Electric vehicle sales accelerate as the world passes the ‘magic number’

Bryce: [00:00:03] From Equity Mates media. This is the dive. I'm your host. Bryce Leske. In America, electric vehicles have crossed the magic number. An analysis from Bloomberg found that 5% of new car sales is the magic number for mass adoption of electric vehicles and the US is the 19th and latest country to cross that threshold. Good news for Tesla, good news for climate really. But I wanted to dig into this 5%. I haven't heard that 5% was the magic number for EVs and I didn't know there was a magic number at all. It is Friday, 15th of July and today I want to know why is 5% the magic number for electric vehicles? And once the country passes it, what can we expect to see next year? To do this, I'm joined by my fellow co-founder of Equity Mates, Alec Renehan, the Ren. Alec, welcome [00:00:50][47.8]

Alec: [00:00:51] How's it going? [00:00:52][0.3]

Bryce: [00:00:53] I'm well. I'm excited for this one. So let's start with this 5% number, to quote Bloomberg. Once 5% of new car sales go fully electric, everything changes. Everything. Everything. Wow. Two things to unpack here. The 5% number and then how everything changes. So let's start with the percentage, 5%. Why five? [00:01:14][21.6]

Alec: [00:01:15] Yeah. So Bloomberg has looked at the 18 countries that have already reached this 5% threshold and basically what they found is this is an inflexion point. This is where the S-curve starts to shift up exponentially. [00:01:28][13.1]

Bryce: [00:01:29] You love and as the Curve is talking about this before, give us a quick primer on the S-curve. [00:01:33][4.4]

Alec: [00:01:34] Yeah. So most technology follows an S-curve in terms of how people start to use it. [00:01:40][6.0]

Audio clip: [00:01:40] One of the ways to think about how technologies emerge is that stuff tends to turn out small and slow. You have an early period where the technology isn't quite working and it's emerging from university labs and corporate research labs, and you've got a few things that look like they're not going to be very useful, important. And then you reach a point where the growth accelerates upwards because everything starts working. [00:02:01][21.3]

Alec: [00:02:02] At some point it hits an inflexion point, or as Bloomberg is calling it, a magic number. This is when it starts to reach mass adoption. This is when people like you and I find out about it. It's suddenly in the papers and suddenly everyone wants it. [00:02:16][14.0]

Audio clip: [00:02:16] So the PC emerged in the very early days in the 1970s, and then it took off in the 1980s around the IBM PC and around Microsoft's operating system and around the Mac. And that S-curve kind of ran up until really the 1990s after. [00:02:30][14.2]

Alec: [00:02:30] A period of mass adoption where everyone is rushing to the stores and buying it. Most people have it. And then the top of that is plays out where it's just the laggards, the people that refuse to adopt the technology that are left, and they slowly come around and use it and the. [00:02:47][16.9]

Audio clip: [00:02:47] Internet comes along and that gives a whole bunch of other people a reason to buy this device and a whole new set of experiences that have to be created. And the Internet goes from being this crazy, silly idea to becoming something that everyone has. And so the Internet again, has an S-curve from the early nineties through until the late 1990s, where you get the frenzy and the bubble and then the growth slowed down as we got to kind of 2003, four, five, six. [00:03:07][20.1]

Alec: [00:03:08] So we see this S-curve for most major technologies throughout history electricity, TVs, mobile phones, the Internet, even things like LED light bulbs. It's really in three phases the slow early growth, then the mass adoption and then the late adopters. And basically what Bloomberg is saying is for electric vehicles, 5% is where it shifts from the early adopters to mass adoption. [00:03:34][26.4]

Bryce: [00:03:35] So 5%, we move from early adopters to mass adoption. And that's where electric vehicles go mainstream. [00:03:42][7.1]

Alec: [00:03:43] Yeah, that's right. And when we think about why this is the case, there are a number of factors that start to play out. So the first one is at 5%. We just start to see more electric vehicles on the road in Australia. I've definitely noticed more Teslas over the last year. [00:03:58][15.2]

Bryce: [00:03:59] So there's a. [00:03:59][0.3]

Alec: [00:03:59] Bit of social proof there. You start to see it more, it starts to be in your conscious more, you start to consider it as a choice. But also car dealers say the demand is there and they're more willing to import electric vehicles, more willing to range electric vehicles, take up space that was traditionally for other vehicles, but also things like the infrastructure starts to get built. There are more charging stations, you know, car park operators, local governments are say that there's demand for charging stations. So they put more in and then that again puts it in front of mind for people like us and say, oh, there's more electric vehicle, car parks with charging stations that this car park never really considered it. So there's a number of factors that sort of contribute to this 5% being that tipping point where it starts to be in people's conscious. And then we say it right there, just some of the factors that Bloomberg have pointed to when they look at those previous 18 countries that have hit the 5% sales mark. 5% of new car sales being electric. And they say that's the inflexion point. [00:05:03][64.2]

