News

Jan 31, 2024

EV Sales in California Spiked in 2021, Share Hit Nearly 10%. Legacy Automakers, Years Behind, Finally Put Heat on Tesla

Registrations of all new cars and light trucks in California in 2021 jumped by

Registrations of all new cars and light trucks in California in 2021 jumped by 13.3%, to 1.86 million vehicles, recovering about half the plunge in 2020, but were still down 16% from 2016, according to the California New Car Dealers Association (CNCDA). As everywhere, new vehicle sales in 2021 were handicapped by the shortages of vehicles due to the semiconductor shortage.

By comparison, in the US overall, total new vehicle sales ticked up 3.1% in 2021, from the collapsed levels of 2020, to 14.9 million vehicles, about the same as in 1978, adding another year to the 25-year stagnation interrupted by plunges. California fits right in.

The one segment where sales exploded in 2021 and set a huge new record, after having barely ticked down in 2020, were battery electric vehicles (EVs).

Sales of EVs spiked by 74% in 2021, to 176,357 vehicles. Their share of total registrations jumped to 9.5%, from 6.2% in the prior year. While total registrations since 2016 have fallen by 16% in California, EV sales have more than quadrupled over the same period.

Tesla's sales jumped by 69.6% in 2021, to 121,080 vehicles. But other automakers’ EV sales jumped by 82.8% to 55,277 vehicles. And Tesla's share of all EV sales, while still dominant, ticked down to 68.7%, from over 70% in the prior three years (EV registrations = blue columns, left scale; EV share of all registrations = red line, right scale):

In California, electric utilities have been stuck in a stagnating and declining business since the peak in electricity consumption 13 years ago. Since 2008, total electricity sales to end users dropped by 7.5%.

Most electric utilities in the state are publicly-traded companies that want revenue growth and earnings growth to attract investors, like other companies, and EVs were going to be the ticket.

But electricity consumption is still declining, and consumption by EVs is small and has so far not been able to fill the hole:

EVs are still only a small part of the total fleet of vehicles in operation, and it will take a few more years before they’ll lead to any visible growth in electricity consumption.

For electric utilities, EVs are the biggest no-brainer in the history of mankind because most people will charge them at night in their garages to top them off after the commute, thereby consuming electricity in the middle of the night, when utilities sit on very expensive idle capacity.

Demand from EVs would allow utilities to make money in the middle of the night, and that demand in the middle of the night could be met without having to add new capacity. But it's just going to take a while to make a dent.

Toyota (includes Lexus) has been the undisputed #1 in California for many years. In 2021, its market share increased to 21.2% (from 19.3% in 2019).

Honda's share (includes Acura) dropped to 11.9% (from 12.8% in 2019).

Among the US automakers:

Of the top 15 automakers in California, 11 booked lower sales in 2021 compared to the pre-pandemic year 2019, including Toyota.

Only four automakers booked higher sales compared to 2019, and only one booked a large sales increase:

The boom in EV sales in California has been fueled largely by Tesla. Every Tesla sold in California is manufactured in California. No other major automaker assembles vehicles in the state.

Now the boom is also starting to be fueled by other automakers. All kinds of models are coming on the market. This belated competition by the legacy automakers – they brushed off EVs for a decade and got caught flat-footed – will diminish Tesla's share of this booming sector … well, once there are enough semiconductors to build the vehicles.

Federal incentives for EVs are no longer available to buyers of Tesla and GM vehicles. But buyers can still get federal incentives for EVs from other automakers. State and local incentives are available on a first-come-first-serve basis, often limited by income categories.

Given the booming demand for EVs, including the booming demand for Teslas that no longer qualify for federal EV incentives, it's time to let the federal incentives phase out as planned when the other automakers reach the milestones. And it's high time to end state and local incentives – because…

The industry has been attracting a gazillion dollars from investors, and EV startups have sprouted like mushrooms, including a slew of EV SPACs whose shares have now collapsed, and legacy automakers are investing tens of billions of dollars each to switch development and production to EVs because that's the only segment that is growing in leaps and bounds. The entire industry is swimming in money. EVs will thrive without incentives. Incentives just allow automakers to keep their prices high and pad their margins. Taxpayers should no longer be shanghaied into fattening up corporate profit margins.

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