Here comes the supply crunch: 2021 EV Market Trends

Written by: Scott Case, Co-Founder & CEO of Recurrent

SMART Car in Parking Lot
"SMART car" by Kim Siever is marked with CC PDM 1.0

It’s a big year for the American electric vehicle industry and EV market.

Electric vehicle (EV) sales had every reason to underperform in 2020. The COVID-19 pandemic slowed innovation, temporarily shut down factories, disrupted the growth of charging infrastructure and created a precarious economic environment for consumers. Despite all of this, the EV market saw explosive growth.

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A study from Blastpoint found that EV sales rose by more than 30% last year (and are projected to increase by 71% in 2021).

As the appetite for EVs grows, it is becoming clear that we’ve got a problem.

There aren’t going to be enough EVs for everyone who wants them in the United States. If policy incentives expected from the Biden administration have a similar impact to EU policy incentives this year, we’ve got a big problem.

Let’s break it down.

January 2020 vs. December 2020 EV Adoption

In January 2020, BCG projected a market share gain of 1% per year for U.S. battery-electric and plug-in hybrids combined between 2021 and 2025, for a total EV market share growth of 5% in that period.

However, a Consumer Reports survey in December illustrated the potential imbalance: 4% of U.S. drivers say they “plan to get” an EV for their next vehicle purchase, and an additional 27% “will consider it” for their next purchase. Given the 6-year average buying frequency for vehicles in the U.S., most of these “next purchases” will happen between now and 2025.

So, there will be enough EVs for the “plan to get” crowd but not enough for any of the “will consider it” crowd, unless automakers substantially increase their new EV production.

A delivery increase in the U.S. won’t come at the cost of a reduction in EU deliveries: the delay of the U.S. rollout of VW’s ID.4 shows that.

Cash for Clunkers 2.0 Will Accelerate the Crunch

Included in the array of federal policy changes expected from the new Biden administration to increase EV adoption are measures to restore the full EV tax credit for manufacturers that have phased out (Tesla and GM) and direct car buyer rebates for EVs, similar to the original Cash for Clunkers program in 2008 that rebated the trade-in of inefficient vehicles for purchases of fuel-efficient cars.

We can see the potential impact of favorable policy in the market dynamics of the EU in 2020:

New car sales in the EU overall were down 20% due to the COVID-related recession. But new EV sales during that same period: up 134%.

Compare that to the U.S. market dynamics in the same period and same recessionary conditions: overall market down 15%, EV sales up just 4%.

The main difference between the two is regulatory policy, which neatly illustrates the potential impact of U.S. policy changes in 2021 and beyond.

The Rise of Used EVs

As demand begins to outpace supply, consumers will likely turn to the used EV market. This is especially relevant in a year when the Tesla 3 is celebrating it’s 3-year anniversary (on average, the first time a car sells on the used market is three to four years after it was sold as new).

Used car prices are shaped by a number of complicated factors. Pricing on used EVs is even more complicated given the rapid innovation in underlying technology and major increases in both supply of new EVs and market demand.

One of the most important factors to the success of the EV resale market is battery condition, which has become the new odometer for EVs.

Before 2020, there was not much data around battery health available to consumers, forcing many to look at range estimators and other less-than-accurate data fields.

Enter Recurrent, a startup that recently became the first company to provide independent reports on the condition of used EV batteries. Recurrent’s battery health reports give prospective buyers more confidence in used EV transactions and could play a vital role in accelerating the adoption of used EVs.

2021 Used Electric Vehicle Market Trends

Throughout the year, the team at Recurrent will be tracking and reporting on used EV market trends. Here are some trends they are looking for in 2021 that could shape the used market in major ways:

1. Rapidly increasing demand for EVs that outpaces auto makers’ ability to deliver new EVs may result in increasing prices for used EVs.

2. Battery uncertainty will continue to depress prices for used EVs: This underlying consumer concern is holding back the used EV market and is the primary reason that Recurrent launched its used electric car battery health reports.

3. The full restoration of tax credits on new Tesla and GM vehicles may cause a reduction in price for the used equivalent for models from those manufacturers though (the reverse of what happened early last year where used Chevy Bolts increased in price across the board when tax credits on new Bolts were phased out).

How Recurrent Can Help

If you’re a current EV owner thinking about when to sell your EV and upgrade, you should sign up for Recurrent’s monthly EV battery health reports so you can eventually sell your car at a premium by showing your battery history.

If you’re thinking about buying a used EV, keep in touch with us and we’ll continue to provide market trends and other research throughout the year.

If you’re a dealer, we’d love to have you join us at Recurrent to provide certainty to your shoppers with our used EV reports.

Recurrent is a member of Western Washington Clean Cities Coalition.


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