Europe, which has driven EV growth up to now, has shown signs of stagnation since the beginning of 2024. Goldman Sachs report says this is due to concerns about three factors: EV capital cost due to lower prices of used EVs, poor visibility on government policy visibility, and a shortage of rapid charging stations. These shortages are changing consumer preferences towards Hybrid EVs and plug-in hybrid EVs.

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But despite the current slowdown in EVs, the bear-case scenario still calls for EV sales volume to rise 21 per cent YoY in 2024. The GS report says the bear-case scenario seems more realistic because of the three reasons for the slowdown mentioned above.

EV sales volume is likely to decline by 2 per cent in 2024 and negative growth would likely result in oversupply across the EV supply chain.

The Goldman Sachs report says that EVs are nearing a turning point in terms of economic viability as governments across the world are reducing subsidies that have lowered initial investments, aggressive pricing strategies adopted by Chinese makers, and running cost benefits, i.e., fuel savings. On the other hand, capital costs upon sale are emerging as a new concern showing the decline in EV used car prices.

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While it is difficult to forecast when used EV prices will bottom out, innovation in batteries is a bottleneck. Batteries currently account for 30-40 per cent of the cost of EVs. Consumers think tomorrow’s batteries will be superior to today’s batteries in terms of performance, so used EV prices are unlikely to stabilize soon. The decline in recent battery prices is not only due to technologies but also to over-supply in China’s EV supply chain.

Also, as EV penetration accelerates, rapid fast charging station infrastructure issues emerge as a more tangible problem. Several automakers, such as Nissan and Mitsubishi Motors, have said that concerns about driving range and charging infrastructure increase when people return home or go to rural areas.

Goldman Sachs concludes that all above-mentioned reasons have attracted makers and consumers towards hybrid EVs (HEVS) and plug-in hybrid EVs (PHEVs). Sales of HEVs and PHEVs have been accelerating amid the slowdown in EVs in the US, growth has outpaced EVs over the past several months.

But EV sales declining trend is not seen in India. Government Vahan portal dashboard shows an uptrend in EV registrations, especially of 2-wheelers, although 3 and 4-wheelers have shown a marginal decline. In January 2024, EV registration in India was 1,44,877, in February, it declined a little bit to 1,41,382 but as of 30 March, the figure for the month showed an uptrend of 32% at 1,86,143 vehicles.

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But, a Goldman Sachs report suggests that Global HEV sales could exceed the outlook by 1-2 million vehicles.

Automaker Toyota has officially said that HEV margins are higher than margins for Gasoline engine cars. The report suggests that the additional cost of an HEV is compensated by savings on fuel and higher used car prices. For Industry, the economic benefits of HEVs are higher margins, comparatively lower capital costs and high confidence in used car prices.

The report, however, adds that if lower EV costs are realized by 2030, the advantages of EVs will again come under focus.