A research report by Goldman Sachs on electric vehicles suggests that the adoption of EVs is at a critical juncture, with hybrids and plug-in hybrids presenting significant competition.
A Goldman Sachs research report on electric vehicles highlights that the adoption of EVs is reaching a pivotal moment, with hybrids and plug-in hybrids providing strong competition. Europe, previously a driving force behind EV growth, has shown signs of stagnation since the beginning of 2024. The report attributes this slowdown to three main concerns: the capital cost of EVs due to lower prices of used EVs, uncertainty surrounding government policies, and a shortage of rapid charging stations. These factors are shifting consumer preferences towards hybrid EVs (HEVs) and plug-in hybrid EVs (PHEVs).
Despite the current slowdown in EV adoption, the report’s bear-case scenario still predicts a 21% year-over-year increase in EV sales volume in 2024. However, the report suggests that a 2% decline in EV sales volume is more likely, which could lead to an oversupply across the EV supply chain.
The report also discusses the challenges facing the economic viability of EVs. Governments worldwide are reducing subsidies, which have previously lowered initial investments, while aggressive pricing strategies by Chinese manufacturers and the benefits of lower running costs (such as fuel savings) are becoming more prominent. However, the capital cost upon sale is emerging as a new concern due to the decline in used EV prices.
Battery innovation is identified as a bottleneck, with batteries accounting for 30-40% of EV costs. Consumers anticipate that future batteries will outperform current ones, making it unlikely that used EV prices will stabilize soon. Additionally, the decline in battery prices is attributed not only to technological advancements but also to an oversupply in China’s EV supply chain.
The report also highlights the growing issue of rapid fast charging station infrastructure as EV penetration accelerates. Automakers like Nissan and Mitsubishi Motors have noted that concerns about driving range and charging infrastructure increase when people return home or travel to rural areas.
In contrast to the global trend, EV registrations in India show an uptrend, particularly for two-wheelers, although three and four-wheelers have shown a marginal decline. The report suggests that global HEV sales could exceed expectations by 1-2 million vehicles, with Toyota stating that HEV margins are higher than those for gasoline engine cars. The economic benefits for the industry include higher margins for HEVs, comparatively lower capital costs, and higher confidence in used car prices.
The report concludes that if lower EV costs are realized by 2030, the advantages of EVs will once again come into focus, potentially reigniting interest in this sustainable mode of transportation.
