Electric vehicles in the US: Another gold rush for everyone?<\/h1>\n\n Detroit, April 2023<\/span>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n\n\n \n \n\n F<\/span>\n rom today\u2019s 6% EV market share to the single biggest EV opportunity after China. More than 30 million EVs sold cumulatively in the US by 2030. Higher growth rate than any other geography. In this second part of the EV study, we shed light on whether US EV actually constitutes a \u2018gold rush\u2019 opportunity for everyone.\u00a0<\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tThe race is on:\u00a0<\/span><\/strong>Competition in the US EV market is quickly intensifying, but can anyone still unseat Tesla?\u00a0<\/span><\/b><\/h2>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tNET PROFIT\/ LOSS MARGIN<\/h5>
(2018-2022, %)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/04\/diagram-7-scaled.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n 1) VW earnings through Q3, 2022
Source: Tesla, Volkswagen AG, Ford, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tJudging by today\u2019s metrics, Tesla is well positioned to take advantage of the US\u2019 EV growth potential. Tesla currently has a 63% share of the EV market including EV SUVs and displays superior profitability \u2013 the second biggest player (Ford) has a 6% share1<\/sup>. Tesla\u2019s profit margin over the past 5 years has increased significantly, and now exceeds Ford\u2019s and VW Groups\u2019. This can be attributed to the growing economies of scale, new manufacturing technology (e.g., use of large castings), and smart insourcing of selected supply chain elements (e.g., battery manufacturing)15<\/sup>. Most importantly these margins now provide Tesla with breathing room for tactical price movements (e.g., see Tesla\u2019s movements in China16<\/sup>).\u00a0<\/span><\/p>With the shared mission of unseating Tesla, OEMs are tripling the total number of EV models by 2025 and the number of OEMs offering EVs is set to double by 2030. The ICE leaders GM, Ford, Stellantis are also expected to grow massively in EVs. Volkswagen has bet the farm on them. And even EV-laggard Toyota is expected to play a key role with a projected EV market share in the 10 to 15% range. For all these contestants navigation of the specific needs of the US EV customer and geographical landscape is key to enhance EV profitability and unseat Tesla as the US EV leader.1<\/sup>\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tClinging to California is not enough:<\/span>\u00a0Do\u00a0the easy part first<\/strong><\/h2>California is the market model: More EVs sold than in any other state, 34% of all 2022 US EV sales1,17<\/sup>, second highest charging point density of 128 points per 100,000 licensed drivers and the first state to introduce clean vehicle legislation in 1990. California\u2019s success in the EV game can be attributed to early and continuous adoption of EV-forward policies and regulations18<\/sup>, public and private purchase incentives, and a vast charging infrastructure. To scale EV, manufacturers need to identify regions that follow the Californian model in optimizing the subsidy, infrastructure, and policy triangle.\u00a0<\/span><\/p>OEMs should focus on areas where the triangle is complete, which is rarely found at the state level so OEMs ought to go deeper to a regional level. When applying the triangle principle, OEMs should assess population density as it skews the charge point per population metrics. For example, the state of Washington has a small number of public chargers per licensed driver and limited state subsidies, but a high EV penetration rate, primarily due to a high density of chargers around Seattle and limited infrastructure throughout the rest of the state. The state of Colorado has higher number of chargers per licensed driver and more subsidies than Washington, but significantly lower EV market share, due to a smaller number of residents throughout the state and more dispersed pockets of EV infrastructure. In addition, city-level incentives like charging infrastructure subsidies and access to parking discounts (e.g., Sacramento)19<\/sup>\u00a0play a role at the municipality level. OEMs should also weigh the consumer demographic and psychographic differences within regions. For example, Chicagoland (Cook County plus surrounding counties) residents live in more densely populated areas and, on average, have a higher income than downstate Illinois20<\/sup>. OEM\u2019s segmentation of target markets needs to go deeper than state level to reflect local particularities in population make-up and public support.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tEV PENETRATION AND NUMBER OF PUBLIC CHARGERS<\/h5>
