This is Dana Perkins and you're listening to Switched on the bn EF podcast. At the beginning of every year, several of b and EF's teams publish their things to Watch research notes for the year ahead. In addition to our weekly episodes on this show. In January, we're going to be sprinkling in a few shorter bonus shows and they will focus on some of these things to watch.
Hopefully they'll be as fun for you to listen to as they were for our team to write and then record, because these shows are really a chance for our team to digest everything that happened in twenty twenty three and think about what all of this means for the year ahead. To kick off our series of things to Watch shows today, I am joined by bn EF's head of Advanced Transport, Colin Mcerriker, and he talks to us about electric vehicles
and clean transport. In twenty twenty four, we discussed the biggest electric vehicle manufacturers in the world, Tesla and BYD, and which one could come out on top for car sales during the year ahead. We also talk a bit of the United States and whether crossing the one million EV's soul mark in twenty twenty three, will or won't mean new milestones met in twenty twenty four, and we'll discuss whether developing markets will be taking advantage of cheaper
electric vehicles. And finally we turn to oil demand and whether we expect to see significant demand destruction from transport owing to electric vehicles. To access the research note that our team wrote titled EV's and Clean Transport Ten things to Watch in twenty twenty four, B and e F subscribers can find them at BNF dot com or at BNF go on the Bloomberg terminal. If you like this podcast, if you subscribe or give us a review, it'll help
make us more discoverable by others. But right now, let's jump into our conversation about twenty twenty four for Electric Vehicles and Transport with Colin. Colin, thank you for joining us again today.
Thanks Dana Greig to be here.
We are here at the beginning of the year. It is still January, and we're talking about EV's and Clean Transport Ten things to watch in twenty twenty four. Now, how many years running have we been doing things to watch? Note for the clean transport space, so.
We've had a broader Bloomberg one. Since BNF was founded, there's been one, but for transport, we've just been doing it since twenty sixteen, and that was because I liked what we were doing company wide and I decided, actually, we should start doing one on First it was just on electric vehicles, and then as our scope has expanded to include other parts of transport, we've started adding predictions in on that as well.
Everybody likes a good predictions note, but I would actually say this is just as much looking back and digesting really what happened in the previous year. I want to know, how do you rate your scorecard for your twenty twenty three predictions?
Yeah, I mean this is one of the things that we think is we've always said is really important, is you have to go back and see what did you actually get right. Otherwise you sort of don't really absorb the learnings it and you see lots of groups make prognostications but not actually come back and revisit them. So what we do is we go and say, okay, we pull in all the data at the end of the year, and we say, look what did we get right and
what did we get wrong? And then across the group, we try and give ourselves a score on each one of the ten predictions we made. So, just as an example, last year, we predicted fourteen million EV sold. We're still tabulating a bit of December data, but it looks like that's going to be within about one percent of the actual total. So there, we'd give ourselves ten out of ten. Right, we'd give ourselves a pat on the back and say.
We did that. Well.
There's a couple other good predictions. There's some that didn't go as well. So we also had one around battery prices. We thought this time last year we thought raw material prices might stay higher for longer, battery prices would stay kind of elevated the way they were in twenty twenty two, but in fact they dropped really sharply in twenty twenty three, so down fourteen percent. So in that case, we gave
ourselves zero out of ten. So overall we I think our predictions end up coming out pretty good, but there's always one or two misses, And I think that's kind of the point, right. You don't want to only predict safe things, or predict things that are so generic that you can't really test them. So we try and have quantifiable, testable things that we're making predictions because that's part of the value and it's also part of the fun of it too.
Yeah, I mean it's interesting to actually see what does end up happening. And also if you're surprised by it, surely there are other people out there who are supplied by it in the industry. So so let's jump right into some of these predictions. So in twenty twenty three, passenger EV sales actually broke the one million vehicles sold mark.
Do we see this momentum continuing in the US in twenty twenty four because one of the things we also talked about on the show is that US auto manufacturers have started to temper their production.
