The biggest challenge for OEMs rolling out new battery electric
vehicles (BEVs) is rising input costs, which are affecting cost
parity with traditionally powered vehicles. With prices of key raw
materials used in BEVs having risen dramatically since 2019,
S&P Global Mobility sees the potential for changes in consumer
behaviour, although the projected long-term market share of BEVs is
likely to be unchanged.
- Overall, we expect 2022 to be a year when rising raw material
prices peak. However, we also expect automakers to be working with
critical raw materials prices about 75% higher in 2030 than in
2019. Our forecasts for vehicle sales, powertrains, and components
now reflect the impact of that expectation.
- In terms of the current make-up of the global passenger car
market, we expect two major challenges for vehicles powered by
traditional ICE technology. Firstly, stricter emissions regulations
will increase the cost of vehicle technology and emissions
controls. Secondly, in the shift to electrification, with
decreasing volumes of ICE vehicles against increasing volumes of
BEVs, this will erode the economies of scale of ICE vehicles and
probably increase their cost base.
- Prior to the rise in critical raw materials costs, some price
parity of BEVs with ICE and hybrid models had been expected by
about 2025, excluding vehicles in entry-price-point segments. Such
parity would probably result in some OEMs leaving the city car
segment and increasingly narrowing options in terms of entry-level
Market dynamics may see some change
- S&P Global Mobility does not expect the pricing pressures
to have much impact on vehicle sales at the topline, despite
expectations that smaller vehicle segments will retain limited BEV
options as a result. In 2031, our latest forecast sees BEVs
reaching a 51.5% market share in the United States, nearly 78% in
Europe, and about 74% in China. However, the rest of the world is
expected to continue to lag and BEVs to have a market share of only
- OEMs have some tools available to them to keep BEV costs in
check. These include switching to less-expensive lithium iron
phosphate (LFP) battery chemistries. One potentially interesting
but untried option for managing residual values and lease rates is
a Toyota proposal for factory refreshing of used cars. OEMs may
also opt to reintroduce aggressive vehicle discounts, but in the
past few years, the industry has been moving away from doing
- For consumers, there are also options. First, we will see a
degree of acceptance of price increases. Consumers are most likely
to accept price increases when they are in the form of moderate
lease rates for less-price-sensitive buyers. Another outcome may be
consumers switching to lower-positioned brands or segments.
Consumers may also increase the holding period of a vehicle or opt
to leave the new-car market. Both of those options have the
potential to affect topline sales volumes over time, however.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.