Electric cars are on the rise, and there is no doubt about it. According to the IEA, the number of new registrations for electric cars worldwide reached 750,000 in 2016. This number represents a growth of 60 percent in registrations compared with 2015.
With sales like these in the electric vehicle sector it is understandable that, even though no profit has been made on any of its sales, Tesla has now become the most valuable car company in the US with a total value of US$51.4 billion as of April 10, 2017. GM took second place with a total value of US$50.22 billion. After raising US$1.15 billion to support its manufacturing operations, Tesla is on the verge of delivering the Model 3. The car will only cost US$35,000 and will allow the company to compete with more affordable electric vehicles in the market, including the Nissan LEAF and the Chevrolet Volt.
No wonder then, that another traditional carmaker is jumping on the electric bandwagon. Volvo announced on July 5, 2017 that by 2019 it would only offer vehicles with an electric powertrain, either hybrid or full-electric. This came just one day before France announced that the country would ban sales of petrol and diesel vehicles by 2040. Volvo’s President and CEO Håkan Samuelsson also disclosed on June 21 the establishment of Polestar as a new brand focused on electric sports models. Incidentally, on July 5, Tesla saw a 7 percent decrease in its stock price, followed by a 6 percent decrease the day after. Although luxury vehicle manufacturers such as BMW and Mercedes-Benz have stated their interest in electric vehicles, they remain on the side of the combustion-engine.
A cautious approach is understandable. Although sales have increased exponentially, electric vehicles account for only 0.2 percent of the total worldwide number of passenger light-duty vehicles. According to Guillermo Rosales, President of the Mexican Association of Automotive Distributors (AMDA), electric vehicle sales represent 0.5 percent of the domestic market. Sales of these models are still mainly driven by tax breaks. In Norway, the market share for electric vehicles reached 29 percent in 2016 but this goes hand in hand with the generous incentives customers are offered, such as a 25 percent VAT tax exemption, exclusive traffic lanes and parking spots and free charging stations. In comparison, Denmark’s electric vehicle sales plunged by 68 percent from 2015 to 2016 after the country phased out its tax breaks.
Reduction of CO2 emissions is a delicate theme and although companies recognize that consumers want to drive low-polluting automobiles, they also understand that the true factor moving them to buy is price, as confirmed by Volkswagen’s record sales during its diesel scandal.
For more articles on Mexico’s automotive industry, check out our blog here!
For more articles on Mexico’s energy industry, check out the blog here!