(2021, by state)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/04\/diagram-8-scaled.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n Source: Alliance for Automotive Innovation, WLRN, Berylls\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tMade in America:\u00a0<\/span><\/strong>The Inflation Reduction Act will further amplify the local-for-local US EV market.\u00a0<\/span><\/b><\/h2>Looking beyond cities and regions, both the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) will have a profound effect on the EV landscape nationwide with over $100bn in total investment \u2013 nearly 30x more than government investment to date21<\/sup>. While the BIL will significantly boost nationwide EV infrastructure and grid upgrades, the IRA has more direct implications for OEMs and consumers. With the IRA, OEMs have access to both consumer and production-related incentives, which are conditional on their supply chain and production setup as well as pricing policy. For consumer tax credits, incentive eligibility is conditional on vehicle price, battery mineral sourcing, and battery production and vehicle assembly location. For production incentives22<\/sup>, eligibility is based on production profile for each individual project (e.g., for the Advanced Manufacturing Production Credit, eligibility hinges on production of battery cells or modules with a capacity-to-power ratio not to exceed 100:1)23<\/sup>.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tIRA CONDITIONS<\/h5>
(by affected value chain element)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/04\/diagram-9-scaled.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n 1) Lithium iron phosphate batteries; an alternative battery chemistry option for customers to in addition to Ford\u2019s existing nickel cobalt manganese (NCM) battery option
Source: The Inflation Reduction Act of 2022, US Department of Energy, Reuters, Alliance for Automotive Innovation, Ford, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tThe IRA has an impact on the automotive landscape on the macro and micro level. At the micro level, players will need to make a choice whether to increasingly focus on the US market to access funding (e.g., Hyundai has announced acceleration of EV plant construction in Georgia and reconfigured its battery supply chain). At the macro level, other countries (especially the EU) will need to compete with the US to attract local production (e.g., Tesla scaled down plans for Berlin production in favor of the US because of IRA incentives24<\/sup>; VW announced the ramp-up of a battery plant in Canada)25<\/sup>. The IRA is expected to necessitate stronger local and regional presence and OEMs will need to reevaluate their global production value chain.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tNetwork of networks: <\/b><\/span>New players in the US EV market need a strong [dealer] partner in the US to survive.\u00a0<\/span><\/b><\/h2>The US automotive market is dealer-dominated. Franchise law protects dealer access to the market. Although Tesla has managed to implement its direct sales model in some states, realization of direct sales will continue to be contested (see e.g., Tesla v. the State of Louisiana), more cumbersome for new entrants (e.g., entry needed to happen before 2015 in Georgia) and allow a \u2018patchwork footprint\u2019 at best. Direct sales regulation will also continue to evolve \u2013 with the regulation of EV infrastructure and connected services sales still to be defined.\u00a0<\/span><\/p>Considering customers\u2019 education and perception gap, the complexity of the regional US landscape and the vast (aftersales) footprint to be serviced, OEMs need to closely examine the tradeoff between going fully direct and being able to depend on a strong (dealer) partner to really cover a market and bridge the gap to the customer.<\/p><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tFRANCHISE LAWS<\/h5>
(2021, extent to which direct sales are permitted in the respective state)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/04\/diagram-10-1.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n Source: National Conference of State Legislatures, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tSo what? Now what?<\/span><\/h2>The question for OEMs, suppliers, dealers and other automobility players is one of how not if<\/em> to participate in the US EV market. The US will become the second biggest single EV market by 2030 and will be growing faster than any other region. The specific demands of US customers (e.g., emphasis on fuel economy, residual value, TCO) will necessitate a US-centric (SUV) product strategy, which goes beyond derivatives of Europe\/Asia-focused platforms.<\/p>New entrants and niche manufacturers face the additional complexity of having to realize sufficient volumes of such local products for scale economies, while keeping the costs of ramping-up the supporting sales\/after-sales footprint to a minimum. The price sensitivity of US customers coupled with the superior profitability of the current market leader Tesla and stringent localization requirements for securing IRA subsidies will make demystifying the IRA and the configuration of EV value chains a key success factor. The heterogenous regional policy, infrastructure and customer regional US landscape favor the cooperation with a strong local partner. The Inflation Reduction Act is the United States\u2019 holistic answer to other nations\u2019 industrial policy. Succeeding in the US EV market beyond its niche existence will necessitate similarly holistic strategies of new and incumbent players alike.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/04\/diagram-11-1.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
