The year 2023 marked significant milestones in EV (electric vehicle) sales across key markets—China, Europe, and the US. Yet, despite record-breaking sales figures, the growth fell short of automaker expectations.

To shed light on the outlook for electric vehicle demand and the potential for disruption in the industry, GLG’s Sam Stopps sat down with seasoned industry expert, Marc Robinson, who has more than 30 years of experience in the automotive market.

Can you discuss how demand for EVs grew across 2023 and how the market is positioned in 2024?

It’s important to think about EVs differently in the three major markets, China, Europe, and the US. But it is true that in 2023, EV sales hit records in all three markets. For example, in the US, it passed 1 million battery EVs for the first time ever. Yet sales growth was somewhat disappointing in all three markets since the OEMs (original equipment manufacturer) expected it to be even greater. There were about 8 million battery electrics sold worldwide and the market share again was records in all three markets, 8% in the US, 16% in Europe, and 25% of the market in China. When you add in plug-in hybrids, PHEVs, you end up with 18% in the US, 24% in Europe, and 37% in China. So those would have been astonishing numbers a decade ago, but the automakers were expecting sales to grow faster and frankly, they were also expecting their share of the market to be greater. So they were expecting to be all be the winners.

Ford, which sold 80,000 or so electric vehicles in the US, has been talking about selling 2 million EVs by 2026, and GM, which sold about 70,000, has talked about 1 million sales by the end of 2025. Tesla has been talking about 40% growth annually. So what that means is that there’s quite a lot of excess capacity in 2024, and probably going forward, though the manufacturers have slightly scaled back their launches and their expansions of capacity.

We can also discuss why the sales were disappointing. Part of it has been that the OEMs were expecting that we were at an inflection point, that the development of the product would become mass market very quickly. And in the US for example, the pioneers and early adopters already have their Teslas. So the early majority of buyers have different motivations, and I think that the OEMs were somewhat surprised at the resistance of consumers to making the EV switch. These early majority buyers are much more pragmatic, and so the issues of convenience of charging, for example, and range anxiety, both due to the cold weather and somewhat spotty charging systems has slowed adoption or made consumers a little reluctant to buy.

And then the incentives, which the automakers expected to be very powerful motivators, the government incentives and subsidies for EVs have been, I think, somewhat disappointing. At least on the sales side, they’re quite complex, they’re deliberately designed as part of an industrial policy to try and bring EV supply chains to the US. And they were also designed to be only available to middle and lower income consumers. And so to date, I think those incentives have been more effective for subsidizing leases than for subsidizing purchases. It’s also true, I think, that EVs have become in the United States at least highly politicized and with both short-term and long-term implications. In Europe on the other hand, there’s much more consensus about the need to electrify, but there is concern about the impact on the auto industry, particularly in Germany and France. Germany for example, got rid of its EV incentives at the end of 2022, and that slowed the EV adoption there. Europe is also concerned about the Chinese OEMs coming in, and so they’re launching reviews of that and may try and impose some restrictions on imports or on the Chinese makers.

So for 2024, I would expect that the sales to continue to grow, but unfortunately for the OEMs, capacity is going to be growing faster than sales and that will have some long-term implications.

BYD has disrupted the EV market by overtaking Tesla as the world’s bestselling electric vehicle maker in 4Q23 by delivering 526,000 versus 484,000 cars for Tesla. Can you discuss the rise of BYD and how they are positioned in 2024?

Absolutely. BYD is a remarkable story. It’s got a dominant position in EVs in China with a 35% market share. Because the Chinese market is by far the largest, that gives it scale. It’s also the lowest cost place to produce. The government, which views EVs as a strategic industry, has a chance to leapfrog. And in some way, the Chinese are very concerned about the so-called middle-income trap of not being able to get into truly high productivity areas. They see EVs as one important industry to escape that middle income trap and so they’ve long supported it, and that support of the entire ecosystem gives the BYD some important advantages.

It’s also true that the Chinese consumers are increasingly favoring Chinese brands, and that also benefits BYD relative to Tesla, particularly as tensions between the US and China rise. But it’s not competing head-to-head with Tesla. Essentially the EV market in China and soon, I think, in the rest of the world has bifurcated. There’s the lower cost EVs, which BYD is by far the leader in, and the more luxury end of EVs on which Tesla is leading.

BYD has very ambitious expansion plans. They’ve announced plans to build vehicles in India, Thailand, they’re talking about Indonesia. So they’re going, if you will, to the rest of the world to try and expand. They’ve also announced plans to expand in Hungary in stages, which is their basic plan to enter Europe. And they’ve been busy launching retail locations all across Europe in 19 different countries, I think. There was just a story yesterday that they’re also in intensive discussions to launch a plant in Mexico, which would give them a logical export base into the US thanks to the US MCN, the trade agreement among Mexico, Canada, and the US.

So almost all those sales that BYD was having that allowed it to overtake Tesla were Chinese sales. And it’s happened partly because the fourth quarter is always a very high-volume time in China, but longer term they definitely will be a major player. They have exceptionally good vehicles at an astonishingly low price. In China, they’re selling high quality EVs for $11,000.

Have there been any new technological developments in the EV space in the last year that you think is relevant to discuss?

A technological development is these new manufacturing approaches that Tesla took, the Gigacastings. That is a revolutionary way of building vehicles. Essentially, they’re building the castings and then merging them, which allows for a much more efficient assembly plant, and they’re using the battery as the floor of the vehicle instead of heavy metal plate. And so that both reduces weight and cost. GM has announced that they’re exploring Gigacasting as well. That’s a major development.

Then there continues to be enormous efforts to innovate in the battery space. Solid state is increasingly being looked at, they’ve made some technological progress there, and they’re continuing to investigate battery chemistry and battery design. Lucid has quite different battery design than say General Motors. So that’s promising, but it makes it also very challenging for automakers because they are trying to roll out these EVs when it’s not clear what the final solution is on the key powertrain. So they’re having to invest and may have to reinvest as the battery changes.

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About Marc Robinson

Marc Robinson has more than 30 years’ experience in the automotive market and served in the White House on the Council of Economic Advisers under President George H.W. Bush. Most recently, he was Economist and Assistant Director at General Motors Company (2012-2020), where he led more than 300 projects on strategic issues and helped oversee company pricing. Before this, he was Senior Manager, Strategy (2010-2011) and Senior Technical Fellow (2010-2012) at General Motors Company. He is the owner of MSR Strategy (2020-present), where he provides advice on strategy and risk management and publishes an applied business strategy newsletter, The C-Suite.

This article is adapted from the GLG Teleconference “Electric Vehicle Pricing in 2024” hosted on February 15, 2024. If you would like access to this event or would like to speak with Marc Robinson, or any of our industry experts, please contact us below.