Brian Gaynor: Car boom looks like last hurrah for petrol power

Vehicle sales are thriving but are we buying cars that will be obsolete before the end of their working life?

This issue has been highlighted by Volvo’s latest decision that all fresh models launched from two thousand nineteen onwards will have an electrical motor. The company’s press release notes that this will mark “the historic end of cars that only have an internal combustion engine (ICE) and placing electrification at the core of its [Volvo’s] future business”.

Volvo’s decision is consistent with studies concluding that electrically-driven cars will progressively substitute petrol driven automobiles over the next decade or two. This will have a significant influence on the automotive industry, energy usage and oil prices.

The Fresh Zealand vehicle market is flourishing, as indicated by the accompanying table.

Motor Industry Association data shows that there were 107,880 fresh car sales in the year ended June, an 11.8 per cent increase over the previous corresponding period.

The record high prior to two thousand sixteen was 96,418 sales in the one thousand nine hundred eighty four calendar year.

Commercial vehicle sales have also soared in latest years with 49,048 fresh sales in the June two thousand seventeen year, an Legal.9 per cent increase over the June two thousand sixteen year. The pre-2014 record high was 30,492 sales in the December one thousand nine hundred eighty two year.

The latest commercial vehicle sales figures reflect thriving business conditions and a shortage of skilled drivers. The latter requires companies to upgrade their vehicles to attract fresh employees.

Second-hand imports are also rocketing with Statistics NZ reporting 155,876 imports for the May two thousand seventeen year. This is only one thousand ninety six below the all-time calendar year high of 156,972 in 2003.

The combined two thousand seventeen passenger, commercial and second-hand figure of 312,804 compares with just 190,094 in 2013.

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These figures clearly demonstrate that car importers and dealers are experiencing unprecedented boom conditions. Consequently, the country’s total vehicle imports have enlargened by 15.8 per cent, in dollar terms, over the past twelve months and are our largest import category by a broad margin.

The meaty stack of imported vehicles, both fresh and used, on the Auckland waterfront is a graphic illustration of this.

The two right-hand columns demonstrate total vehicle registrations as at May thirty one and the increase over the previous year. The figures are the net outcome of fresh vehicle sales minus vehicles scrapped. Vehicles with an original date inbetween one thousand nine hundred ninety and one thousand nine hundred ninety four have the highest scrappage rate at present.

These vehicle registration figures explain why our roads have become more and more congested. The total number of registered vehicles has enhanced by 637,676 over the past five years with around a third of these, around 215,000, in Auckland.

Neither the Government, nor the Auckland City Council, anticipated this massive growth in vehicle numbers and our roads cannot cope with this volume increase. Another few years of national vehicle registration growth of more than 150,000 per annum will put further pressure on the country’s roads.

Ministry of Transport figures display that electrical vehicle (EV) numbers are petite but enlargening rapidly. Fresh EV registrations have grown from just four hundred five in the June two thousand fifteen year to eight hundred two the following year and two thousand two hundred eighty one in the twelve months ended June this year.

The Ministry reports that the introduction of the Mitsubishi Outlander, Audi and BMW plug-in hybrids boosted the market three years ago but second-hand EV imports have made a greater contribution in latest months.

The Motor Industry Association’s fresh car sales figures demonstrate that one hundred five Tesla vehicles were sold in the very first six months of the current year compared with twenty four in the utter two thousand sixteen calendar year and twenty one vehicles in the twelve months ended December 2015.

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EV advocates argue that these vehicles have several clear benefits including:

• They are environmentally friendly as they run on clean energy and do not emit toxic gas or smoke.

• Albeit electrical play isn’t free, EVs are far cheaper to run than petrol-based vehicles.

• EVs require less maintenance because they have fewer moving parts.

• They generate less noise pollution.

• They often have government subsidies to encourage lower pollution levels.

The main disadvantages of EVs are their limited battery capacity and long recharge time. One of the main objectives of EV manufacturers is to improve battery capacity to enable vehicles to travel further and reduce recharging time.

Volvo isn’t the only company to commit phat resources to electrical vehicle development.

Mercedes has announced plans to spend US$11 billion ($15b) over the next five years on ten EV models, Volkswagen has committed US$10b to EVs over the same period and General Motors has earmarked almost US$4b.

Meantime, Ford has committed to develop an EV with a 480km battery range by 2020.

In addition, governments are very keen to promote EV usage. Norway has a target of one hundred per cent EVs by two thousand twenty five while earlier this month Emmanuel Macron’s French Government announced that it would ban the sale of petrol and diesel vehicles by two thousand forty to meet its targets under the Paris climate accord. Several major cities want to ban older petrol based vehicles and China has a twenty per cent clean energy vehicle target.