Yeah, this was the US is probably the most the trickiest region to forecast this year. And yeah, they broke a million with a few months to spare, so they're well over a million for the year. Around one point four million plug in vehicles sold in the US last year. We think they're going to keep growing up to around somewhere between one point eight and one point nine million. But I would say the US is the region where we're the most uncertain, and that's because of multiple factors.
One of them is that this incentive that's available in the US, the tax credits, it's significantly harder to access them this year because that's because there's this Foreign Entities of Concern guidance that restricts the number of models that are going to be eligible, as well as the existing caps on incommon caps on retail price. So there's a lot fewer models that are available for incentives, at least
at the federal level. And then on the pushing on the other end of that is those incentives in the US are now available at the point of purchase instead of at the end of the tax here like they've previously been, or at the end of the calendar year like they've previously been. So I think that's where we had a bit of trouble calling it. And then you do see something from the established automakers like Ford and GM where they're saying, look, actually inventory levels are pretty high.
They've downgraded there where they think their targets are going to land and push back their manufacturing ramput plans a bit. But on the other side of that, then you see groups like Hindai Kia selling really well, Tesla selling really well, Tesla's about four percent of the overall US auto market right now, and the US auto market's quite fragmented, so that's actually quite a decent share, ahead of groups like BMW and others.
So it's a tricky one right now.
I do think the biggest thing I would say about the US market is it will have an outsized impact on the headlines that you see written about the global EV market, but it's not the most important region for the global EV market. It's going to be about eleven percent of global EV sales this year the US and the US share of the global EV market has declined almost every year for the last decade, so really that's reflecting much more rapid ad option in places like China and Europe.
Well, so let's talk about that Tesla and BYD so the US and China specifically. You know, at the end of twenty twenty three, Tesla delivered this cybertruck that people have been waiting for for some time now, and at the same time, BOID has been making headlines because they have also been growing. We're already a very significant player in Asia, but have expanded further. So how are these
two companies positioned? I guess versus one another in terms of growth and who will be the dominant EV auto manufacturer next year.
Yeah, I think it's probably going to go to BYD this year. So we actually predicted that in twenty twenty three that BID would edge out. Tesla is the largest seller of battery electric vehicles at the end of twenty twenty three, and that is pretty much what happened in
the final quarter. Bid edge them out, and I think they will continue to have an advantage there, and that's really because they've spent a lot more time in the last few years launching new models in many different price segments, whereas Tesla still has quite a limited model range, and those models that it sells, particularly the Model Y and the Model three, do extremely well. So it's not to take anything away from those, but they are all at a minimum price point that is higher than the average
price point BID. And so while BID has been pushing into all these different segments and pushing down all the way down to sort of an eleven thousand dollars car that it can sell in emerging economies, Tesla the cyber truck is going to be a relatively low volume vehicle for in our view, this year, and Tesla just doesn't really have anything at that entry level in the market where a lot of the volume sits, especially in countries outside of North America and Europe. So I think BID's
probably gonna edge it. Bid is probably going to be ahead of Tesla this year for the whole year. But I think what's most important to recognize that these two companies are way ahead of everyone else. So they're miles ahead of all of the legacy autit makers. So we can get a bit fixated on this race between at the very top. In some ways, it doesn't matter. You would just say there's two breakout winners, they're beating everyone, and then everyone else is a long way back.
And you can also look at it in different ways.
You can look at volume, you clink a profit generated, there's different ways to cut this, but certainly we see a gap opening up at the top between those two and everyone else.
Okay, so let's stick on one of these. So b WHYD one of the things they've done is actually taken over a Ford plant in Brazil. What does this really signify? What does it tell us about growth markets and developing economies in terms of electric vehicles?
Yeah, I think it's a fascinating case study. So you look at a lot of the places BYD's planning on expanding to. They do have a plant that they're going to build in Eastern Europe, but a lot of the places that are going to expand to are in emerging economies.
