Industry News: In 2030, Internal Combustion Engines will Still Reign

[G. David Felt]

Market forecasts of the future is a fragile thing, yet LMC Automotive has a strong reputation as a consulting firm looking at the global markets. The daily announcements of electric-car churn, major production investments, battery supply, etc. is cause for people to want to take a reality check of the projections by various OEM producers to individual government pronouncements.

US projection is that fossil fuel light-duty autos will still be 69% or 7 out of 10 autos on the road in 2030. According to the LMC Automotive research report, 2018 saw that globally light vehicles running on fossil fuels were 95%. This is expected to drop to 92% by the end of 2019 yet a slowing of the change over from ICE to BEV is expected over the next decade. LMC is expecting a contraction of just 3 to 4 percent annually. This respected report is showing that more than half of the global vehicle demand will still have tailpipes and fuel tanks.

So let’s take a look at some of the facts starting with the country India where in 2017 it stated that they would be fully electric by 2030. Yet LMC own research points to India being only 3% electric by 2030. On the other end of the spectrum, we have China where LMC expects the country to have a majority of light autos be electric. LMC expects fossil fuel light autos to make up only 48% of the market by 2030 in China, BEV's will be 52%.

This is backed up by many other analysts that point to the massive growth of EV's in the next decade that eventually will taper off as costs stop falling for battery production and EV charging infrastructure. Electric cars are expected to be 55% of the global market by 2040 according to the Bloomberg New Energy Finance. One reason for slowing is the acknowledgment that not all markets will have the electrical infrastructure to support BEV auto's when many in countries like Africa do not even have electricity at their home.

Looking at the three major automotive markets of China, India and the US, LMC points to the differences in how the change will happen. China will use the carrot and stick approach pushed by the political elite to ensure the New Energy Vehicles (NEV) come to market. Automakers are getting subsidies to manufacture these NEVs and receive strict penalties if they fail to meet the government goals. Here is where demand for ICE autos will fall off the fastest. 

In the US, demand is expected to be gradual with growth being slowed by the oil industry that has every reason to keep the price of gas low. This is also being tempered by the popular rise of the pickup truck and SUV sales that will keep BEVs in check till these full-size autos are offered in pure electric mode.

Then we have India, per the LMC report where government ministers made global headlines in 2017 with their ambitious target to electrify the whole country by 2030 retiring all ICE autos. Including all types of transportation, 2, 3- and 4-wheel vehicles, the India government has since set a target of 30% BEVs by 2030 which LMC believes is unachievable.

Despite having adjusted goals, the India government has approved a 3-year $100 billion program to promote electric vehicle adoption. Even with this big push, LMC sees India with a 97% ICE market share in 2030.

Based on LMC's own 3-4% ICE decline annually, where ICE made 95% of global sales in 2018, expected to be 92% in 2030 ICE globally is still expected to make up 62% of global market if the 3% a year drop stays constant, yet numerous external factors will also affect this globally.

Yet to make this change happen, one critical area is needed to grow. Batteries are the new OIL of the 21st century. Bloomberg expects $548 billion in investments by 2050 in the battery production industry as costs fall, homes and businesses push for a more reliable clean energy source. Battery prices per kilowatt-hour are expected to be below $70, down 67% from today’s cost. Annual batteries to be commissioned by 2050 is expected to exceed 1,288 gigawatts of power.

To quote the Bloomberg story: “It’s a matter of ‘when and how’ and not ‘if’ wind, solar and battery technologies will disrupt electricity delivery all over the world,” Seb Henbest, lead author the report, said in an interview.

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[G. David Felt]

I will say that the more I read this, the more I can see even in a single country like the US a very disruptive change from one coast to the other. I actually expect the West coast to convert far faster than the east coast.

This then brings up the strange issue of will we have problems on the west coast for people with ICE finding fuel and the same for people with BEV that visit or move to the east coast with finding charging.

We be in interesting times over the next 20 years.

[riviera74]

Somebody get ocnblu to read this.  This might calm him down.

[Drew Dowdell]

33 minutes ago, riviera74 said:

Somebody get ocnblu to read this.  This might calm him down.

Not likely

[balthazar]

In the US, demand is expected to be gradual with growth being slowed by the oil industry that has every reason to keep the price of gas low. This is also being tempered by the popular rise of the pickup truck and SUV sales that will keep BEVs in check till these full-size autos are offered in pure electric mode.

If LMC has ignored the price factor, their entire forward projection may be invalidated (guesswork as it is).

[Drew Dowdell]

There's also the issue of oil prices dropping ahead of another recession that will keep ICE competitive longer. 

[balthazar]

It's not ICE that's uncompetitive tho.

[Drew Dowdell]

2 minutes ago, balthazar said:

It's not ICE that's uncompetitive tho.

I didn't say otherwise.  ICE is the more financially competitive option as long as gas prices stay low. Battery prices would have to fall that much further just to keep up. 

[A Horse With No Name]

1 hour ago, Drew Dowdell said:

There's also the issue of oil prices dropping ahead of another recession that will keep ICE competitive longer. 

Do you really see another recession coming?

 

 

[G. David Felt]

5 minutes ago, A Horse With No Name said:

Do you really see another recession coming?

Yes, I do! I know @Drew Dowdell and I have both seen things in the financial / investing markets that raise concern for another recession that is long overdue.

[Drew Dowdell]

5 minutes ago, A Horse With No Name said:

Do you really see another recession coming?

 

It's taking longer than I thought to get here, but yes.  I expected it by the fall of 2018. 

There are plenty of indicators that something is brewing, but unemployment remains low for now without an increase in real wages, which is a good thing economically. 

Eventually, it's just a cycle and it will come time for a recession to hit.  Either way, it won't be as bad as the last one we were in. 

