powered vehicles.  But such public statements of commitment and love, by car makers and car buyers, seem to be totally contradicted by the measured marketplace realities.

Actually, there’s another contradiction, too.  We should note that BEV technology is not as clean and green as thought.  This article has an excellent table showing the relative CO2 emissions of different types of vehicle technologies as measured over their entire life.

Why aren’t BEVs selling in greater quantity?  Is it due to a shortage of marketplace demand, or a refusal on the part of auto manufacturers to make and sell the cars the marketplace wishes?

The manufacturers say they want to make more electric vehicles, and promise they will make more in the future, but meantime, for yesterday, today, and the next today and the next today, sales numbers languish, for reasons that are far from clear.