Electric Vehicles Are Picking Up Speed

Last month saw U.S. Electric Vehicle (EV) sales up 40% year-over-year. Every Tesla owner I know loves their car – although the February jump was helped by the launch of Ford’s Mustang Mach-E. EV market share (which includes hybrids as well as all-electric vehicles) rose from 1.8% to 2.6% in February. Nonetheless, EV sales fell last year due to Covid, from 331K to 296K.

Forecasts of booming EV sales are so common as to scarcely be news anymore. It’s possible to go back and find old forecasts that were way off. This one from 2011 looking ahead to 2020 includes a few the authors would like us to forget. Deutsche Bank’s forecast of U.S. sales was off by 2X. However, McKinsey’s global estimate was only slightly high.

David Victor recently published Energy Transformations in association with Engine No. 1, the activist investor pushing for Exxon Mobil to respond more quickly to the energy transition. The chart below is from his report – the small chart in the inset is a 1992 forecast from Shell on EV sales which has turned out to be wildly inaccurate. But the point of the main chart is that sales really are going to take off over the next decade.

It’s possible to find other old forecasts that were wildly inaccurate. Futurist Tony Seba predicted in 2017 that by 2030 100% of auto sales would be autonomous (self-driving) EVs (see A Futurist’s Vision of Energy). It’s still nine years away, but for autonomous EVs in the U.S. to reach that level would require their market share to double approximately every 20 months.

Growth in renewables and EVs have been about to break out for years. The world will need more energy – the U.S. Energy Information Administration (EIA) expects global energy consumption to increase by 50% over the next three decades. They expect every source to increase, including coal.

High among Elon Musk’s many talents is marketing, because he’s successfully linked EVs with clean energy in the minds of consumers. America generates around 60% of its power from coal and natural gas, with renewables (including hydro) and nuclear each providing around a fifth.

There are substantial variations – California is required to reach 100% emission-free power by 2050, and is about two thirds of the way there, even if their grid sometimes fails (see California Dreamin’ of Reliable Power). The state leads in EV sales. But Wyoming residents who buy a Tesla thinking they’re contributing to a cleaner planet overlook that over 80% of the state’s power comes from coal.

America’s coal consumption is heading in the wrong direction – the EIA expects coal’s market share of power generation to rise from 20% last year to 23% this year and next, matching the growth in renewables. Some of the growth in coal is due to higher natural gas prices – Democrat policies are intended to raise energy prices, although using more coal is an unintended result. And nuclear continues to drop, which is a big missed opportunity.

EV sales globally reached a 6.9% market share last year. President Biden is planning for the U.S. government to only buy EVs in the future. As my partner Henry pointed out, today’s internal combustion engine automobiles are built around a small power generator, which does seem less efficient than simply a battery.

Although insufficient charging stations and the time required to recharge remain impediments for many buyers, these challenges can be surmounted. A battery that lasted an entire day’s drive would certainly help. There are also fewer moving parts, which keeps maintenance costs down. And every EV owner loves the acceleration.

EVs are selling because they’re providing consumers what they want, and are growing market share as a result. By contrast, growth in renewable energy is more reliant on utilities increasing the portion of the power they supply from solar and wind. The absence of a carbon tax from the Democrats’ planned clean energy legislation reveals that, although many voters express concern about climate change, they’re unwilling to spend much to solve the problem.

Meanwhile, pipeline operators such as Williams Companies (WMB) have found that increased use of renewables is boosting natural gas demand – weather-dependent power needs something reliable when it’s not sunny and windy.

Increased EV penetration is part of the electrification of the transportation sector. Since natural gas remains America’s biggest source of power generation, this trend will tend to constrain growth in crude oil demand in favor of natural gas, although the impact remains years in the future. In emerging countries, EV growth adds to the urgency to lower their dependence on coal for power generation. The energy transition continues to rely on natural gas.

We are invested in all the components of the American Energy Independence Index via the ETF that seeks to track its performance.

Print Friendly, PDF & Email

Important Disclosures

The information provided is for informational purposes only and investors should determine for themselves whether a particular service, security or product is suitable for their investment needs. The information contained herein is not complete, may not be current, is subject to change, and is subject to, and qualified in its entirety by, the more complete disclosures, risk factors and other terms that are contained in the disclosure, prospectus, and offering. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy,  completeness or timeliness of this information. Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments.  Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.

References to indexes and benchmarks are hypothetical illustrations of aggregate returns and do not reflect the performance of any actual investment. Investors cannot invest in an index and do not reflect the deduction of the advisor’s fees or other trading expenses. There can be no assurance that current investments will be profitable. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase. Indexes and benchmarks may not directly correlate or only partially relate to portfolios managed by SL Advisors as they have different underlying investments and may use different strategies or have different objectives than portfolios managed by SL Advisors (e.g. The Alerian index is a group MLP securities in the oil and gas industries. Portfolios may not include the same investments that are included in the Alerian Index. The S & P Index does not directly relate to investment strategies managed by SL Advisers.)

This site may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involves a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of SL Advisors LLC or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made. r

Certain hyperlinks or referenced websites on the Site, if any, are for your convenience and forward you to third parties’ websites, which generally are recognized by their top level domain name. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with SL Advisors LLC with respect to any linked site or its sponsor, unless expressly stated by SL Advisors LLC. Any such information, products or sites have not necessarily been reviewed by SL Advisors LLC and are provided or maintained by third parties over whom SL Advisors LLC exercise no control. SL Advisors LLC expressly disclaim any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.

All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.

Past performance of the American Energy Independence Index is not indicative of future returns.

Print Friendly, PDF & Email
1 reply

    EVs are selling because they provide customers what they want? Take away the subsidies to buy them and see what happens to sales.


Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.