#45. George Heppel: How a Metals Analyst Looks at EV Sales Potential

On this episode of the Fueling the Future podcast, I spoke with George Heppel, senior analyst for CRU Group, about electric vehicles and the future of the battery metals markets. Following is an excerpt from our discussion, which you can download below or listen to in ITunes.

On What You Really Need to Focus on When Assessing EV Sales Potential:

“2017 was kind of when the electric vehicle sort of boom was really beginning to take off. Tesla was doing extremely well. Electric vehicle sales in China were absolutely booming. We took the top 11 biggest electric vehicle manufacturers in China, and we looked at their cumulative sales forecast to 2020, because around that time, around 2017 a lot of these Chinese electric vehicle sales were saying, ‘We’re going to be making X a number of cars by 2020.’ We took the top 11 and we added up all of their sales expectations of 2020, and it came to 4.2 million cars. 4.2 million electric vehicles is a huge number. I think at the time, back in 2017, I think annual sales were about 800,000. The idea it was going to grow to 4.2 was just, it was an extraordinary forecast.

 

That hasn’t materialized. Fast forward to today, and are we going to see 4.2 million electric vehicles sold in China next year? Well, no. In fact, Chinese government target is 2 million, and a lot of people think it’s going to be a lot less than that. On average, people are torn between 1.3 and 1.7 as the general view. The point I’m trying to make here is that in the past we had a huge expectations for electric vehicle sales, and they just haven’t materialized in practice.

 

We need to remember that. It’s really important having that hindsight and having an understanding of what’s being forecast in the future when you’re trying to understand what electric vehicle sales are going to be like in 2025, because you need to understand that bias in the market. If someone says that EV sales are going to reach 10 million in 2025, bearing in mind they’re two million today, you need to factor in the potential that there is a little bit of upward bias on that.

 

Personally, when I’m looking at electric vehicle sales over the next five to 10 years, the key question that I ask myself, and this is if anyone wants to really try to understand how many of these vehicles are going to be made over the next five to 10 years, or how many that vehicles are going to be sold, rather, the key question you have to ask yourself is who is going to make them? That is the key question. Because I do not deny that there’s huge demand for electric vehicles at the moment. If you want to go out and buy a Tesla or a Nissan Leaf or anything, you have huge waiting lists. I think the Volkswagen ID.3 has sold extremely well and they haven’t even started making them yet.

 

The demand is there. I think 10 million cars by 2025, the demand is there, but is the manufacturing capacity there? I don’t think it will be. For 2025, we have more conservative forecasts for EV sales based on expectations of what companies are going to make, as opposed to what we think demand is going to be.”

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