And if you look at the portfolio of vehicles they have, they have all these ev models that are in this kind of ten to fifteen to twenty thousand dollars range, which are much cheaper than the vehicles you see on average in North American Europe, but really appealing to an
emerging market buyer. And that place, that plant in Brazil is really fascinating because it used to be a Ford plant, and Ford pulled out a few years ago from Brazil, and there's sort of this I mean, you don't want to overdo the symbolism too much, but the idea of like a Western automaker not fully pulling out of Latin America, but pulling out of that plan, pulling out of there, and bid coming in, taking it over, relaunching with a
whole bunch more investment. It's kind of emblematic of a broader shift in the overall auto industry, and that's that Chinese automakers are about to have their moment. They have been building towards this for a long time. They've been building up to know how, and they are exporting more vehicles now than the Japanese. They overtook Germany two years ago, overtook Japan last year. We think they'll be ahead of
Japan again this year. And so I think there's a really fascinating thing to watch there on these emerging economies, because there is still this narrative that EV adoption is primarily a wealthy economy thing, and there's some truth to that now. But if you look at the vehicles that the Chinese automakers are launching, many of them are not premium, high end vehicles. They're ones that are very much aimed at average buyers, and so I think we're going to
be watching that quite closely. We're expecting almost a million evs sold in places like India, Southeast Asia, Latam other emerging economies this year, which is just quite a jump versus where we've been in other other years before.
I mean, this is a story about expansion, but really one of the themes that ran across all of twenty twenty three was supply chain disruption, not just by the way for transportation, but for a number of the different industries that we cover. It benfter talking about higher material costs and higher interest rates. Where do you see that going in twenty twenty four as it relates to the transport space. Do we foresee a more stable environment for auto manufacturing?
So what kind of happened through last year is that raw material prices started out high and then they really plummeted. So they were already sort of turning this time last year, and then they really went further. So lithium, cobalt, nico, all these things way way down. And so when we looked at the battery prices this year, they were down fourteen percent on average, and in some cases down significantly more than that. And that's for lithium I own battery packs.
So that's really reflecting a couple things. One of them is this drop in raw material costs. Another No One is just intense price competition between manufacturers because they have built a lot of manufacturing capacity and again really driven
out of China. So some quick number crunching we did this at the end of this year, was that China produced enough batteries to more than supply all of the world's evs and all of the world's stationary storage deployed in twenty twenty three, So just produced in China significantly more than was needed globally. So that just kind of gives you a sense of how competitive this market is, and that's sort of part of one of the reasons
we saw those declines. I think on the supply chain, the really interesting story that I would take cut of last year and that I think will continue into this year is this tension between localization and on one side, and then cost reduction and deployment on the other. So for most of the last decade, we've been talking about how do we get this stuff deployed really quickly, and now increasingly we're saying talking about okay, but we also want it made locally. We also want it made in Europe.
We also want it made in North America, not just the cheapest and that's those two things are sometimes at odds with each other, right, Sometimes the cheapest way to do it would be too important from the cheapest producer, which is still know right now. So I think those all that effort to try and localize supply chains in the long term will be a very positive thing, but in the short term actually think it's driving up costs
and in some ways going to slow down deployment. So this is kind of where we got a bit uncomfortable with this year, is there may be some real hiccups this year around deployment, and we could even see sales be significantly lower than we thought. But that's the number we went out with. That's sort of sixteen about seventeen million headline number. We'll see where it lands.
Yeah, we'll see your scorecard this time next year. Let's talk about some of the implications for other industries, so specifically oil. How much oil demand is being destroyed by electric vehicles becoming more popular.
Yeah, this is one of those things that's probably it's been hyped a bit too early in some ways. So you go back a few years and everyone's talking about how there's stories about EV's and peak demand, and if you look at the impact, it was pretty modest so far. Really it's a relatively modest amount of displacement. But that's really going to start to change this year. And so there's about fifty seven million evs on the road by the end of this year, that's going to be about
four percent of the passenger vehicle fleet. And if you just break down where oil consumption goes, road transport is still the largest source of oil demand, and passenger cars are still the largest source of oil demand within road transport. So there's sometimes said, oh, no, the really important thing is plastics or aviation, and those are important for growth, but in absolute numbers, displacement from passenger cars is where the biggest chunk of oil demand is, or that's where
the largest absolute share of oil demand comes from. So what we're kind of watching right now is internal combustion engine vehicle sales are still down about twenty percent from their twenty seventeen peak. They're significantly off that peak we think they peaked in twenty seventeen, or internal decline. We've been saying that for a long time or long term decline. There might be bumps upward or downward here and there, and that twenty seventeen peak is starting to flow into
the fleet. So there's a big lag between what happens on sale new sales and the fleet. So it's not going to turn the corner anytime immediately. But we think broadly the fleet of internal combustion engine vehicle starts to sort of plateau in the next few years. And those vehicles are also more efficient than the ones that were sold twenty years ago or fifteen years ago the ones
that are being retired. So all that together means we think think that there is a start to become a material impact from electric vehicles this year.