rom today\u2019s 6% EV market share to the single biggest EV opportunity after China. More than 30 million EVs sold cumulatively in the US by 2030. Higher growth rate than any other geography. In this second part of the EV study, we shed light on whether US EV actually constitutes a \u2018gold rush\u2019 opportunity for everyone.\u00a0<\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
The race is on:\u00a0<\/span><\/strong>Competition in the US EV market is quickly intensifying, but can anyone still unseat Tesla?\u00a0<\/span><\/b><\/h2>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tNET PROFIT\/ LOSS MARGIN<\/h5>
(2018-2022, %)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n 1) VW earnings through Q3, 2022
Source: Tesla, Volkswagen AG, Ford, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tJudging by today\u2019s metrics, Tesla is well positioned to take advantage of the US\u2019 EV growth potential. Tesla currently has a 63% share of the EV market including EV SUVs and displays superior profitability \u2013 the second biggest player (Ford) has a 6% share1<\/sup>. Tesla\u2019s profit margin over the past 5 years has increased significantly, and now exceeds Ford\u2019s and VW Groups\u2019. This can be attributed to the growing economies of scale, new manufacturing technology (e.g., use of large castings), and smart insourcing of selected supply chain elements (e.g., battery manufacturing)15<\/sup>. Most importantly these margins now provide Tesla with breathing room for tactical price movements (e.g., see Tesla\u2019s movements in China16<\/sup>).\u00a0<\/span><\/p>With the shared mission of unseating Tesla, OEMs are tripling the total number of EV models by 2025 and the number of OEMs offering EVs is set to double by 2030. The ICE leaders GM, Ford, Stellantis are also expected to grow massively in EVs. Volkswagen has bet the farm on them. And even EV-laggard Toyota is expected to play a key role with a projected EV market share in the 10 to 15% range. For all these contestants navigation of the specific needs of the US EV customer and geographical landscape is key to enhance EV profitability and unseat Tesla as the US EV leader.1<\/sup>\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tClinging to California is not enough:<\/span>\u00a0Do\u00a0the easy part first<\/strong><\/h2>California is the market model: More EVs sold than in any other state, 34% of all 2022 US EV sales1,17<\/sup>, second highest charging point density of 128 points per 100,000 licensed drivers and the first state to introduce clean vehicle legislation in 1990. California\u2019s success in the EV game can be attributed to early and continuous adoption of EV-forward policies and regulations18<\/sup>, public and private purchase incentives, and a vast charging infrastructure. To scale EV, manufacturers need to identify regions that follow the Californian model in optimizing the subsidy, infrastructure, and policy triangle.\u00a0<\/span><\/p>OEMs should focus on areas where the triangle is complete, which is rarely found at the state level so OEMs ought to go deeper to a regional level. When applying the triangle principle, OEMs should assess population density as it skews the charge point per population metrics. For example, the state of Washington has a small number of public chargers per licensed driver and limited state subsidies, but a high EV penetration rate, primarily due to a high density of chargers around Seattle and limited infrastructure throughout the rest of the state. The state of Colorado has higher number of chargers per licensed driver and more subsidies than Washington, but significantly lower EV market share, due to a smaller number of residents throughout the state and more dispersed pockets of EV infrastructure. In addition, city-level incentives like charging infrastructure subsidies and access to parking discounts (e.g., Sacramento)19<\/sup>\u00a0play a role at the municipality level. OEMs should also weigh the consumer demographic and psychographic differences within regions. For example, Chicagoland (Cook County plus surrounding counties) residents live in more densely populated areas and, on average, have a higher income than downstate Illinois20<\/sup>. OEM\u2019s segmentation of target markets needs to go deeper than state level to reflect local particularities in population make-up and public support.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tEV PENETRATION AND NUMBER OF PUBLIC CHARGERS<\/h5>
