How quickly zero-emission electric vehicles are adopted globally will be determined by the level of government support for policies that reduce carbon dioxide emissions to combat climate change and enhance energy security, S&P Global Ratings said in a report released Thursday.
While the transition of the global light vehicle fleet from internal-combustion-engine vehicles to that of pure electric vehicles is "still in its early stages," the report said the adoption of EVs will depend upon government incentives, battery costs, range anxiety and infrastructure suitability.
"We expect the transition to EVs will occur at a faster rate in Asia, followed by Europe and then by the United States," the credit agency's report said. S&P Global Ratings, like S&P Global Platts, is a unit of S&P Global Inc.
EV sales could reach roughly 10% of global light-vehicle sales by 2025, the analysts said, adding: "How well-positioned traditional automaker and suppliers are to participate in this emerging market will increasingly have credit implications."
As the global car fleet becomes larger, emission standards for many countries have become stricter and "continue to converge."
China has regulations that limit average fleet CO2 emissions to 117 grams per kilometer, while the US is at 119 g/km and Europe 95 g/km, all by 2021.
Besides CO2, there are increasing fears of exposure to nitrogen oxides, or NOX, that has "penalized the share of diesel in new sales in Europe," which, the report said, has accelerated a shift towards gasoline engines and also hybrids. TESLA MAKES LAYOFFS
Global sales of plug-in EVs exceeded 2 million units in 2018, compared with 1.1 million units in 2017. Still, despite vigorous growth, sales of plug-in EVs represented only about 2% of the global total in 2018, according to the report.
Chinese companies made and sold 1.26 million EVs in 2018, up 61.7% when compared with 2017. China made up 40% of the global EV car fleet in 2017. The Chinese government is targeting EV sales of at least 7% of the domestic market by 2020 and 20% of the domestic market share by 2025.
In the US, EV sales in 2018 totaled 361,307, according to industry publication InsideEvs. 2017's total was 199,826.
In 2018, Tesla sold 139,782 Model 3s, making it the highest selling EV in the US. In the final four months of last year, Tesla sold an average of 20,975 Model 3s per month.
According to InsideEVs, Tesla sold just 6,500 Model 3s in January. The California-based company announced two Model 3 price cuts in January as well as a 7% employee cutback. CURING RANGE ANXIETY CAN BE COSTLY
The high cost of EV batteries remains "a major obstacle to mass adoption" of EV's, S&P Global Ratings said.
"Although adjusting the chemistry of lithium ion batteries could improve efficiency, the energy density is relatively fixed," it said.
As demand for EVs increases, the credit ratings agency said it expects to see the cost of battery packs fall due to economies of scale. It said $100/kW is considered a breakthrough price for mass affordability.
"While there may be other technologies showing signs of promise for better performance (i.e. solid-state batteries), we think any alternate approach would need to have substantial advantages to displace the lithium ion battery as the primary technology for EVs in the near and intermediate term, especially given the level of investment in research and development and manufacturing capacity to date," it said.
The report notes that for an EV to go farther and reduce range anxiety, more batteries are required.
The standard version of the Model 3 can go up to 220 miles without recharging, the report said, adding: "The enhanced model can go 310 miles, but at an extra cost of approximately $9,000."
On a full tank, a gasoline-fueled engine vehicle has a range of 300 miles to 400 miles, the report said.