Bryce: [00:05:04] So Bloomberg analysis says 5%. But the second part and the more interesting part is that they've quoted that's when everything changes. So what are we rating change? [00:05:14][10.6]

Alec: [00:05:15] And by everything, they mean the mix of sales of electric vehicles and internal combustion engines. That's maybe slight hyperbole from Bloomberg. Maybe rather than everything changes, it might be more accurate to say we move quickly from 5% of new cars being electric to 25%. Yeah. [00:05:34][18.6]

Bryce: [00:05:34] More people. [00:05:35][0.3]

Alec: [00:05:35] Not as good a headline. [00:05:35][0.5]

Bryce: [00:05:36] And not as great. So. So you've said 18 countries have already passed this threshold. I'm guessing that there are a few Scandinavian countries in there who's out in front who's leading. [00:05:47][11.0]

Alec: [00:05:47] Yeah, look, no surprise. It's those northern European countries that are leading the way. Norway is number one, and as Norway pursues its goal of becoming the first. [00:05:55][7.4]

Audio clip: [00:05:55] To end the scene of petrol and diesel cars. [00:05:57][1.8]

Alec: [00:05:58] They hit the 5% mark in 2013 and now over 80% of new cars sold are electric vehicles. [00:06:05][7.7]

Bryce: [00:06:06] Epic. [00:06:06][0.0]

Alec: [00:06:06] Pretty amazing. They reckon they're going to phase out diesel and petrol engines by 2025. [00:06:12][5.1]

Bryce: [00:06:13] Wow. [00:06:13][0.0]

Alec: [00:06:13] From New from the U.K. by 2025. [00:06:15][1.3]

Bryce: [00:06:16] I'd love to know the actual numbers. Like how many cars are on the road in Norway. [00:06:20][3.5]

Alec: [00:06:21] Good question. Yeah, yeah. [00:06:22][1.2]

Bryce: [00:06:23] Don't know who will pick that up. [00:06:24][1.0]

Alec: [00:06:27] So after Norway, there are two other countries that are over 20% of new cars sold being electric. Iceland crossed the 5% mark in 2017. Now that over 50% of new cars sold. Sweden crossed the 5% mark in 2020. They're now at 29%. [00:06:44][17.7]

Bryce: [00:06:46] Wow. [00:06:46][0.0]

Alec: [00:06:47] So they're the three countries above 20% of new cars sold being electric. There are some other major countries that have also crossed the 5% mark. China crossed it in 2018. They're now 17% of new cars sold being electric. Germany crossed it in 2020, then out 14%. The U.K. also in 2020, they're now 16%. South Korea crossed it in 2021. They're now six and a half percent. Even New Zealand, they crossed it in 2021. They're now at 6%. [00:07:17][30.2]

Bryce: [00:07:18] Wow. So 18 countries have hit this 5% mark or beyond. And the United States is now joining the list at number 19 Ren. There are 195 countries in the world. My maths isn't great but well actually it's pretty good. What's happening to the other 176, which I may add includes Australia? [00:07:40][21.7]

Alec: [00:07:41] You may add that, yeah, very good maths. So reportedly some of the next closest are Canada, Australia and Spain. Okay. But globally, about 70 million cars were sold in 2021 and about 4 million of those cars were electric vehicles. So quick maths a little bit over 5%. Globally, new cars sold are electric, so maybe the whole world is reaching that magic number tipping point. But yeah, there's a pretty big discrepancy between the Norway's, Iceland's and Sweden's of the world and some of the laggards are. [00:08:16][34.9]

Bryce: [00:08:16] And so returning to the US then have just joined the list. What's next for them? You know, can we expect to see huge adoption now. What's what's in store? Yeah. [00:08:25][9.3]

Alec: [00:08:25] So if the US follows this trend established by the 18 countries that have come before them, a quarter of new car sales could be electric by 2025. So they'll move really quite quickly from that 5% to 25%. And with that will come a lot of accompanying infrastructure. Think more charging stations, more electric vehicle dealers, new electric vehicle models being introduced or imported, and all of which will add social proof. You'll see more of these cars on the road, which will increase demand and increase buyers. So if history is any judge, we can expect a major lift off in American electric vehicle sales over the next few years. We've sort of hit that important inflexion point. [00:09:09][43.7]