[balthazar]

• Oil supplies were expected to be down, but today the report was inventories rose by 2.8 million barrels last week.
The 25% increase in crude this year ($45 > $60) is after a 45% collapse since Oct '18 ($76-$42).

• dave- you were adamant that the Dow 30 at 21,5xx was evidence of an imminent recession, but it since rebounded to 25,6xx. Seems like a it was a false flag.

[regfootball]

always a recession in hiding somewhere.

[Drew Dowdell]

2 hours ago, balthazar said:

• Oil supplies were expected to be down, but today the report was inventories rose by 2.8 million barrels last week.
The 25% increase in crude this year ($45 > $60) is after a 45% collapse since Oct '18 ($76-$42).

• dave- you were adamant that the Dow 30 at 21,5xx was evidence of an imminent recession, but it since rebounded to 25,6xx. Seems like a it was a false flag.

There are industrial cutbacks all over.  China economy is slowing, automakers are pulling back manufacturing all over the place... expect more stories on that front. 

[daves87rs]

5 hours ago, balthazar said:

• Oil supplies were expected to be down, but today the report was inventories rose by 2.8 million barrels last week.
The 25% increase in crude this year ($45 > $60) is after a 45% collapse since Oct '18 ($76-$42).

• dave- you were adamant that the Dow 30 at 21,5xx was evidence of an imminent recession, but it since rebounded to 25,6xx. Seems like a it was a false flag.

 

Which Dave? ? 

I still see the recession myself. There are some really goofy ups and downs with the Dow..and the slightest hint of global issues, and down it goes....And with a certain person in office at the moment- makes those boys on Wall Street sweat like pigs weekly...

Speaking of Wall Street, I expect them to be the reason oil/gas prices go shooting back up.....it’s easy money to them....

[balthazar]

Ah, sorry; talkin' @ dfelt.

Looking at the market daily or weekly (or even monthly) can be misleading. Sure; one wants to catch a linear trend early, but day trading is not for the weak of stomach or wallet and quick jogs are momentary. Long term is better for investments and a better indicator of economic health. I'm not saying everything is iron-clad, and I'm aware of some downturn indicators, but to my observations- I don't see a crazy drop in 2019. We already saw the market go down to 21,xxx- a significant drop from 26K, but that's but one indicator.

[Drew Dowdell]

19 hours ago, Drew Dowdell said:

There are industrial cutbacks all over.  China economy is slowing, automakers are pulling back manufacturing all over the place... expect more stories on that front. 

As I was saying.

Individually, these car industry cuts are a drop in the economic bucket... but they keep piling up and piling up and while the numbers for say Honda in Swindon may only be about 3,500 direct jobs, it is probably going to end up being closer to 75,000 jobs in the UK just related to Honda's closure. 

[oldshurst442]

Ah....sunny days up ahead.

EVs are gonna be profitable by 2025.

ICE cars are gonna be dominant still in 2030.

EVs are going to be selling like mad in 10-15 years from now.

Many manufacturers are gonna stop with new ICE development sometime in 2025 or so...

Car manufacturing world wide is at a slow down currently, but manufacturers are going bat shyte crazy throwing all of their R&D money on EVs and EV platforms when even Tesla is hitting a slowdown right about now...

All kinds of merger talks and partnerships between different manufacturers because...sunny days up ahead. Ah those sunny sunny days. 

And somehow, with all these contradictory story lines, this tune seems quite fitting if you ask me.

 

Sittin' stoned alone in my backyard
Askin' myself "Why should I work so hard?"
Sittin' dreamin' 'bout the days to come
Half-undressed, just soakin' up the sun

Sittin' here, I hope I don't get fried
Two years ago, you know, I almost died
And yet, there's nothin' better for your soul
Than lyin' in the sun and listenin' to rock 'n roll

Sunny days
Oh, sunny, sunny, sunny days
Ain't nothin' better in the world, you know
Than lyin' in the sun with your radio

 

 

Edited March 28, 2019 by oldshurst442

[ocnblu]

On 3/27/2019 at 9:56 AM, riviera74 said:

Somebody get ocnblu to read this.  This might calm him down.

I read it the other day.  It didn't cause a blip because DUH, who didn't already know this?  No need to reply or contradict the obvious. 

[G. David Felt]

7 hours ago, Drew Dowdell said:

As I was saying.

Individually, these car industry cuts are a drop in the economic bucket... but they keep piling up and piling up and while the numbers for say Honda in Swindon may only be about 3,500 direct jobs, it is probably going to end up being closer to 75,000 jobs in the UK just related to Honda's closure. 

Another hit as FCA cuts jobs in Canada at the Mini Van assembly line.

https://www.reuters.com/article/us-fiat-chrysler-canada-layoffs/fiat-chrysler-to-cut-shift-1500-jobs-at-canadian-minivan-plant-idUSKCN1R92RB

1,500 to be laid off. More signs the world needs a correction and debt needs to be paid down.

[Drew Dowdell]

13 hours ago, dfelt said:

Another hit as FCA cuts jobs in Canada at the Mini Van assembly line.

https://www.reuters.com/article/us-fiat-chrysler-canada-layoffs/fiat-chrysler-to-cut-shift-1500-jobs-at-canadian-minivan-plant-idUSKCN1R92RB

1,500 to be laid off. More signs the world needs a correction and debt needs to be paid down.

FCA really has no debt to mention. One thing Sergio did before he died was pay that off. 

[G. David Felt]

5 minutes ago, Drew Dowdell said:

FCA really has no debt to mention. One thing Sergio did before he died was pay that off. 

Yes, I understand that, I should have been clearer as I was just thinking debt in general from country to states, counties, cities, business and personal. I really think the world needs to get their debt pared down.