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visit on finance.org. 7 million electric vehicles were sold globally in the first half of 2024, which is 20% growth over the same period in 2023. Only 1.5 million of those sales were in Europe, according to the research firm Row Motion, which amounts to only 1% growth compared to the same period in 2023. While growth was positive in Italy, France and the UK where their strong government EV incentives, EV sales in Germany, the the largest passenger car
market in Europe, fell by 18% in the second quarter of 2024. EV sales in the United States grew by 10%, which sounds OK, but these statistics include plug in hybrid vehicles. And according to PwC, much like in Europe, most of the sales growth seen this year can be explained by growth in hybrid sales, which grew by 28% year on year in the United States. So where did the 20% global growth come from then?
Well, mostly from China, where EV sales grew 30% in the first half of 2024. But once again that figure includes plug in hybrids. And plug in hybrids have seen a surge in sales in China, where 60% of the E VS sold by BYD were actually hybrids. EV manufacturers who are priced for massive growth don't appear to be growing, and the problem may be that most car buyers don't want an electric vehicle.
An interesting data point is that the markets where EVs have traditionally done best are showing the sharpest downturn in sales. According to the LA Times, electric vehicle sales growth in California began trending down this time last year and now has turned -1.2% fewer all electric cars were registered in the state in the second quarter of this year compared to the same quarter last year.
Tesla, which is still by far the EV sales leader in California, was hardest hit by this downturn, with their sales falling by almost a quarter. According to Kelley Blue Book, Tesla sales in the United States overall fell 6.3% for the second quarter of 2024, even as total EV sales climbed 7.3%.
Some of this can be explained by increased competition, as almost every automaker now has an EV available in the United States, and some of the drop can be explained by a lack of new models out of Tesla, other than the Cyber Truck, which sold around 12,000 units over the period in question. Automakers are responding to this sluggish growth by backing
away from their EV targets. Volvo, which is majority owned by Geely, China's third largest automaker, scrapped its plans last week of going all electric by 20-30. Volvo had been the first legacy automaker to make this commitment. Ford had made a similar commitment for Europe, which they have since walked away
from. Toyota, who launched their first all electric vehicle earlier this year, is now reported to be scaling back its planned increase in battery electric vehicle production in line with their long standing multi pathway strategy of matching powertrain technology to actual public demand. Volkswagen, Nissan and Hyundai have all announced earlier this year that they would focus on hybrids due to the decline in consumer demand for full electric vehicles in major markets.
Dealers who've been stuck with difficult to sell EVs say that sluggish sales can partially be blamed on a lack of affordable models, the slow roll out of charging stations and terrible resale values on used EVs. To a large extent, electric vehicle sales have been a function of government incentive schemes. Italy provides an interesting example, where the country saw a record for EV sales this June with almost 20,000 EV sold following the release of the
government incentive scheme. The scheme was so popular that it ran out of funds within hours of being released. Despite this, sales of battery electric vehicles in Italy have fallen by 11% so far this year. The 18% decline in German battery electric vehicle sales in the first half of 2024 is attributed to the sudden removal of purchase subsidies.
The German Economy Ministry had to halt the seven-year Incentive scheme last November when the German government froze major spending pledges focused on green initiatives after a constitutional court ruled that the spending was incompatible with the constitutional debt break, which restricts annual structural deficits to 0.35% of GDP.
Worse yet for EV manufacturers, a recent report from McKinsey shows that many early adopting EV owners now plan on switching back to an internal combustion car on their next purchase. According to market research from McKinsey, 46% of American Electric vehicle owners claimed that they were likely to switch back to conventional vehicles with their next purchase.
Looking at the chart from McKinsey, it would appear that the urge to switch back to ICE vehicles seems to be greatest in countries like Australia, the United States and Brazil where car owners are more likely to take longer car journeys. Looking at the reasons that EV owners gave for wanting to switch back to combustion vehicles, they mostly seem to relate to difficulties charging, with only 13% saying that they didn't like the driving experience.