On oil demand.
Now, most of the displacement that we've had historically from electrified electric vehicles has been on the two and three wheeler segment that's been relatively stable. That's because China deployed a huge number of these over the last decade. But now passenger vehicles will start to play a material role. So by the end of this year, we think passenger vehicles will be displacing our a little over six hundred
thousand barrels per day of oil demand. That's relatively small still against over one hundred million barrels per day of oil demand, But if you think about what is the additional demand going forward in the twenty twenty in the second half of the twenty twenties year, that starts to be quite material because the annual additions to oil demand are starting to decrease. There's this been this COVID rebound.
We think they're going to start to decrease next year, So then that effect from EV's becomes more visible because it's not being overwhelmed by a pigger increase. So I think you're going to start to see more groups kind of acknowledging that. Like I said, I think the hype on this was a bit early, but I think that starts to play in a real way now. And the place to watch there is China. So China has seven
percent of the vehicle fleet is now electric. Sinopek has said that it thinks gasoline demand has already peaked in the country and that it's long term declined from here. We overall think the road fuel demand globally has still going to a rise for a couple more years till around twenty twenty seven, and then it's a bit of a plateau before it starts to come down more sharply
in the twenty thirties. But I think what we're flagging with this prediction is that this is the year that actually marks real materiality for the energy that's consumed and displaced from evs, and.
If we're not putting oil in the vehicles we're putting electricity in, which then brings us to charging networks, which we have talked about on this show. And you know, one of the themes across twenty twenty three was grids and whether or not grids can handle all of the additional demand on them as well as all of the
new renewable energy in producing infrastructure. On the other end, when it comes to charging infrastructure, which really helps with actually getting these vehicles on the road, what is the outlook for public chargers?
So you're going to see a lot more charging infrastructure built next year. We think there's about one point two million public charging connectors, so not stations, but in outlets public chargers that is installed in twenty twenty three. So that brought the total to just under four million, which instenttally is where we predicted it would be. I think we said four point one million and it came out at three point nine or something, so pretty good there.
We think it's gonna be about one point six million this year. Now it's important to recognize there that this doesn't mean charging is solved everywhere. It's going in much faster in some places than others. So China is installing more public charging than the rest of the world combined, and when it comes to ultra other types of fast charging, it's that ratio is even more than that. So there is going to be a lot more chargers go in.
But I think you're still going to see charging as a as a challenge and as a barrier, particularly in the US where some of the chargers that are in there are not especially reliable. And I think what we're seeing kind of globally is a very uneven picture on the degree to which people trust the charging infrastructure and
should trust the charging infrastructure to be honest. So the other thing is that the public charging networks are starting to be pretty big dispensers of electricity when you look at the total demand for electricity that is going to come from public charging. So we have ev charging in China representing the same amount of total electricity consumption as a sort of small to mid sized country, and last year we think it was about the same as all
of Ireland. So we'll we'll keep going with these country comparisons to hopefully make it a bit more tangible to people who don't think in tear what hours.
So Colin, you and I are about to head to California for our summit that is in San Francisco, which is specifically focused on the transport space. One of the areas that has been tricky for zero missions vehicles across the board has been in the medium and heavy duty vehicle space. And in California they are soon to implement the Advance Clean Truck Legislation, which is abbreviated as ACT
and the Advanced Clean Fleets Rules ACF. What do you think is going to happen then in terms of commercial vehicle sales and is this going to essentially spur that part of electric vehicle transition on?
Yeah, we think it is.
So there has been more activity around heavy trucks in some other markets, but the US it's been relatively slow so far.
The ACT marks.
