Something I think we're all familiar with, but this article puts some numbers to the global switchover that is beginning in earnest. Article starts with the China market and then expands to a more global discussion.
A profound change in the future of cars began to unfold in China last year. The trajectory shift may have happened so suddenly, however, that markets and the public have not fully processed the implications. There’s a term for this phenomenon. Cognitive conservatism describes our tendency to insufficiently revise our beliefs, when presented with new information. Time itself tends to cure this condition, but, when facing a system as large as the global vehicle market, new information coming through may be too unwieldy to process.
Start here: sales of vehicles powered by an internal combustion engine (ICE) are on course to fall by over 4.5 million units from a peak of 28.1 million in 2017 to 23.5 million units this year. That’s just astounding. Were this happening 20 years ago, we’d know that China had either entered, or, was close to a recession. And while it’s true the current trade-influenced slowdown in China has hit growth pretty hard, the concurrent ascent of electric vehicles has helped greatly in cushioning the market’s decline. For, as ICE vehicles are on course to fall 16% from the 2017 peak, the total car market in the same period is on course to fall 12.8%. The difference between the two, equal to about 2.9 million EV units, is due to the rollout of electric vehicles.
Here’s where cognitive conservatism comes into play. If you have a 28 million unit market, and a new technology enters and takes a 2.7% share (2017), then a 4.5% share (2018), and is on course to take a 6.5% share (2019) you should begin to have confidence there’s no regression coming, no imminent reversion to the old technology. And in the case of China, we can legitimately assert the substitution effect is in full swing, because China’s EV industry has largely produced mini, and super-mini EV that are quite affordable, and have been adopted quickly in China’s 2nd and 3rd tier cities.