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North American EV market poised for growth despite pandemic

by The Editor
January 6, 2021
in Blog
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North American EV market poised for growth despite pandemic
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Light duty vehicle (LDV) sales in North America have steadily increased over the past decade since the economic collapse of 2009. However, 2020 will tell a different story. In North America, LDV sales have decreased due to the economic impacts of the COVID-19 pandemic. Guidehouse Insights anticipates LDV sales in the region to be down 20% in 2020 from 2019 levels. Even in the best-case scenario, the pandemic will have a lasting economic impact, resulting in three to five years of recovery to return to 2019 sales levels. Despite the economic impacts to the LDV market, plug-in EV (PEV) sales are proving more resilient than the rest of the market, with sales expected to see only a 5% decline from 2019.

Special report: Future mobility megatrends

The signs are there

PEV market conditions in North America are steadily improving as evidenced by a number of notable 2020 developments. In Washington state, Governor Jay Inslee adopted a zero emissions vehicle (ZEV) mandate in March 2020, making Washington the twelfth state to adopt the California mandate and the final state/province in the Pacific Northwest region to sign such legislation (including British Columbia, which follows a version of the California ZEV mandate). Then, In September 2020, California Governor Gavin Newsom announced that the state will phase out gasoline-powered cars by 2035 to reduce demand for fossil fuels. New Jersey and Quebec followed with similar announcements soon after.

Meanwhile, In January 2020, Tesla began production of its Model Y, and in March, it began deliveries to the North American market. The Model Y is shaping up to be Tesla’s second best-selling vehicle in 2020. Overall, Tesla is expected to account for 60% of PEV sales in North America in 2020. At the same time, automotive start-ups are still gaining investment. In July 2020, electric truck and SUV start-up Rivian announced a US$2.5bn funding round ahead of its 2021 launch of three models. Karma Automotive raised US$100m, and Fisker completed a US$50m private funding round in 2020 as well.

PEV market momentum in North America

The PEV market in North America is largely driven by increased model availability and policy. As discussed above, new ZEV mandates are being passed and states and provinces are beginning to commit to banning ICE LDVs from new vehicle markets. These types of policies will require automakers to increase PEV availability and commit to electrification to maintain market share in states with bans.

Ford F-150
Larger EV models such as the electric F-150 will drive sales in the US

PEV model availability has been an ongoing market issue since the vehicles entered mass production in the mid-2000s. PEVs are traditionally deployed as passenger cars; however, 2019 and early 2020 brought the announcement of several electric pick-ups, such as the Rivian R1T and the electric Ford F-150. Larger vehicle segments like pick-ups are a particularly important segment to the North American market because they make up a major part of vehicle sales as opposed to other markets that typically have higher sales of smaller vehicles.

The pandemic initially created some scepticism around expected EV production rates, but the majority of announced PEVs have seen little disruption to production timelines. Notable production date changes included Rivian announcing the push back of its vehicle deliveries from late 2020 to summer 2021, and Lincoln announcing it was cancelling the electric SUV it was planning to build on the Rivian skateboard chassis; this cancellation was not tied specifically to the pandemic, however.

Sales growth anticipated for North American PEVs

In spite of supportive policy and increasing model availability, several market factors—such as lower consumer demand, fuel prices, COVID-19 economic impacts—will likely affect PEV sales in the short term, meaning slower market growth year-over-year. These economic impacts are likely to be mitigated as the industry approaches 2030, as larger PEV models come to market and consumer demand increases as ICE bans begin to affect markets such as California. The short-term effects of LDV sales declines are likely to linger through 2025, but the early impacts of LDV bans will begin to take over and show market growth. Because of these circumstances, Guidehouse Insights expects nearly 2.7 million PEV sales in North America by 2030, representing a 13% share of total LDV sales and over 14 million PEVs on the road in the region.

What to expect in 2021 from the PEV market

The PEV market in North America is expected to continue to grow in 2021, and Guidehouse Insights expects around 500,000 PEV sales. In terms of policy, more states and provinces are likely to commit to banning the sale of light duty ICE vehicles and pass ZEV mandates. Hawaii and Washington are both considering ICE bans, while New Mexico and Minnesota are discussing ZEV mandates.

EVs are traditionally deployed as passenger cars; however, 2019 and 2020 brought the announcement of several electric pick-ups, such as the Rivian R1T and the electric Ford F-150. Larger vehicle segments like pick-upsare a particularly important segment to the North American market

With the upcoming administration change in the US, more commitments to charging infrastructure are being made, which can have positive effects on consumer opinions of PEVs and increase adoption likelihood. As for vehicle deployments, we can expect to see the first deliveries from Rivian in 2021, along with the Ford F-150 Electric, the revived GMC Hummer, and the Lordstown Endurance (among several others).

EVs are proving to be a resilient vehicle segment. With supportive policy, charging infrastructure investments, and increased model availability, significant market growth can be expected over the next decade.

Raquel Soat is Research Analyst, Electric Vehicles at Guidehouse Insights

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