EV sales are still strong, despite media fallout and government pullbacks
At the end of each year we all tend to get a bit reflective both personally and professionally and look back on what we have accomplished over the past twelve months.
2024 proved to be a year that was very, shall we say “lumpy” for both EVs and EV investments.
I say “lumpy” because if you were to listen to the mainstream media you would think that EVs were the worst idea man had ever come up with as evidenced by tanking sales.
Further, the media could convince you that EV assembly facilities and battery factories were huge white elephants and that if you listen closely enough you can hear the sucking sound of hundreds of millions of dollars of public and private capital investment being pulled down the drain. However, is that the reality? Let’s reflect on the facts.
First ZEV sales are growing — not shrinking.
While at time of writing we only have sales data through the third quarter of 2024, sales for the quarter had increased 31.8 per cent over the same period in 2023 reflected in the fact that 15.7 per cent of all registered vehicles in the 3rd quarter were ZEVs compared to 12.6 per cent in the 3rd quarter a year ago.
Moreover, ZEV sales were 20 per cent higher in the 3rd quarter than they were in the second.
In the 3rd quarter some 75,636 ZEVs were registered with 74 per cent of those being pure battery electric vehicles (BEVs), according to Statistics Canada.
This runs counter to the media narrative that consumers are changing their purchases away from BEVs and towards plug-in hybrid electric vehicles (PHEVs) and/or conventional hybrid electric vehicles (HEVs).
Suppose the proof will be in the pudding of the annual ZEV sales to validate whether or not there is any trend away from BEVs being the preponderance of ZEVs sold.
Second, ZEV assembly facilities and battery plants are moving forward — although some are now on different schedules.
It needs to be said first off, that government ZEV mandates… whether they be federal or provincial, as is the case in B.C. and Quebec — do not make ZEV markets: consumers do.
I raise that here because much of the lumpiness in the ZEV space with respect to manufacturers’ pledges to build only ZEVs by a certain year in the future or to build a ZEV manufacturing facility or a battery plant to supply ZEV manufacturing is totally dependent on consumer adoption of the technology.
Much like consumers, manufacturers — to varying degrees — also got somewhat caught up in the fervor surrounding the transitioning from ICE vehicles to ZEVs. When consumer sentiment towards the adoption of ZEVs changed, however, manufacturers recalibrated their forecasts accordingly, walking back commitments to produce only electric vehicles by 2030 etc. Any manufacturer is only going to be successful at the end of the day if they are building vehicles that consumers will buy.
Does this point contradict the fact I raised above that ZEV sales are growing? Not at all. What it suggests is that ZEV sales are not growing at the pace that manufacturers need them to to essentially bet the farm on full conversion of their product lineup to ZEV.
So, while we have witnessed the walking back of manufacturer commitments to have their fleet or a certain percentage of their fleet to be ZEV by a certain year (typically 2030) in response to consumer demand, what about the $50 B in investment in EV assembly facilities and battery and battery component facilities here in Canada?
Once again the media would have you believe that all ZEV production facilities or battery production facilities that have been part of the largest recreation of perhaps any industrial sector in Canadian history — will never see the light of day. What, however, does reality suggest?
Stellantis has started production of the all-electric Dodge Charger in Windsor and the NextStar joint venture between Stellantis and LG is also producing batteries there.
The VW PowerCo joint venture in St. Thomas, Ont.is also progressing according to plan. And what of Northvolt? That project has been mothballed because of the bankruptcy of the company, right?
Much like consumers, manufacturers — to varying degrees — also got somewhat caught up in the fervor surrounding the transitioning from ICE vehicles to ZEVs.
Actually, the Quebec project is a separate and distinct entity from the parent company in Sweden and both Northvolt and the Quebec government remain adamant that that project will be completed.
Even the Belgium company Umicore’s battery materials facility that was to be built in Loyalist, Ont. confirmed once again last November that it is not cancelling the project but has put construction of the plant on hold as the company reassesses in the light of global demand.
So… that’s the reality but the other reality is that ZEV sales in Quebec have no doubt been juiced by the fact that the Quebec government has announced that the $7,000 sales incentive would be reduced to $4,000 in 2025, $2,000 in 2026 and eliminated altogether in 2027.
In December, however, the government further announced the complete suspension of the program as of February 1, 2025 due to excessive demand for the incentive.
While it is labelled as a “suspension” as opposed to a “termination” of the program — it will be interesting to see if the program ever gets recapitalized. The same “suspension” applies to incentives for the installation of charging stations — which will only add to one of the key barriers keeping consumers from making the move to EVs, which is insufficient infrastructure.
Likewise, facing the same funding challenges, B.C. a number of months ago suddenly and without consultation lowered the MSRP limit and altered the categories for incentive applicability and, lo and behold B.C. was the only jurisdiction to have a decrease in ZEV sales in the third quarter according to Statistics Canada.
Yet, these two jurisdictions, Quebec (85 per cent ZEV by 2030) and BC (90 per cent by 2030) also have the most aggressive and highly unrealistic mandated targets for manufacturers to meet at the same time they are reducing or eliminating the incentive to assist consumers to make those purchases.
In January, the federal government announced it was prematurely shutting down its own iZEV purchase incentive program, sparking an uproar.
The writing is, or at least should be, on the wall for all governments — especially those two provincial governments with completely unrealistic ZEV targets — that the transition to EVs needs to continue to be supported with both infrastructure investment and purchase incentives while mandates are in place, or allowed to grow organically at its own pace without them — based on consumer demand.
Otherwise the only likely outcome in those jurisdictions will be reduced vehicle sales as manufacturers do what they need to do to avoid penalties of $20,000 per vehicle for not being able to meet the governments targets with the concomitant impact on new car dealers and consumers.
The transition to ZEVs will only work if it is consumer driven. That too is reality!