The McKinsey data is backed up with real world data from Edmunds, who found that in the last quarter, almost 40% of the EVs that were traded in at a dealership were used to purchase or lease a new ICE vehicle. A huge issue for early EV adopters has been the extreme depreciation that they've experienced with their cars. I made a video a while ago about the terrible resale values of used EVs and the situation seems
to have only gotten worse. Car Wow analyzed the resale value of a one year old low mileage EV today and compared it to the price of a one year old low mileage EV at the same time last year. So comparing one year old cars to one year year old cars one year apart, you might expect the prices to be somewhat stable. They found that many were down between 25 and 30% over that period. An example would be the Audi E Tron where comparable used cars were worth 27% less in 2024 than in 2023.
They compared that to the Audi A7 diesel which was down only 2.7% over the same period. Now used cars in general had been a bit pumped up in 2023 as due to supply issues it was still difficult to buy a used car back then. But the electric cars they looked at had fallen in value significantly more than equivalent petrol and diesel
cars. Meaning that if you had stepped in and bought what looked like a cheap used EV last year, you still took a further massive depreciation hit on it as buyers are even more wary of them today than they were a year ago.
In the video I made about the terrible resale values of EVs, one of the top comments was that in the same way that you wouldn't buy a used laptop or a used mobile phone, you wouldn't buy a used EV. When the majority of the value of a product is in its battery, no one wants to buy it second hand. Now, maybe that will change over time time, but that does appear to be the situation today.
A study by the Energy Policy Institute at the University of Chicago found that 77% of survey respondents cited a lack of charging infrastructure as a reason for not buying an EV, second only to the high upfront cost. Other reasons that people dislike buying EVs is that they're expensive to insure, as insurance companies write them off after small accidents for fear that the battery's been damaged. Car buyers also worry about the fire risk of charging an EV in their garage.
All of the research that I've found shows that EVs don't pose any more of a fire risk than petrol vehicles do, but there is the issue that once they do catch fire, they're very difficult to extinguish. Last month, an electric semi which caught fire in California was all over the news as it burned for several hours, causing a full closure of the
freeway. The Highway Patrol said that the crash had created a hazardous material situation due to the toxic fumes released from the burning battery. I'm told that electric semis are mostly used to transport potato chips, which are probably quite flammable too. News like this does not help to sell EVs, whether they are a fire risk or not. The recent news about Israel remotely exploding pagers, walkie talkies and mobile phones used by Hezbollah in Lebanon will do nothing to reduce this
fear either. At present, it's unclear if these were specially manufactured devices that contained explosives or if the batteries themselves detonated. A friend said to me after reading about the attacks, if this is to be the future of warfare, you really don't want an EV parked in your garage overnight and a phone charging next to your bed in the event of a new conflict.
In a recent podcast, Doug Demuro argued that electric vehicles are desired by a good percentage of the population, but not the percentage of the population that people taught wanted them a few years ago. According to the McKinsey report, EV buyers tend to be wealthy urban dwellers who are significantly younger than the average car buyer. Fire. Importantly, 84% of the people who said that they would consider buying an EV also said that they would be able to charge the car at home.
Less than half of Americans have access to an off street parking spot, and not every off street parking spot has access to electricity, making home charging impractical for a large percentage of the population. Well, I recognize that home charging is really practical for many people.
Some sort of charging solution will be needed before we're likely to see mass adoption, especially when we know that fast chargers are bad for batteries and they're difficult to get access to in big cities where a lot of potential buyers
exist. The car companies like Volvo and Ford who made these big commitments to transition to 100% EV production did so based on strong government incentives rather than customer demand, and it could be argued that their missteps are great examples of what happens when a company listens to government planners rather than their own customers. A lot of the big commitments were made after car company executives saw the run up in Tesla stock price in 2021, when
EV mania was at a peak. Ford announced in 2022 that it would boost spending on EVs to $50 billion through 2026 and create a new EV division. Ford possibly felt that they could rely on government tax breaks to boost demand in the United States, where buyers were eligible to receive up to 7000 $1500 in tax credits when buying a new EV. Despite the tax incentive, Americans are not adopting EVs anywhere nearly as quickly as analysts projected in 2021.