(2021, by state)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n Source: Alliance for Automotive Innovation, WLRN, Berylls\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tMade in America:\u00a0<\/span><\/strong>The Inflation Reduction Act will further amplify the local-for-local US EV market.\u00a0<\/span><\/b><\/h2>Looking beyond cities and regions, both the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) will have a profound effect on the EV landscape nationwide with over $100bn in total investment \u2013 nearly 30x more than government investment to date21<\/sup>. While the BIL will significantly boost nationwide EV infrastructure and grid upgrades, the IRA has more direct implications for OEMs and consumers. With the IRA, OEMs have access to both consumer and production-related incentives, which are conditional on their supply chain and production setup as well as pricing policy. For consumer tax credits, incentive eligibility is conditional on vehicle price, battery mineral sourcing, and battery production and vehicle assembly location. For production incentives22<\/sup>, eligibility is based on production profile for each individual project (e.g., for the Advanced Manufacturing Production Credit, eligibility hinges on production of battery cells or modules with a capacity-to-power ratio not to exceed 100:1)23<\/sup>.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tIRA CONDITIONS<\/h5>
(by affected value chain element)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n 1) Lithium iron phosphate batteries; an alternative battery chemistry option for customers to in addition to Ford\u2019s existing nickel cobalt manganese (NCM) battery option
Source: The Inflation Reduction Act of 2022, US Department of Energy, Reuters, Alliance for Automotive Innovation, Ford, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tThe IRA has an impact on the automotive landscape on the macro and micro level. At the micro level, players will need to make a choice whether to increasingly focus on the US market to access funding (e.g., Hyundai has announced acceleration of EV plant construction in Georgia and reconfigured its battery supply chain). At the macro level, other countries (especially the EU) will need to compete with the US to attract local production (e.g., Tesla scaled down plans for Berlin production in favor of the US because of IRA incentives24<\/sup>; VW announced the ramp-up of a battery plant in Canada)25<\/sup>. The IRA is expected to necessitate stronger local and regional presence and OEMs will need to reevaluate their global production value chain.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tNetwork of networks: <\/b><\/span>New players in the US EV market need a strong [dealer] partner in the US to survive.\u00a0<\/span><\/b><\/h2>The US automotive market is dealer-dominated. Franchise law protects dealer access to the market. Although Tesla has managed to implement its direct sales model in some states, realization of direct sales will continue to be contested (see e.g., Tesla v. the State of Louisiana), more cumbersome for new entrants (e.g., entry needed to happen before 2015 in Georgia) and allow a \u2018patchwork footprint\u2019 at best. Direct sales regulation will also continue to evolve \u2013 with the regulation of EV infrastructure and connected services sales still to be defined.\u00a0<\/span><\/p>Considering customers\u2019 education and perception gap, the complexity of the regional US landscape and the vast (aftersales) footprint to be serviced, OEMs need to closely examine the tradeoff between going fully direct and being able to depend on a strong (dealer) partner to really cover a market and bridge the gap to the customer.<\/p><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tFRANCHISE LAWS<\/h5>
(2021, extent to which direct sales are permitted in the respective state)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n Source: National Conference of State Legislatures, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tSo what? Now what?<\/span><\/h2>The question for OEMs, suppliers, dealers and other automobility players is one of how not if<\/em> to participate in the US EV market. The US will become the second biggest single EV market by 2030 and will be growing faster than any other region. The specific demands of US customers (e.g., emphasis on fuel economy, residual value, TCO) will necessitate a US-centric (SUV) product strategy, which goes beyond derivatives of Europe\/Asia-focused platforms.<\/p>New entrants and niche manufacturers face the additional complexity of having to realize sufficient volumes of such local products for scale economies, while keeping the costs of ramping-up the supporting sales\/after-sales footprint to a minimum. The price sensitivity of US customers coupled with the superior profitability of the current market leader Tesla and stringent localization requirements for securing IRA subsidies will make demystifying the IRA and the configuration of EV value chains a key success factor. The heterogenous regional policy, infrastructure and customer regional US landscape favor the cooperation with a strong local partner. The Inflation Reduction Act is the United States\u2019 holistic answer to other nations\u2019 industrial policy. Succeeding in the US EV market beyond its niche existence will necessitate similarly holistic strategies of new and incumbent players alike.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