That change for that. There are some other states that follow it. The ACT is essentially a quota system for zero missions trucks that the manufacturers who sell trucks there have to meet and the fleets on the fleet side.
And we think for twenty twenty four somewhe around five to nine percent of sales in California will have to be zero missions in the heavy medium truck segment to meet that, and it depends a bit on the segment, but that's sort of an overall it's not a bad guideline number, and that's a big jump up from where we've been in the last few years. So there is going to be a big surge we think. We know
a lot of groups have been preparing for that. There's also been a lot of lobbying and maneuvering behind the scenes on this, So some of the groups that might make more publicly supportive statements behind the scenes have been lobbying against some of the provisions of the Act. So it's like any other policy around vehicles, there's sort of this fight between the regulators and the manufacturers, most of whom are not that keen on being pushed into new
drive train types. But also, as with passenger cars, you've got some that are going down that path as pure plays and are happy to keep pushing things forward, and this does create a significant opportunity for them. So I think we're going to see a big jump there, and you're going to hear a lot more about charging big trucks, about fleets going electric, and just about the major cost savings that can be available in terms of fuel costs, because you've got to remember, for some of these fleets,
fuels is a big part of the cost. And if they can get more evs into their fleet, because most of them are going to v's, there'll be some hydrogen fuel cell vehicles in there too, but most of them are going to be EV's, they can significantly cut their operating costs. So I think you're going to hear more about both the challenges and the success stories that come from that.
Now pivoting away from the electrification of fleets, but still in decarbonizing, let's talk a little bit about airlines and shipping, where electrification isn't necessarily going to be the most obvious path forward. It's in these kind of sustainable aviation fuels and cleaner burning fuels. With a number of shipping and airlines looking at emissions reduction, is there going to be enough clean fuel to meet demand? And what does twenty twenty four hold.
Yeah, this is an important point and it may seem like a bit of an abrupt pivot when we talk about from cars to ships and planes, but one of the things you have to realize is the ways to decarbonize these things are linked and one of the reasons they're linked is that there is a scarcity of supply to decarbonizing some of the hardest things, and those things
are things like shipping and aviation. So a big part of the reason you need to push hard on electrifying the things you can electrify is because there's going to be really intense competition for the supply.
Of those liquid renewable.
Fuels for things like shipping and aviation. So that's kind of why they're linked, and in our view, it doesn't make sense to do anything other than electrify, at least in terms of the most efficient route to getting there. In terms of decarbonizing passenger cars, that's by far the
most cost effective and efficient way of getting there. So on the fuel side, yes, what we're starting to see is this competition shaping up between the shipping sector and the aviation sector for supply some of those clean fuels that can be used either directly or to make sustainable aviation fuel through a different conversion pathway. And we've actually we track every off take agreement between an airline and a fuel producer of sustainable aviation fuel. We've tracked one
hundred of those deals since twenty nineteen. We have a database on this if anybody wants to see it. We've got quite a bit of coverage of this now and that amounts to the total amount of purchase about thirty seven billion leaders and that looks like an amount that can be supplied. But the point is is that not everyone's entered the market yet, so more what we're expecting to see is more and more groups saying, look, we're trying to purchase sustainable aviation fuel, but we can't necessarily
find the supply, the reliable supply to do that. And I think that's where you're going to see this sort of intense this competition ramp up between the shippers and the aviation sector. And so far, what we're seeing is the aviation sector is jumping out ahead, so they're the ones signing many more of these deals. There is some activity on the shipping side, but it's generally much smaller, and that might just be because those are less consumer
facing brands than airlines are. But the pressure is going to start to come on them too, So I think you are going to see this continued competition and that's going to probably be a good thing for catalyzing more supply to help these others harder to abate sectors decarbonise as well.
Well.
Colin, thank you for joining today and talking through some of the points that came out of ten Things to Watch, and we'll have you back to give as a scorecard, and certainly we'll be digging in on a number of these topics with members of your team throughout the course of this upcoming year.
Thanks Dana, and we will definitely revisit them. There's no point in doing these things if you're not accountable on them, So looking forward to joining in a year's time and we can score them and see how we did.
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