One of the issues is the American preference for light trucks and SUVs. Ford CEO Jim Farley recently explained on an earnings call that smaller and more affordable vehicles are the best way to go with EVs in volume. He explained that the math is completely different for EVs than for ICE cars. He said in ICE, the business we've been in for 120 years, the bigger the vehicle, the higher the margin. But it's exactly the opposite
for electric. The larger the vehicle, the bigger the battery you need, which puts more pressure on margins because customers will not pay a premium for those larger batteries. Ford announced this summer that it would retool a plant in Canada to produce large pickup trucks rather than the electric SUVs it had previously planned
to build at that location. Around the same time, GM said that they expected to make significantly fewer battery powered cars and trucks this year than they'd previously forecast. Some of the decline in interest in electric vehicles is possibly driven by a much slower roll out of charging infrastructure than EV bulls were predicting, combined with overhyped expectations for battery
improvements. US auto manufacturers hesitation about building more electric vehicles comes at a politically uncertain time for the industry, as incentives could change significantly if Donald Trump wins the election in November, given that he has pledged to undo many of Biden's green policies, including those that promote the transition to
battery powered cars. Elon Musk does appear to have befriended Trump, possibly with the goal of striking some sort of a deal, but the probabilities of that happening are impossible
to predict. Electric vehicles themselves seem to carry all sorts of political baggage, in particular in the United States, where they're often promoted by those who see them as a virtuous product that will save humanity from climate change, and opposed by people who resent the tax breaks they get for their wealthy owners, special parking spots they get, and the feeling that the vehicles are being forced on society by government regulation.
People who believe in free markets are offended by the amount of government support EV manufacturers have received through direct subsidies and carbon credits. With demand for EVs dropping off in Europe, hybrid sales have been rising and are up about 22% for the first seven months of the year. The market share for plug in hybrids, which operate like true EVs for a limited range before swapping over to a combustion engine battery combination, has however declined year on year. In Europe.
Plug in hybrids tend to be more expensive than traditional hybrids which have smaller batteries. We'll be back after a quick break. It's like our brains have a mind of their own when it comes to money, right? Yeah. It's crazy. We're diving into that today, how our brains really deal with money. We're going deep on this one, looking at money and how we decide behavioral research. This stuff is like eye opening. Seriously, it turns out our brains aren't always rational,
especially with money. No kidding. So what's the deal with that? Why are we so bad at making, you know, sensible financial decisions well? Our brains are kind of lazy in a way. They love taking shortcuts. Hybrid sales have grown by 31% year over year in the United States and made-up 8.6% of the total light duty market in the first quarter, which increased
to 9.6% in the second quarter. Plug in hybrid sales in the United States grew slightly from 1.7% to 2% of the total light duty market year over year, according to investors Business Daily. Toyota, Honda, and Ford are the market leaders in hybrid sales, in that order.
According to Price Waterhouse Coopers, the Tesla Model Y is the top selling full electric vehicle in Europe, China, and the United States. While Tesla still holds the number one spot in the United States, it no longer sells the majority of EVs as it used to. This was to be expected over time as more and more competition came online.
Teslas market share comes in at 49% of the total EV market in the second quarter as sales shifted to legacy brands like Ford, GM, Hyundai and Kia, according to the FT Foreign brands used to make up 64% of auto sales in China in 2020. That has declined to 37% in the first seven months of this year. US brands are down more than 23% so far, and Japanese, Korean and German car makers have also suffered double digit declines.
Sales of Chinese brands, on the other hand, are up nearly 22%, with Chinese companies dominating sales in the Chinese EV market, which is the biggest EV market in the world. Tesla's share of Chinese EV sales fell to 6 1/2% in the first seven months of the year, from almost 9% a year earlier.
As Tesla sales have fallen in China, BYD sales have grown, partially driven by Chinese demand for hybrids, which work out to be more practical and benefit from generous EV subsidies provided by the Chinese government.
Anecdotally, a few weeks ago I saw first hand how uninterested people have becoming E VS When waiting at an airport rental counter for a car, the car rental employees were struggling to clean and refuel the returned cars to hand them over to new customers and a bit of a line of irate customers had built up who had paid for contactless rental where they were supposed to not need to stop the rental counter when an employee announced. Does anyone want an electric vehicle?
The entire tire line took a step backwards in horror. They may have been tired from long flights, but they didn't want the hassle of an EV messing up their vacation or business trip. A few years ago, I think people would have been more enthusiastic to try one out.
