Electric vehicle sales are closely followed by auto industry analysts who are trying to predict when they will surpass internal combustion engine sales.
Morgan Stanley’s analysts are the latest to share their prediction in a new report today. They predict that more electric vehicles will be sold in 2040 than gas-powered cars.
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The report was published by Harald C Hendrikse, Adam Jonas, and Victoria A Greer. They described their 3 cases that they modeled for battery-powered cars (BEVs) going forward:
“Our base case BEV penetration assumes that the 16% penetration in 2030 accelerates to 51% by 2040 and 69% by 2050. In our bull case, based on an even more aggressive regulatory regime to accelerate the reduction of emissions, we get to 60% penetration by 2040 and 90% by 2045. Our bear case BEV penetration model assumes that BEV development proves too expensive, or technically not viable and governments are forced to delay regulatory tightening. In this case, new BEV models grow global share to 9% by 2025, but fade after that, as they have done previously.”
Here are the growth models:
The base case means a cumulative of 1 billion all-electric vehicles on the roads globally by 2050.
Morgan Stanley sees EV sales being driven by emission regulations over demand, but I see it in a different way.
Call me biased as a restless EV enthusiast, but I think most forecasts are way too conservative. For example, Bloomberg Energy is even more conservative than Morgan Stanley and predicts 35% of global car sales will electric by 2040.
Those predictions are understandable since current EV sales are barely breaking 1% in most markets, but I believe there will be an inevitable shift in the near future that will change everything.
Once all-electric powertrains, due to the falling cost of batteries, reach cost parity with internal combustion engines before accounting for cost of operation (gas and maintenance savings), there will be virtually no reason for buyers to want gas-powered cars over battery-powered cars.
At that point, automakers will divert all their investments to electric vehicles. As we recently reported, even the major automakers most forward thinking about EVs are still investing more in gas-powered car R&D than electric vehicle R&D: VW is spending $10 billion on EVs over $22 billion on other cars.
Therefore, it becomes about predicting when that point is reached and then how long it will take for automakers to convert all their manufacturing capacity to electric vehicle production.
Based on current battery cost trends and current investments in electric vehicles, I see that point happening between 2020 and 2025. After that, it’s more difficult to predict how long it will take for the industry to build the supply chain around EVs, but considering there’s already a lot of work being done on it now, I doubt it will take more than 10 years.
It means that I predict that all new car sales will be all-electric by 2035. Am I crazy? Let me know in the comment section below.