NET PROFIT\/ LOSS MARGIN<\/h5>
(2018-2022, %)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t1) VW earnings through Q3, 2022
Source: Tesla, Volkswagen AG, Ford, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Judging by today\u2019s metrics, Tesla is well positioned to take advantage of the US\u2019 EV growth potential. Tesla currently has a 63% share of the EV market including EV SUVs and displays superior profitability \u2013 the second biggest player (Ford) has a 6% share1<\/sup>. Tesla\u2019s profit margin over the past 5 years has increased significantly, and now exceeds Ford\u2019s and VW Groups\u2019. This can be attributed to the growing economies of scale, new manufacturing technology (e.g., use of large castings), and smart insourcing of selected supply chain elements (e.g., battery manufacturing)15<\/sup>. Most importantly these margins now provide Tesla with breathing room for tactical price movements (e.g., see Tesla\u2019s movements in China16<\/sup>).\u00a0<\/span><\/p> With the shared mission of unseating Tesla, OEMs are tripling the total number of EV models by 2025 and the number of OEMs offering EVs is set to double by 2030. The ICE leaders GM, Ford, Stellantis are also expected to grow massively in EVs. Volkswagen has bet the farm on them. And even EV-laggard Toyota is expected to play a key role with a projected EV market share in the 10 to 15% range. For all these contestants navigation of the specific needs of the US EV customer and geographical landscape is key to enhance EV profitability and unseat Tesla as the US EV leader.1<\/sup>\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t California is the market model: More EVs sold than in any other state, 34% of all 2022 US EV sales1,17<\/sup>, second highest charging point density of 128 points per 100,000 licensed drivers and the first state to introduce clean vehicle legislation in 1990. California\u2019s success in the EV game can be attributed to early and continuous adoption of EV-forward policies and regulations18<\/sup>, public and private purchase incentives, and a vast charging infrastructure. To scale EV, manufacturers need to identify regions that follow the Californian model in optimizing the subsidy, infrastructure, and policy triangle.\u00a0<\/span><\/p> OEMs should focus on areas where the triangle is complete, which is rarely found at the state level so OEMs ought to go deeper to a regional level. When applying the triangle principle, OEMs should assess population density as it skews the charge point per population metrics. For example, the state of Washington has a small number of public chargers per licensed driver and limited state subsidies, but a high EV penetration rate, primarily due to a high density of chargers around Seattle and limited infrastructure throughout the rest of the state. The state of Colorado has higher number of chargers per licensed driver and more subsidies than Washington, but significantly lower EV market share, due to a smaller number of residents throughout the state and more dispersed pockets of EV infrastructure. In addition, city-level incentives like charging infrastructure subsidies and access to parking discounts (e.g., Sacramento)19<\/sup>\u00a0play a role at the municipality level. OEMs should also weigh the consumer demographic and psychographic differences within regions. For example, Chicagoland (Cook County plus surrounding counties) residents live in more densely populated areas and, on average, have a higher income than downstate Illinois20<\/sup>. OEM\u2019s segmentation of target markets needs to go deeper than state level to reflect local particularities in population make-up and public support.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t (2021, by state)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Source: Alliance for Automotive Innovation, WLRN, Berylls\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Looking beyond cities and regions, both the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) will have a profound effect on the EV landscape nationwide with over $100bn in total investment \u2013 nearly 30x more than government investment to date21<\/sup>. While the BIL will significantly boost nationwide EV infrastructure and grid upgrades, the IRA has more direct implications for OEMs and consumers. With the IRA, OEMs have access to both consumer and production-related incentives, which are conditional on their supply chain and production setup as well as pricing policy. For consumer tax credits, incentive eligibility is conditional on vehicle price, battery mineral sourcing, and battery production and vehicle assembly location. For production incentives22<\/sup>, eligibility is based on production profile for each individual project (e.g., for the Advanced Manufacturing Production Credit, eligibility hinges on production of battery cells or modules with a capacity-to-power ratio not to exceed 100:1)23<\/sup>.