The Future Is Electric

EV Penetration Steadily Rising in North America, but Not as Quickly as in Europe and China

Since J.P. Morgan’s previous EV report in 2018, Battery Electric Vehicle (BEV) adoption has progressed only roughly as expected in North America; rising from 1% in 2017 to 2% in 2018, 3% in 2019, and a forecast of 4% for 2020, according to J.P. Morgan Research estimates. This contrasts from the adoption in Europe and China, where growth has been much faster. J.P. Morgan Research attributes this lag, in part, to the relaxation of Corporate Average Fuel Economy (CAFE) standards in the United States earlier this year, although notes the trajectory of EV penetration could change again should priorities shift in any new political administration.

Trucking Along at Zero Emissions

General Motors (GM) recently announced a planned alliance with Nikola Motor Company, an electric truck start-up that has piqued investor interest with plans to transform the industry through zero emission, hydrogen and battery-powered vehicles.

With the partnership, GM will engineer and manufacture the Badger, Nikola’s all-electric and hydrogen fuel cell pickup truck. GM will also supply the batteries and hydrogen fuel cells for two variants of the Badger, and become the sole provider of hydrogen fuel cells for certain long-haul commercial trucks.

“GM’s next-generation of batteries, Ultium, possess performance characteristics that we estimate are at least on par with, or even exceed that of the most advanced competition,” said Ryan Brinkman, U.S. Autos & Auto Parts Research. “The alliance is a validation of GM’s Ultium battery technology, its hydrogen fuel cell technology, and the cost competitiveness of both.”

Tesla Charges Ahead With New Battery Plans

Tesla’s recent Battery Day detailed plans to significantly lower the cost of its batteries, while also increasing their power and range. Cost and performance gains are primarily expected to stem from design and material improvements, as well as better packaging into its vehicles.

Tesla targets a +54% improvement in range, a -56% reduction in cost per kWh, and a -69% reduction in upfront investment per GWh to begin to be realized by approximately mid-2022. However, according to Brinkman, benefits are about three years away. “We generally believe Tesla can at least maintain its comparative advantage in batteries, allowed by its earlier start and currently greater scale,” he said.

Tesla also plans to debut an inexpensive $25K model within the next three years, enabled by its lower cost batteries; although, Brinkman anticipates delays. “The ability to price an EV that low seems contingent upon Tesla realizing its targeted battery cost savings, which it does not expect for another three years,” he said.