Bryce: [00:09:10] That's the magic number. But you know, we don't get from 5% to 100% with magic that that would be nice. It is going to require some massive changes to our transport infrastructure, as you've just alluded to, and in the companies that actually make the cars. And Tesla was obviously leading the charge, but they've recently been knocked off their perch as the biggest electric vehicle maker in the world. So and let's take a quick break and we'll come back to discuss. [00:09:37][27.3]

Audio clip: [00:09:40] The global electric vehicle market is heating up and China wants to dominate in the Nordic countries. However, EVs are starting to command a sizeable market share. Nearly 50% of Norway's cars are electric. [00:09:51][11.4]

Bryce: [00:09:52] They have an all of society approach to winning and dominating the electric vehicle market globally. Welcome back to The Dive. Today we're talking about the United States reaching the magic number in the ATV game, but that's not the only thing that's changing. Tesla has been knocked off their perch as the biggest electric vehicle maker in the world. So Ren, tell me who's knocked them off. [00:10:14][21.8]

Alec: [00:10:15] So the company that's knocked them off is the Chinese carmaker by day. That is short for Build your dream and really a dream. Die hard. Oh, my God. We should be clear. They haven't knocked Tesla off in terms of market value, but they have knocked them off in terms of total cars sold for the first half of 2022. Have you heard of Bad? [00:10:37][22.4]

Bryce: [00:10:37] I was going to guess that it was Volkswagen because I knew they had. That is an ambition. [00:10:41][3.1]

Alec: [00:10:41] Volkswagen. But they're not even in the top three. [00:10:44][2.2]

Bryce: [00:10:44] No. Wow. But they're the biggest car maker in the world. [00:10:47][2.5]

Alec: [00:10:47] No, Toyota is the Volkswagen. [00:10:49][2.3]

Bryce: [00:10:50] That's why I love this this show. Finding out new things all the time. [00:10:53][2.8]

Alec: [00:10:53] Not electric vehicles, just total cars. Toyota does about 10.9 million. Okay. So a bit over ten, Volkswagen comes in the 8 million. Okay, a second. [00:11:01][8.2]

Bryce: [00:11:02] Interesting. Well, are two short answer. No, haven't heard of Bhiwadi. [00:11:05][3.1]

Alec: [00:11:06] They've just opened a showroom near my place. Yeah, yeah, yeah. So the expanding buffet invested about a quarter of $1,000,000,000 in them a few years ago. So they've been kicking around. They've actually been in business for a couple of decades, but they have really accelerated recently and for the first half of this year, they've taken Tesla's crown as the most popular electric vehicle maker. To give you the numbers by day, delivered 641,000 electric vehicles for the first half of 2022, and that's up over 300% from last year. So they've got their skates on 641,000 for baby day compared to 564,000 for Tesla. So not a massive gap there. And then in third place, SAIC, another Chinese company just under 400,000. [00:11:57][51.5]

Bryce: [00:11:58] So first and third on that list are both Chinese companies, which appears to be a pretty interesting development. But before we get there, there is a bit of nuance here, right, Ren? You know, I'm assuming Alun would actually contest that he has lost the crown. [00:12:12][13.9]

Alec: [00:12:13] Yeah, that's right. There is a bit of nuance Elon would contested. Even if there wasn't nuance. Right. About half of the cars sold by Bhiwadi in that 641,000 number of plug in hybrids. So they are both electric and internal combustion engine, trying to count them as new energy vehicles alongside the pure play electric vehicles. So Tesla remains the top of the pure play fully electric vehicle game by day of the hybrid plus fully electric. So a little bit of nuance Elon would contest it. I think my conclusion from that, though, is we're saying a number of different variations come to market. It's not just new companies all making the same type of electric vehicle. We're seeing new companies also come up with maybe alternatives to to the road. Tesla's driving down. [00:13:05][52.9]

Bryce: [00:13:06] Well-Played, pun intended. Now, Baywa D and SAIC sake. They're both Chinese companies, as we alluded to. Do you feel like this has been a concerted effort from China? [00:13:16][9.9]

Alec: [00:13:16] Yeah, it definitely has been. And we should be clear, China is already the biggest car market in the world in terms of amount of vehicles sold, 21 million in China last year, compared to about 15 million in the US. So China is the biggest buyer of cars. But in saying that electric vehicles have been a real strategic priority for the Chinese. [00:13:37][20.5]