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t (by affected value chain element)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t 1) Lithium iron phosphate batteries; an alternative battery chemistry option for customers to in addition to Ford\u2019s existing nickel cobalt manganese (NCM) battery option The IRA has an impact on the automotive landscape on the macro and micro level. At the micro level, players will need to make a choice whether to increasingly focus on the US market to access funding (e.g., Hyundai has announced acceleration of EV plant construction in Georgia and reconfigured its battery supply chain). At the macro level, other countries (especially the EU) will need to compete with the US to attract local production (e.g., Tesla scaled down plans for Berlin production in favor of the US because of IRA incentives24<\/sup>; VW announced the ramp-up of a battery plant in Canada)25<\/sup>. The IRA is expected to necessitate stronger local and regional presence and OEMs will need to reevaluate their global production value chain.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t The US automotive market is dealer-dominated. Franchise law protects dealer access to the market. Although Tesla has managed to implement its direct sales model in some states, realization of direct sales will continue to be contested (see e.g., Tesla v. the State of Louisiana), more cumbersome for new entrants (e.g., entry needed to happen before 2015 in Georgia) and allow a \u2018patchwork footprint\u2019 at best. Direct sales regulation will also continue to evolve \u2013 with the regulation of EV infrastructure and connected services sales still to be defined.\u00a0<\/span><\/p> Considering customers\u2019 education and perception gap, the complexity of the regional US landscape and the vast (aftersales) footprint to be serviced, OEMs need to closely examine the tradeoff between going fully direct and being able to depend on a strong (dealer) partner to really cover a market and bridge the gap to the customer.<\/p><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t (2021, extent to which direct sales are permitted in the respective state)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Source: National Conference of State Legislatures, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t The question for OEMs, suppliers, dealers and other automobility players is one of how not if<\/em> to participate in the US EV market. The US will become the second biggest single EV market by 2030 and will be growing faster than any other region. The specific demands of US customers (e.g., emphasis on fuel economy, residual value, TCO) will necessitate a US-centric (SUV) product strategy, which goes beyond derivatives of Europe\/Asia-focused platforms.<\/p> New entrants and niche manufacturers face the additional complexity of having to realize sufficient volumes of such local products for scale economies, while keeping the costs of ramping-up the supporting sales\/after-sales footprint to a minimum. The price sensitivity of US customers coupled with the superior profitability of the current market leader Tesla and stringent localization requirements for securing IRA subsidies will make demystifying the IRA and the configuration of EV value chains a key success factor. The heterogenous regional policy, infrastructure and customer regional US landscape favor the cooperation with a strong local partner. The Inflation Reduction Act is the United States\u2019 holistic answer to other nations\u2019 industrial policy. Succeeding in the US EV market beyond its niche existence will necessitate similarly holistic strategies of new and incumbent players alike.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tClinging to California is not enough:<\/span>\u00a0Do\u00a0the easy part first<\/strong><\/h2>
EV PENETRATION AND NUMBER OF PUBLIC CHARGERS<\/h5>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tMade in America:\u00a0<\/span><\/strong>The Inflation Reduction Act will further amplify the local-for-local US EV market.\u00a0<\/span><\/b><\/h2>
IRA CONDITIONS<\/h5>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Source: The Inflation Reduction Act of 2022, US Department of Energy, Reuters, Alliance for Automotive Innovation, Ford, Berylls<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tNetwork of networks: <\/b><\/span>New players in the US EV market need a strong [dealer] partner in the US to survive.\u00a0<\/span><\/b><\/h2>
FRANCHISE LAWS<\/h5>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tSo what? Now what?<\/span><\/h2>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t