A latest report by McKinsey & Company – Automotive revolution – perspective towards two thousand thirty – had this to say about electrical vehicles: “Stricter emission regulations, lower battery costs, widely available charging stations, and enhancing consumer acceptance will create fresh and strong momentum for invasion of electrified vehicles (hybrid, plug-in, battery electrical, and fuel cell) in the coming years.

“Hence, in 2030, the share of electrified vehicles could range from ten to fifty per cent of fresh vehicle sales. Adoption rates will be highest in developed, dense cities with rigorous emission regulation and consumer incentives (tax cracks, special parking and driving privileges, discounted electro-stimulation pricing, etc).

“Sales invasion will be slower in puny towns and rural areas with lower levels of charging infrastructure and higher dependency on driving range.”

Goldman Sachs is forecasting twenty two per cent EV invasion by two thousand twenty five while most forecasters agree that EVs should be gaining strong momentum by the end of the 2020s.

The switch to EVs should have an influence on the price of oil as the International Energy Agency estimates that road transport represents 42.Two per cent of total world oil consumption. A substantial shift to EVs would have a negative influence on oil prices and the prosperity of oil-producing countries.

A bullish report by Bloomberg Fresh Energy Finance (BNEF), released this week, forecast that EV sales would represent fifty four per cent of fresh car sales by two thousand forty compared with its previous forecast of thirty five per cent. BNEF analyst Colin McKerracher was quoted as telling: “This is economics, unspoiled and ordinary economics, lithium-ion battery prices are going to come down sooner and quicker than most people expect.”

Bloomberg believes that this seismic shift will see electrical cars accounting for a third of the global auto fleet by two thousand forty and displace about eight million barrels a day of oil production. This compares with Saudi Arabia’s current oil exports of seven million barrels a day.

It is significant to note that electrified vehicles include a large proportion of hybrid-electrics. This means that the internal combustion engine will proceed to be relevant, albeit less and less superior.

There is a strong incentive for the Fresh Zealand Government to encourage greater electrical vehicle usage because we have a plentiful supply of electro-stimulation, and annual petroleum imports of $5b represent 9.Four per cent of the country’s total imports.

The issue for Fresh Zealand consumers is that the resale value of petrol-based vehicles could decline more rapidly than previously as electrical vehicles become more popular and cheaper to operate.

Astute buyers, with a long-term perspective, will take this into account when purchasing a fresh vehicle or a second-hand import.

• Brian Gaynor is an executive director of Milford Asset Management.

Brian Gaynor: Car boom looks like last hurrah for petrol power – NZ Herald

Brian Gaynor: Car boom looks like last hurrah for petrol power

Vehicle sales are flourishing but are we buying cars that will be obsolete before the end of their working life?

This issue has been highlighted by Volvo’s latest decision that all fresh models launched from two thousand nineteen onwards will have an electrified motor. The company’s press release notes that this will mark “the historic end of cars that only have an internal combustion engine (ICE) and placing electrification at the core of its [Volvo’s] future business”.

Volvo’s decision is consistent with studies concluding that electrically-driven cars will progressively substitute petrol driven automobiles over the next decade or two. This will have a significant influence on the automotive industry, energy usage and oil prices.

The Fresh Zealand vehicle market is flourishing, as indicated by the accompanying table.

Motor Industry Association data shows that there were 107,880 fresh car sales in the year ended June, an 11.8 per cent increase over the previous corresponding period.

The record high prior to two thousand sixteen was 96,418 sales in the one thousand nine hundred eighty four calendar year.

Commercial vehicle sales have also soared in latest years with 49,048 fresh sales in the June two thousand seventeen year, an Legal.9 per cent increase over the June two thousand sixteen year. The pre-2014 record high was 30,492 sales in the December one thousand nine hundred eighty two year.

The latest commercial vehicle sales figures reflect flourishing business conditions and a shortage of skilled drivers. The latter requires companies to upgrade their vehicles to attract fresh employees.

Second-hand imports are also rocketing with Statistics NZ reporting 155,876 imports for the May two thousand seventeen year. This is only one thousand ninety six below the all-time calendar year high of 156,972 in 2003.

The combined two thousand seventeen passenger, commercial and second-hand figure of 312,804 compares with just 190,094 in 2013.

Related articles:

Crimson gauze tying business in knots

These figures clearly demonstrate that car importers and dealers are experiencing unprecedented boom conditions. Consequently, the country’s total vehicle imports have enhanced by 15.8 per cent, in dollar terms, over the past twelve months and are our largest import category by a broad margin.

The fat stack of imported vehicles, both fresh and used, on the Auckland waterfront is a graphic illustration of this.

The two right-hand columns showcase total vehicle registrations as at May thirty one and the increase over the previous year. The figures are the net outcome of fresh vehicle sales minus vehicles scrapped. Vehicles with an original date inbetween one thousand nine hundred ninety and one thousand nine hundred ninety four have the highest scrappage rate at present.

