By Elric Langton | 13 February 2024
The electric vehicle (EV) sector, once propped up by lavish government subsidies and bold sales goals, is now wading through choppy waters. The sudden yanking away of financial support has brought about a marked slump in EV sales, casting doubt over the automotive sector's high-flying aspirations. This turn of events prompts a hard look at the practicality of consigning internal combustion engine (ICE) vehicles to history by the optimistic year of 2035.
However, with dealerships lumbered with EV sales targets or punished with a blunt financial instrument, I still feel this will not be enough because consumers will buy what they want unless bribed with financial incentives. Even so, as attractive eye candy as some of these new designs are, the consumer is awakening to the many problems inherited when flashy marketers have suckered them into their alluring spin.
The Climb of EVs: A Subsidy-Driven Success Initially a fringe player, the EV market shot to prominence, mainly on the back of hefty government handouts. These incentives, from tax breaks to direct fiscal boosts, were pivotal in sweetening the EV proposition for the masses. This led to a remarkable boom in EV sales over the last decade, underpinned by governmental ambitions for an electric-dominated future.
The 2035 ICE Phase-out Ambition: A Worldwide Aspiration The plan to phase out ICE vehicles by 2035 took shape as a collective nod to escalating climate change and environmental preservation concerns. Nations globally pledged to this deadline, envisioning a future where EVs reign supreme. However, this noble goal is now hitting unforeseen roadblocks thanks to the shifting market landscape.
Current Challenges: The Fallout from Subsidy Withdrawal, The abrupt end to subsidies, has served as a cold splash of reality for the EV sector. Once coddled by financial perks, buyers are baulking at the steeper upfront costs of EVs, particularly in market segments that leaned heavily on these subsidies. Economic and Market Pressures Beyond the subsidy cliff, other economic pressures like supply chain hiccups and soaring raw material costs add to the woes. These factors have increased EV prices, making them a tougher sell to a broader audience. Moreover, lingering worries over charging infrastructure and battery range are scaring off potential customers.
Industry's Reaction and Sales Target Woes: Automakers, facing sagging sales, are being cornered into rethinking their EV production plans, starkly contrasting their earlier expansionary stance. These shifts impact their financials and have broader employment and sector growth implications. Governments' Policy Quandary, The industry's backpedalling, poses serious questions for governmental EV adoption targets. Authorities, once gunning for aggressive EV uptake, are now facing the music of a slower-moving market. This disconnect between policy dreams and market realities might force a reevaluation of strategies and deadlines.
Current EV Market and Subsidy Impact
EV Sales Post-Subsidy: According to the International Energy Agency (IEA), global EV sales dropped by 15% in the six months following the subsidy cut.
Consumer Price Sensitivity: A survey by JD Power revealed that 30% of potential EV buyers are discouraged by prices exceeding their budget, highlighting the impact of subsidy removal.
Economic and Market Factors
Raw Material Costs: The cost of lithium, a key component for EV batteries, has risen by over 50% in the past year, as reported by the Financial Times.
Supply Chain Disruptions: A 2023 report by McKinsey & Company noted that supply chain disruptions have increased the lead time for EV production by an average of 6 months.
Long-Term Outlook: The 2035 ICE Ban Scenario Optimistic Perspective in a rosy scenario, the current challenges are mere bumps in the road. Breakthroughs in battery tech, enhanced charging networks and renewed government incentives could re-energise the EV market, keeping the 2035 goal alive. I am doubtful this will happen.
Realistic Assessment: A more grounded view hints at a slower EV market rebound, making the 2035 target a more challenging hill to climb. Steady investment in EV tech and infrastructure, backed by moderate government support, could partly counter the current setbacks, leading to a more gradual shift away from ICE vehicles.
Pessimistic Forecast: In a gloomier outlook, a continued downturn in EV sales could seriously derail the 2035 ambition. Lingering economic strains, sluggish tech progress, and consumer hesitance could prolong our dependence on ICE vehicles, potentially necessitating a rethink of the phase-out timeline.
