Two respected energy forecasting agencies revised their Electric Vehicle (EV) expectations up by an order of magnitude and still, according to ARK’s research, they are missing the mark by a long shot. Despite a strong year for traditional SUV and truck sales, both OPEC and the Energy Information Administration (EIA) increased their annual EV sales forecast more than tenfold this past year. ; ARK extrapolated EIA estimates for global numbers] ARK maintains that in 2022, EV sales will not only hit roughly 17 million units globally, but they will begin to outpace the demand for gasoline powered cars.
In 2015, ARK’s EV sales forecast for the year 2022 was more than 100 times that of OPEC and the EIA. Curiously, in 2016 both agencies increased their EV sales forecast for the year 2022 from 100,000 to 2 million units but, with little media coverage, few industry analysts took note. ARK’s forecast is still an order of magnitude higher so OPEC and EIA estimates should continue to move higher, significantly higher.
For perspective, thus far Tesla [TSLA] has received over 400,000 reservations for the Model 3, which will be launched during the second half of this year, and it plans to produce one million vehicles in total annually by 2020. Unless it misses its production targets dramatically or dominates the EV market completely in the early 2020s, Tesla’s forecast suggests that OPEC and the EIA may have to revise their forecasts up again. In other countries, Volkswagen [VW] intends to launch more than 30 EV models during the next ten years, targeting two to three million EV sales annually in 2025, while China’s target is five million “new energy vehicles” on the road by 2020, including hybrids. EVs have dominated new energy vehicle sales to date in China, suggesting that they will approach three million by 2020 (given their recent ratio to hybrid sales, as shown below).
As shown below, at fewer than 1 million units per year, EV sales account for less than 0.5% of global auto sales, and in ARK’s view they are primed for exponential growth, thanks to the declining cost curve of battery pack systems. The key component of an EV is the battery, making up roughly 20% of its costs. Today, battery cell costs are falling more rapidly than most analysts had projected. ARK anticipates that in 2022 a 200-mile range EV will sell at a lower price point than today’s best-selling Toyota Camry, at which point EV demand should take off. In its infancy, the EV market already is surprising on the high side of expectations, so much so that agencies recently hiked their forecasts for 2022 by twentyfold.