These vehicle registration figures explain why our roads have become more and more congested. The total number of registered vehicles has enlargened by 637,676 over the past five years with around a third of these, around 215,000, in Auckland.

Neither the Government, nor the Auckland City Council, anticipated this massive growth in vehicle numbers and our roads cannot cope with this volume increase. Another few years of national vehicle registration growth of more than 150,000 per annum will put further pressure on the country’s roads.

Ministry of Transport figures display that electrical vehicle (EV) numbers are puny but enlargening rapidly. Fresh EV registrations have grown from just four hundred five in the June two thousand fifteen year to eight hundred two the following year and two thousand two hundred eighty one in the twelve months ended June this year.

The Ministry reports that the introduction of the Mitsubishi Outlander, Audi and BMW plug-in hybrids boosted the market three years ago but second-hand EV imports have made a greater contribution in latest months.

The Motor Industry Association’s fresh car sales figures demonstrate that one hundred five Tesla vehicles were sold in the very first six months of the current year compared with twenty four in the utter two thousand sixteen calendar year and twenty one vehicles in the twelve months ended December 2015.

SHARE THIS QUOTE:

EV advocates argue that these vehicles have several clear benefits including:

• They are environmentally friendly as they run on clean energy and do not emit toxic gas or smoke.

• Albeit tens unit isn’t free, EVs are far cheaper to run than petrol-based vehicles.

• EVs require less maintenance because they have fewer moving parts.

• They generate less noise pollution.

• They often have government subsidies to encourage lower pollution levels.

The main disadvantages of EVs are their limited battery capacity and long recharge time. One of the main objectives of EV manufacturers is to improve battery capacity to enable vehicles to travel further and reduce recharging time.

Volvo isn’t the only company to commit hefty resources to electrified vehicle development.

Mercedes has announced plans to spend US$11 billion ($15b) over the next five years on ten EV models, Volkswagen has committed US$10b to EVs over the same period and General Motors has earmarked almost US$4b.

Meantime, Ford has committed to develop an EV with a 480km battery range by 2020.

In addition, governments are very keen to promote EV usage. Norway has a target of one hundred per cent EVs by two thousand twenty five while earlier this month Emmanuel Macron’s French Government announced that it would ban the sale of petrol and diesel vehicles by two thousand forty to meet its targets under the Paris climate accord. Several major cities want to ban older petrol based vehicles and China has a twenty per cent clean energy vehicle target.

A latest report by McKinsey & Company – Automotive revolution – perspective towards two thousand thirty – had this to say about electrified vehicles: “Stricter emission regulations, lower battery costs, widely available charging stations, and enhancing consumer acceptance will create fresh and strong momentum for invasion of electrified vehicles (hybrid, plug-in, battery electrified, and fuel cell) in the coming years.

“Hence, in 2030, the share of electrified vehicles could range from ten to fifty per cent of fresh vehicle sales. Adoption rates will be highest in developed, dense cities with rigorous emission regulation and consumer incentives (tax cracks, special parking and driving privileges, discounted electro-stimulation pricing, etc).

“Sales invasion will be slower in petite towns and rural areas with lower levels of charging infrastructure and higher dependency on driving range.”

Goldman Sachs is forecasting twenty two per cent EV invasion by two thousand twenty five while most forecasters agree that EVs should be gaining strong momentum by the end of the 2020s.

The switch to EVs should have an influence on the price of oil as the International Energy Agency estimates that road transport represents 42.Two per cent of total world oil consumption. A substantial shift to EVs would have a negative influence on oil prices and the prosperity of oil-producing countries.

A bullish report by Bloomberg Fresh Energy Finance (BNEF), released this week, forecast that EV sales would represent fifty four per cent of fresh car sales by two thousand forty compared with its previous forecast of thirty five per cent. BNEF analyst Colin McKerracher was quoted as telling: “This is economics, unspoiled and elementary economics, lithium-ion battery prices are going to come down sooner and quicker than most people expect.”

Bloomberg believes that this seismic shift will see electrical cars accounting for a third of the global auto fleet by two thousand forty and displace about eight million barrels a day of oil production. This compares with Saudi Arabia’s current oil exports of seven million barrels a day.

It is significant to note that electrified vehicles include a large proportion of hybrid-electrics. This means that the internal combustion engine will proceed to be relevant, albeit less and less superior.

There is a strong incentive for the Fresh Zealand Government to encourage greater electrified vehicle usage because we have a plentiful supply of tens unit, and annual petroleum imports of $5b represent 9.Four per cent of the country’s total imports.

The issue for Fresh Zealand consumers is that the resale value of petrol-based vehicles could decline more rapidly than previously as electrified vehicles become more popular and cheaper to operate.

Astute buyers, with a long-term perspective, will take this into account when purchasing a fresh vehicle or a second-hand import.

• Brian Gaynor is an executive director of Milford Asset Management.

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