Stakeholder Viewpoints: Governments may need to re-strategise, perhaps reintroducing subsidies or crafting new measures to promote EV adoption without excessively taxing the public purse. Manufacturers could pivot towards hybrids as a stopgap, balancing investment in ICE and EV technologies until the market finds its footing. Environmental Advocates might ramp up pressure on governments and industries to stick to the 2035 commitment, highlighting the pressing need to combat climate change.
Conclusion Navigating to 2035: A Balancing Act The road to the 2035 ICE exclusion goal is riddled with obstacles exacerbated by the recent subsidy cuts. To traverse this tricky terrain, a well-rounded strategy is critical. Governments should aim for policies that nurture EV market growth without imposing undue financial strains. Automakers should adjust to evolving market trends, potentially eyeing hybrids as a temporary fix. Crucially, sustained collaboration among all stakeholders is vital to advance towards a more sustainable automotive future.
The lithium market, a playground of supply and demand, is increasingly a stage for political theatre. Lithium has been thrust into the limelight with climate change narratives and the shift to renewable energy. But is this another ploy in the grand geopolitical game, where environmental concerns are perhaps exaggerated for political gain?
Political Factors: Ever keen to appear, governments have made lithium a cornerstone of their policies. Initiatives and subsidies are pouring into the lithium industry, driven more by political posturing than practical considerations. Take the United States, where the Biden administration uses lithium as a prop in its infrastructure and clean energy plans. The European Union's Green Deal and China's Made in 2025 initiative are no different, strategically leveraging lithium for geopolitical clout while ignoring the environmental damage mining of rare earth metals, including lithium, has on the planet. The lies are bold, and we assume everyone is ignorant of them, but we are not.
International Relations: The global hunt for lithium has created an intriguing mix of alliances and tensions. Countries like Chile, Argentina, and Bolivia have become pawns in a larger game of resource nationalism and international investment. And let's not overlook the simmering rivalry between the US and China, each vying for lithium supremacy in a game of resource chess.
Environmental Considerations: The environmental impact of lithium mining is a hot topic but perhaps overblown in the grand scheme of things. While traditional methods like evaporation ponds raise eyebrows, newer technologies like Direct Lithium Extraction promise a more sustainable approach. The lifecycle of lithium batteries, from cradle to grave, is becoming a focus, but let's not be too hasty in demonising a process still in its infancy. The lunatics residing in the European Parliament have adopted a “batter passport” with the regulation sets targets for producers to collect waste portable batteries (63% by the end of 2027 and 73% by the end of 2030) and introduces a dedicated collection objective for waste batteries for light means of transport (51% by the end of 2028 and 61% by the end of 2031). I actually agree this is a good policy.
Climate Change and Demand for Lithium: Climate change has become the rallying cry for lithium demand. Nations are falling over themselves to reduce carbon emissions, often without fully considering the practical implications. The Paris Agreement, while well-intentioned, has become a convenient excuse for policy shifts that may not be as altruistic as they seem. This push for a low-carbon economy is inextricably linked to lithium. Still, one must question whether it's truly about environmental stewardship or more about political manoeuvring and controlling the masses.
Conclusion: The lithium market's trajectory is a complex mix of ambition, international relations, and environmental rhetoric. Governments are jostling to position themselves as climate champions, but at what cost? The demand for lithium, while driven by noble intentions, must be weighed against the realities of geopolitics and environmental pragmatism.
This narrative of lithium is more than just economics; it's a tale of humanity's struggle to balance technological progress with geopolitical strategy and environmental realism. It begs for a deeper understanding beyond surface-level environmental alarmism and political opportunism. Ultimately, the less developed countries will be left behind while the developed countries crush the working class masses with overburdensome taxes and inflation while the elites carry on doing precisely what they demand we plebs do not.
Next in the Series - We do a deep-dive into the lithium market, price and influences that drive them.
Part Three: Electric Dreams Deferred
Overview of Lithium Market Dynamics (November 2022 - Present)
Part Two: Electric Dreams Deferred
Consumer Demand: Market Hype Bombs
Part One: Electric Dreams Deferred
The High-Voltage Impact of Germany's EV Subsidy Cutoff
Riding the Lithium Rollercoaster
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