Among the biggest stories of 2014 was the crash in global oil prices. Just when it looked like the world had started to take $100/barrel oil for granted, prices plunged by 50 percent. Somespeculated that lower oil prices would translate into reduced consumer enthusiasm for electric vehicles (EVs). Now that we have EV sales for 2014 tallied up, let’s look at how the story actually played out.
As it turns out, EVs, including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), continued to sell consistently around the world. The EV market share in Norway is still far ahead of other countries, at 13.8% of new car sales in 2014. However, in Sweden, the United Kingdom, Denmark, and China the EV market tripled, while in Austria and Germany the EV sales share nearly doubled. The Netherlands is the only country that saw a big drop in EV sales, from 5.6% to 3.4%, likely due to a decline in fiscal incentives. Electric vehicle market share in other countries, including the US, France, and Japan, remained consistent in comparison to 2013.
Further, compared to the first half of 2014, the dramatic drop in global fuel prices during the second half of 2014 did not have any measurable impact on EV sales, and some markets even saw EV sales spike towards the end of the year. There are two main reasons for this: (1) Savings from fuel/electricity costs are only part of all EV incentives, which mainly consist of a variety of fiscal or non-fiscal benefits, and (2) in some countries, particularly in the European Union, fuel taxes already account for a large share of total fuel price, so even during times of fluctuation in global oil price the price at the pump remains relatively stable.
Here is a snapshot of the EV policy front by country:
In 2014, Tesla Model S sales almost caught up with those of the Nissan Leaf, which remained the leading EV in Norway, followed by VW e-Up!, BMW i3, and VW e-Golf. Interestingly, March saw a spike in Tesla Model S sales, which accounted for more than 50% of EV sales and 10% of all new car sales that month. Everything happens for a reason. A potentially related event is the successful crisis management by Tesla in dealing with consumer complaints regarding a charging issue encountered in extreme cold weather affecting outlets at the beginning of 2014. The cold weather didn’t cool down Norwegians’ enthusiasm for EVs, as Tesla rapidly fixed most of the charging problems. This is also a prime example of how comprehensive deployment of charging equipment can enhance the market confidence in the use of EVs.
The NetherlandsIn comparison to 2013, the EV market share in the Netherlands fell 40%. This trend is consistent with a drop in EV sales during the first half of the year due to the expiration of a tax exemption for company cars emitting less than 50 g/km CO2. Nevertheless, the company car tax rates for BEVs and PHEVs remain lower than the rates for conventional vehicles. Moreover, the tax adjustment in 2014 lowered the CO2 emission tax threshold and adjusted the tax rate—in effect, potentially raising the tax amount for conventional vehicles and enlarging the tax benefit of EVs in comparison to gasoline and smaller diesel vehicles. For example, the tax for Renault Clio (gasoline) increases from about 3,000 EUR in 2013 to about 5,000 EUR in 2014.
The U.S. EV market has been steadily growing over the past three years. California is still the largest EV market in the U.S., with an increasing sales share. An important reason is California’s Zero Emission Vehicle (ZEV) program, which mandates that an increasing share of auto sales in the state be EVs. As shown in the figure below, the total benefit from incentives offered to consumers for BEVs and PHEVs is not the highest in the country. But California offers two incentives that our state incentive study showed have a higher benefit-cost ratio: direct subsidy and high-occupancy vehicle (HOV) lane access. The ZEV program clearly contributes to the deployment and marketing efforts of automakers and the policies on both the demand and supply sides complement each other effectively. Another ongoing city-level analysis is also revealing that California cities, including San Francisco, San Diego, and Los Angeles, invest much more in public charging compared to-populous metropolitan areas elsewhere with lower EV market shares.
Sweden had the highest total PHEV sales growth in 2014. One factor in this rapid increase was the cap on funding for the “super green car premium.” The funding was set to subsidize the purchases of up to 5,000 EVs. However, this funding threshold was met in August 2014 and no one knew whether the program would be extended. This uncertainty may have triggered a race to secure the last available funding, as the registration of green cars increased rapidly from Q1 to Q3 of 2014, whereas sales were slowing down in Q1 of this year. To further support the promotion of EVs, the funding for green cars has been renewed with SEK 215M for 2015 and will also be used to retroactively pay for the additional green cars that were registered in 2014 after the funding had run out. In total, the funding extension will be sufficient enough to subsidize another 5,000 vehicles.
Other factors that may explain an increase in sales are the increase in models to choose from, improved charging infrastructure, and increased consumer awareness.
The heavy investment to support ultra-low-emission vehicles (ULEVs) in the UK finally started to show a payback, as EV sales tripled in 2014. The long-term (2015–2020) comprehensive policy commitment, including consumer incentives, funding for vital infrastructure, and support to ULEV-specific R&D effectively raised market confidence in EVs and is expected to keep boosting the development of ULEVs.
In 2014, although the EV market share in China remained low, 0.3% of total car sales, the sale of EVs increased fourfold in comparison to 2013. But since China is the largest vehicle market in the world, this makes China the second largest electric car market, trailing only the U.S. in national annual sales of EVs. China’s ambition is to have 5 million EVs on the road by 2020, including passenger cars and commercial vehicles, and it is working industriously toward that goal. Note that China is heavily developing electric commercial vehicles and is making great progress in promoting electric coaches and buses, which already accounted for one-third of total new EV sales in 2014. At the end of 2014, China published a proposal on EV fiscal incentive policies from 2016 to 2020. The proposal showed a commitment to strong fiscal incentives for BEVs and PHEVs sold in 2016, with a 10% decrease in the subsidy for 2017 as compared to 2016 and the subsidy will decrease 10% again in 2019 compared to 2017.
Meanwhile, cities in China like Beijing are expanding their public charger network to support the growing EV fleet. For example, by the end of 2014 Beijing had installed nearly 1500 public chargers and built an EV charger map, letting EV users check the location, type (fast or slow), and availability of public chargers in the city through the website directly or via smartphone app. Beijing is also planning to install more public chargers along the highways connecting surrounding cities
Overall, the U.S., EU, China, and Japan continue to lead EV sales. And as they pursued adoption or revision of policies to achieve their electric vehicle sales goals, the global vehicle market continued its strong uptake of EVs in 2014, despite the collapse in oil price.