Who will build our EVs in the coming years to meet demand? Not Tesla.

Tesla production facility
Photo by Martin Geiger on Unsplash

Of all my friends and family, I’m the one who supports EV adoption at all costs. I tell everybody that in a few years most of the new vehicles sold will be battery-electric. I also support the government’s decisions to ban ICE vehicles although I don’t like public intervention in the markets, I think it will be a good drive to the cause.

I would say that half of the new vehicles sold in the world should be electric by the end of the decade, but at least 90% in Europe and China and 75% in the USA. My bet has been supported by ARK Invest in their 2022 Ideas Report as they forecast 40 million electric vehicles sales in 2026. This would be about 50% of all vehicle sales in just 4 years.

ARK Invest

Most Tesla and growth stocks fans know ARK Invest. For the ones that don’t, it is an investment firm with several funds mostly made up of companies who have projects related to technology and innovation.

They publish every year a document called “Bid Ideas” where they report about their forecasts in several fields of innovation: artificial intelligence, digital wallets, blockchain, gene editing, electric vehicles, and 3D printing among others.

In their 2022’s report, they forecast that EV sales will reach 40 million units in 2026, but when I try to make some numbers about this, something doesn’t add up. In just 4 years, most companies won’t be ready to produce their share to meet this number.

I assume these figures are for BEV only and not PHEV as their 2021 number is around 5 million units.

EV production

First, let’s see how many vehicles Tesla, the EV leader, is supposed to produce in 2026. The company said that they are aiming to increase production by an average of 50% per year in this decade. If they produced almost one million vehicles in 2021, with this 50% increase per year, they could be producing about 5 million cars in 2026. If we think they can beat these expectations, as they’ve been doing for the last years, and grow 75% annually, then they could produce around 9 million vehicles. This would be a very bullish case.

That would leave 30 to 35 million cars left for other automakers to produce. Does anybody see it?

According to EVVolumes.com, the total 2021 BEV sales have been 4.8 million (6.75 million including PHEV). Half of those were sold in China. To reach 40 million, there should be an average annual growth of more than 50%. If the EV leaser, Tesla, is aiming for this growth, what are the chances that all the others make it to this figure on average? And what will happen if these figures cannot be reached?

Electric vehicle prices won’t fall in the short term

The main scenario for ARK Invest to make this forecast is reaching price parity with ICE cars in 2023. This would boost demand to get to those high numbers.

But if car manufacturers cannot meet their production goals, there won’t be any incentive to lower prices. We know that Tesla is selling every car they can produce and prices have been rising for more than a year.

Also, supply chain constraints are pushing hard on costs and at some time, these costs will be translated to sales prices.

Reaching even prices with ICE cars is the key for exponential growth to happen. As long as customers perceive EVs as expensive cars, they will still demand ICE cars from their favorite and polluting brands, and they will serve these cars with joy having more time to prepare for the production change.

Maybe it is not so bad that these numbers are not reached so fast. It will give an opportunity to legacy automakers to transform their production facilities to electrification and give them the chance to survive. This will translate into a healthier and choice-rich scenario for consumers.

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Enrique Llanes

Enrique Llanes

3X Top Writer // Tesla fan. Technology enthusiast. AI will change the world. Madrid.