Audio clip: [00:13:38] Government, the Chinese government has invested at least $60 billion to support the EV industry and it's pushing an ambitious plan to transition to all electric or hybrid cars by 2035. [00:13:47][9.5]

Alec: [00:13:48] They've definitely identified this as an emerging industry that they have a chance to take meaningful global market share and they're putting their money and the white where their mouth is. [00:13:58][10.1]

Audio clip: [00:13:58] Increasingly, more and more analysts expect China to be a leader in EV production, partly because it has the largest automobile market in the world, and then it has all these government policies to support consumers to buy EVs. [00:14:12][13.8]

Bryce: [00:14:13] When will we see the Great Wall Electric car coming out of China? You know, the big one that's driving. [00:14:17][4.6]

Alec: [00:14:18] I know. I reckon there probably is one. [00:14:21][2.9]

Bryce: [00:14:21] Probably. So you've got the American start ups like Tesla and the Chinese state backed companies like BYD. But the one player that we haven't really spoken about yet are the traditional automakers, especially the European giants like Volkswagen, Daimler, who have Mercedes and BMW. So what's going on there? [00:14:39][18.1]

Alec: [00:14:40] So there they are getting into the game. But it's tough in some ways. It's tougher for them than a company like Tesla or Bay Wide who get to start from scratch. Because these traditional automakers have existing models that they're trying to sell, existing factories that are designed to build a certain type of car and existing relationships with dealers all around the world. It's sometimes really tough to turn that boat around, but Bryce, much like consumers, have tipping points. We spoke about this 5% magic number. These traditional automakers also have a tipping point or a magic number. Okay. [00:15:15][35.2]

Bryce: [00:15:15] So tell me about that. [00:15:16][1.0]

Alec: [00:15:17] As we said, these factories already exist. They need to be retooled. The supply chains need to be reconfigured rather than buying parts for an internal combustion engine. You're now buying parts of, you know, battery packs and for electric vehicles in Europe, the data that Bloomberg is saying so far, it appears that the tipping point is about 10% of a factory sales, once about 10% of the cars being made in a factory are electric. That appears to be the inflexion point to really flip the factories focus rate or, you know, re-orientate the supply chains from the data we've seen, once a factory has hit 10% of sales being electric or 10% of cars produced being electric from there, sales have tripled in less than two years. Wow. So again, a pretty major inflexion point. Now, Volkswagen, Ford and BMW are each targeting 50% or more of their global sales to be fully electric by the end of the decade. So these traditional automakers are getting into the game in a big way. And once they hit that 10% mark, it feels like they're going to the race will be on. [00:16:25][67.2]

Bryce: [00:16:25] Race is on. They're getting into it in a big way. But how big is this all going to get? [00:16:29][4.4]

Alec: [00:16:30] So earlier I said that globally, 70 million cars are sold each year. And in 2021, 4 million were electric vehicles. So we're still early in this story. Tesla might get to the 1 million mark this year in terms of cars sold. VW this year are aiming for 700,000. That's just so far away from the ten and a half million cars that Toyota sold in 2021. So there's just plenty of growth to go. And, you know, we're seeing good growth numbers. In 2021, electric vehicle sales grew 160% in the past two years. Global electric vehicle sales have tripled like pretty phenomenal numbers. But when you put it in the context of that 70 million total addressable market still early. [00:17:16][45.8]

Bryce: [00:17:16] It is still. [00:17:17][0.3]

Alec: [00:17:17] Early. The question is, who's going to win? [00:17:18][1.3]

Bryce: [00:17:19] Do you want me to answer that? [00:17:20][0.8]

Alec: [00:17:21] I love you. [00:17:22][0.5]

Bryce: [00:17:22] Will leave that for another episode. Ren. But look, I think I love this space. There's plenty of plenty of opportunity here and love to see the dynamic between those pure play, electric vehicle, car start ups, the Teslas of the world, and now some of the more traditional automakers, Volkswagen and Daimler, coming into play as well. And how they're going to play with that dynamic and and take on those that are leading in the front. But thank you so much, Ren. I really took a lot out of that episode today. We'll leave it there. But I'm sure this one we will return too. So thanks for joining us for today's edition of The Dive. If you'd like more, you can follow us on Instagram. Otherwise we would appreciate if you could rate and review us. But Ren. [00:18:02][40.2]

Alec: [00:18:03] It's been a pleasure Instagram link in the show notes for us, so definitely get to talk about this story again. [00:18:08][5.3]

Bryce: [00:18:08] Love it or leave it there. [00:18:08][0.0]

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