The More Things Change…

By John Eichberger | January 2017

What does the U.S. auto industry have in common with Bon Jovi, Machine Head, Cinderella, Rush and Ludacris? Each of these musical acts recorded songs containing the lyrics, "the more things change the more they stay the same." This is very much what has been witnessed in the auto industry over the past several years with regards to powertrains purchased by consumers – nothing significant has changed.

Last year marked the second straight year in which the industry set a record for light duty vehicle sales, moving 17.55 million units off dealer lots for a 0.44% jump over the prior record set in 2015. This is a very impressive accomplishment and worthy of celebration for the industry.

Some might also see this as an opportunity to accelerate the pace at which alternative fuel vehicles gain additional market share among vehicles on the road. It takes a long time for the market to transition, so it stands to reason that a record-setting year for sales could contribute to further diversification of the market. However, this does not seem to be the case…yet.

On a year over year basis, there was some increase in the market share of electric powertrains among new vehicles sold. In 2015, battery electric vehicles (BEVs) and plug in hybrid electric vehicles (PHEVs) represented 0.41% and 0.25% of total sales, respectively. In 2016, there was some growth with BEVs and PHEVs increasing units sold by 10.6% and 61.3%. But, as a percent of total vehicles sold, there was minimal advancement – BEVs and PHEVs represented only 0.46% and 0.40% of all new light duty vehicles sold in 2016. By contrast, however, hybrid vehicle sales dropped 9.2% and fell from 2.1% to 1.9% of all vehicles sold. Liquid fuel powertrains (including traditional hybrids, which run on gasoline) continued to command greater than 99% share of new vehicles sold.

Even if we look back further in time, we see only limited growth in the expansion of these powertrains. Since 2012, sales growth in electric powertrains has been anemic. Although BEV unit sales are up about 550% and PHEVs are up 83%, the impact on market share has been less than impressive. At the same time, hybrids have lost favor, with unit sales dropping 21% since 2012.

It is fascinating to me that the momentum that is being reported with regards to the emergence of the electric vehicle market has not yet translated into demonstrated sales. That said, we could simply be seeing the calm before the storm. As more models become available, as battery costs come down further, as range extends and recharge times dwindle, the market opportunities for electric vehicles will only grow faster and faster. The translation to share of vehicles on the road will take a very long time, but the increase in share of vehicles sold could gain traction relatively soon.

Without a doubt, the vehicles market is evolving and this word is chosen carefully – we are witnessing the makings of an evolution, not a revolution. Sales of alternative vehicles are likely to grow significantly over the next decade, but in terms of vehicles on the road the transition will be difficult to notice.

"The more things change the more they stay the same." Are we closing in on a time when these lyrics can no longer be attributed to the vehicle market? I guess time will tell.

Read more from the January Issue of our Fuel for Thought newsletter.