My sister, who actually owns an EV and knows their pros and cons and is familiar with dealing with charging stations, got stuck with a rental EV from Hertz this summer when on vacation in the United States with her three small children. She was driving from New York City to Cape Cod at night and expressed skepticism to the Hertz employee that the car would make it. They assured her that it would,
and of course it didn't. She found herself searching for charging stations in the middle of the night, only to find that the plug that came with her car was not compatible with the first charging station she found. The next charging station she found was out of order, stranded in the middle of the night with three small children. She parked the EV at a police station where they let her plug it into a regular outlet, and she took an Uber the rest of the
way. The next day, when she was able to collect the car and return it to Hertz, they hit her with a $175 fee for returning it. With a low battery, she was unable to fit the five hour charging time into her schedule. What should have been a six hour drive costing $140.00 turned into. To a 19 hour nightmare that cost
$400.00. Obviously, that's really shameful customer service from Hertz, but stories like this explain people's reluctance to pay a premium for cars that are often a downgrade in terms of practicality. So are EVs terrible products? No, they're not. They may make terrible rental cars, but they really work for commuters who can charge them at home, where charging is often cheaper than filling up with gas and it can be done while you're asleep. They improve the air quality in
congested cities. They have phenomenal acceleration, and they're very quiet. But like every other product, they involve compromises. According to Kelley Blue Book, the average price of a new EV sold in the United States this year was $57,000, the average hybrid was $15,000 cheaper at $42,000, and the average petrol car cost half the price of the average EV at $27,000 new.
Now, these numbers are likely skewed by people buying more luxurious EV's on average than regular cars, but nonetheless, these things are expensive. It appears that sales growth expectations from both auto manufacturers and investors were a bit optimistic over the last few years. The latest numbers from the ACEA showed that August electric vehicle sales in Europe were down 36% year on year, despite all the green subsidies in place.
Hybrid sales growth slowed too, but are still up 8.3% year on year. Even Tesla, the leading EV manufacturer, has changed its plans because it no longer expects the kind of sales growth it's seen in the past. The company has slowed plans to build a factory in Mexico and cancelled a meeting with the Indian Prime Minister to discuss a new plant in India. The one bright spot for those interested in buying an EV is that there appear to be amazing lease deals available in the United States.
Ed Bolian of the Vin Wiki YouTube channel, who didn't particularly want an EV, described how he managed managed to lease a new Audi E Tron RSA $150,000 vehicle for only $250 per month, plus some fees and taxes and things like that. This is cheaper than a lease on an Audi A3, the company's cheapest model. I'll put a link to his video in
the description. The fact that unsold EVs are stacking up on dealer lots, combined with changes in the rules for the US federal EV tax credit, which favours leasing over buying electric vehicles, means that some leases were available this summer for as little as $20.00 a month after EV tax credits and special state incentives. As Bloomberg points out, that's less than the cost of a tank of
gas. Joe Biden's Inflation Reduction Act restricted tax breaks for EV buyers if a car cost more than $55,000 or a truck cost more than $80,000. The tax break doesn't apply to cars not assembled in the US or to cars that use Chinese materials in their batteries. It also capped the incomes of buyers who could apply for tax
credits. The act left a loophole, however, where lease DVS were classified as commercial vehicles, which would qualify for the full tax credit even if they don't meet the battery and parts sourcing requirements. With this credit, dealerships can bundle the $7500 tax credit savings into the lease financing cost, lowering customers monthly
payments. The expected residual value of a leased vehicle is a factor in the lease calculation, and it would appear the dealers are assuming these cars will not depreciate as much as they actually do depreciate. As in a typical lease, if the car is worth less than the expected residual value at the end of the lease, you can turn
it in without any extra fees. We might eventually move to an EV future, but based on recent trends it does not appear that this will happen at the pace many were projecting a few years ago. It does appear that governments around the world do want to make this happen, even if they are walking back the dates. Thanks for tuning into the podcast. If you found it interesting, I'd appreciate if you sent a link to a friend to help the podcast grow. Have a great week and talk to
you again soon. Bye. If you enjoyed this episode, be sure to subscribe so you're notified when a new episode is posted. Thank you to everyone who is supporting this content on Patreon. If you enjoyed this content, you can find more like it on YouTube, on the Patrick Boyle on Finance channel, or follow us on Twitter at Patrick E Boyle. Thanks for listening. Bye.