Bank of America predicts national EV penetration at 25% by 2027

Bank of America estimates that EV sales penetration will slowly build over the next three years as affordability challenges, residual value risks and higher ownership costs plague wider adoption. Bank of America projects EV penetration of 11% in 2024, 15% in 2025, 20% in 2026 and 25% in 2027, John Murphy , senior automotive analyst for Bank of America Securities, said during the bank’s Global Research Virtual Car Wars report roundtable today. The bank forecasted EV sales volumes and penetration in the U. .S. market based on expected new EV model launches between 2024 and 2027 along with average annual volume of a model over its life span to determine metrics such as replacement rate and average showroom age, according to Bank of America Merrill Lynch ’s annual Car Wars study published June 5. The bank compares its annual aggregate EV volume forecast with total U. .S. sales forecasts to determine the implied EV penetration rate for a given year. Projected U. .S. . EV volumes and EV penetration [caption id="attachment_58342029" align="aligncenter" width="649"] Source: Bank of America Global Research [/caption] Separately, the bank projects U. .S. . EV sales will make up 8% of the market this year and grow to 14% by 2027 before ramping up to 29% by 2030 under its cost-up analysis, Murphy said. . The bank’s cost-up analysis factors estimates of the bill of materials for an internal combustion engine (ICE) vehicle versus an EV and the implied price automakers will charge to maintain margins, Murphy has said previously. [caption id="attachment_58342030" align="aligncenter" width="1479"] Source: Bank of America Global Research [/caption] EV penetration growth in the short term will likely be hindered by manufacturers having few economic incentives to ramp up EV production compared with ICE dynamics, Murphy said. “Given the current EV setup, as an automaker it doesn't make a whole lot of sense to push volume hard until you get to your next-gen platforms that are cost competitive and are truly better vehicles than what you might have on the ICE side,” he said. As updated EVs hit the market and costs are better addressed, EV penetration will likely ramp up “significantly” by 2030, Murphy said. “We're looking at seven or eight years before the actual next-gen platforms are launched and cost curves come down on EVs where they become at parity or potentially even a little bit better than ICE costs,” he said. “That's where we could reach the tipping point.” Cost of ownership Higher cost of ownership also poses barriers to EV adoption in the current market, Murphy said, noting that high insurance costs for EVs are a “major challenge for the industry.” “A 5-mile-an-hour fender bender becomes potentially a complete total, which is a major problem for the consumer and the insurance company,” he said. Price cuts also are contributing to higher total costs for EV owners and hesitancy regarding repeat purchases, Murphy said. “In addition to total cost of ownership on an operating basis, the residual value getting annihilated by price cuts driven by Tesla , and other folks have followed in the industry, has created bad taste in a lot of the early adopters,” he said. “Total cost of ownership, which is dominated by depreciation costs, has been much higher than expected. “The industry is going to have a challenge, both on insurance costs and then on residual values, of convincing the folks that are in EVs right now to stay in EVs and buy another one.” Costs will also continue to be a barrier to both EV production scale and sales over the next three years, Murphy said. Automakers “have to do a lot of work on the vehicle architecture and the entire cost of the vehicle, way beyond just scaling up,” he said. “Cutting the price like crazy to drive scale and volume up on EVs wouldn't answer everything that the incumbent automakers need to do here. . They really need to work on the design, engineering and the cost of the entire vehicle outside of the battery pack.” Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 7-9 at Wynn Las Vegas. . To learn more about the 2024 event and register, visit www. .AutoFinanceSummit.com.

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Bank of America predicts national EV penetration at 25% by 2027

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