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Tesla is Pwning Markets Traditionally Dominated by ICEs as Manufacturers Desperately Call for More Battery Production

Last year, the world produced more than 1.2 million electrical vehicles. This was nearly 60 percent growth from the previous year when just shy of 800,000 EVs hit the world stage. During 2018, the world is expected to achieve anywhere between 1.6 and 2 million electrical vehicle sales. And by 2020, the number is likely to exceed 3 million. In other words, clean transportation that transitions away from climate change producing fossil fuel burning is a major emerging and rapidly growing global market.

(Tesla is surging ahead in the race to produce clean energy vehicles. But Volkswagen has promised to spend 48 billion on batteries in a bid to catch up. Image source: Inside EVs.)

Today, Tesla presently dominates global clean transport sales. Producing just three models — the S, the X, and the 3 — this new automaker is seriously disrupting a number of traditional segments. During most weeks, Tesla now produces more than 4,000 all electrical vehicles in total. This makes it the largest global EV producer by a long shot at a present pace of more than 200,000 vehicles per year. In the key U.S. market, Tesla appears to have sold between 5,000 and 8,500 vehicles during April alone. And the mass-produced Model 3 is presently making up more than half those sales at between 3,875 and 4,777 according to estimates by InsideEVs and CleanTechnica.

For Tesla, it’s just another milestone on the road to mass vehicle electrification. By summer, the clean energy company expects to be producing around 7,000 electrical vehicles per week in total — with fully 5,000 of that number coming from the Model 3 alone.

What this means is that Tesla is both racing ahead of other automakers in the EV field and that it will also start to dominate markets traditionally ruled by carbon-belching ICE makers. As one example of this trend, the Model 3 is presently the #21 best-selling car in the U.S. — out of all cars sold. By summer, it is likely to be #6. In its segment — small to medium sized premium cars — it is presently crushing the likes of Acura, Infiniti, and Jaguar to take the #5 spot. But with 5,000 per week production on the way, in just a few months it will assuredly take the crown from Mercedes and BMW.

(According to CleanTechnica analysis, Tesla appears likely to dominate the small to mid-size luxury vehicle segment in the U.S. come May to June. Image source: CleanTechnica.)

This from a type of vehicle — electric — that was once thought to be humble and non-competitive. One can practically hear the crack of the world-spanning shot running through the global auto industry at this time. An industry that has been mostly caught flat-footed by a trend that us clean energy advocates have long been predicting.

The reaction by traditional industry has been predictably varied and chaotic. Ford appears to be in full retreat from segments that are now increasingly dominated by high-quality EVs — recently announcing that it will no longer build sedans, but will instead focus on trucks and SUVs. On the other side of the spectrum, a Volkswagen still reeling from the PR disaster that was dieselgate appears to have seen the electric light. That OEM has now pledged to spend 48 billion in battery orders in an effort to beat or at least confront Tesla in the market that it created.

Batteries are the key enabler to mass EV production. Hyundai had a hard lesson in this over past days as the all-electric Ioniq — celebrated for its efficient design — ran into a supply wall. The reason? Hyundai had only planned for 1,200 battery packs per month. But demand for the clean energy vehicle quickly outstripped supply. Hyundai subsequently stretched Ioniq production to 1,800 per month. But, at that point, the automaker was dead in the water on further expansions due to a 2 year lead time for battery contracts. In other words — if you don’t have battery production or suppliers, then you’re out of luck if you want to produce EVs in higher volumes.

(Global lithium battery supply and demand keep running ahead of expectations. By 2021, racing global battery producers are likely to supply 344 GWh of battery production or more. Image source: Bloomberg New Energy Finance.)

Battery manufacturers are thus scrambling to meet a rapidly rising demand. In 2017, global battery production capacity stood at about 100 gigawatt-hours (GWh). And global expansion plans appear to be aiming for around 300 to 350 GWh by 2021. But even this estimate could be low. For Volkwagen’s own recent 48 billion dollar call for EV batteries is likely to generate even more supply chain expansions even as other automakers call for more production.

Returning to Tesla, we would be remiss if we didn’t highlight one of its many key advantages — it owns its battery supply chain. Tesla’s Gigafactory in Reno, through its partner Panasonic, is expected to be able to produce 35 GWh of batteries all by itself over the next year or two. This is enough to support annual Tesla EV production in the range of 400,000 to 500,000. Gigafactory battery capacity is expected to expand to 150 GWh by the early to mid 2020s — which would support two million or more EVs each year.

(Without the Tesla Gigafactory in Reno, U.S. battery production would be dead in the water due to myopic and harmful policies produced by the republican-dominated federal government and various similar state legislatures. Europe, China and Tesla have realized that large scale battery production is necessary for a clean energy future and a related strong response to climate change.)

By contrast, Volkswagen is presently targeting 3 million EVs per year by 2025. In 2018, it is well behind Tesla — unlikely to see sales across all EV models exceeding 100,000 while Tesla is likely to at least doubleĀ that number. So VW will have to race to catch up. A 48 billion dollar battery buy will be key to achieving this goal. It’s a very aggressive move that will enable the manufacturer to produce millions of EVs in the future. But, at the present time, it is seriously lagging. A situation that doesn’t have much chance of changing until the early 2020s even as Tesla gains both credibility and market share.

At least Volkswagen appears to have seen the proverbial writing on the wall. Transition is, after all, the best option in the face of competition from far more healthy and desirable EVs. For the other laggards in the traditional auto industry — time’s a-wasting.

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Tesla’s EV Lead Expands as Production Hits 13,000 to 17,000 in April

In the present day, two forces are helping to drive the potential for a rapid and much-needed transition to clean energy. On the one hand, we have countries like China and states like California providing clean energy leadership and incentive. And on the other hand, we have clean energy innovators like Tesla who continue to stretch the bounds of what’s possible.

This month, Tesla proved naysayers wrong by consistently producing more than 2,000 all electric Model 3 vehicles per week. During late March, Tesla produced 2070 Model 3s in one week. The next week they produced 2100. And the following week they produced 2250. During the third week of March they probably produced around 1,000 as the line shut down for improvements for 3-5 days. However, it’s likely that the final week will show in excess of 2,200 as the production line again expanded.

(Tesla EV production rates saw a big jump in Q1 as Model 3 began to hit a stride. However, Q2 2018 results will likely more than double that of Q4 of 2017 with Model 3 likely averaging over 2,000 per week. Image source: Statista and Tesla. )

Assuming that average weekly Model S and X production rates of around 1,000 (each) continued throughout the month, it appears that Tesla achieved a total rate of 4,000 BEVs produced each week. In sum, that adds up to a yearly rate of 200,000 per year.

Such a rate would make Tesla the present fastest-rate producer of EVs in the world. It would outstrip BYD and BIAC. It would leave BMW, Volkswagen, and Nissan in the dust.

Since Tesla rates of production can vary from week to week and month to month, the estimate I’ve given ranges from 13,000 to 17,000 EVs produced for April. Implied in this number is a one-month rate for the Model 3 that approaches all of Q1 production.

(CO2 emissions per 100 kilometers driven is greatly reduced when EVs are mated to grids with high clean energy penetration — like the one in Ontario. And it is for this reason that mass replacement of ICE vehicles with EVs is a key climate solution. Image source: Plug’n Drive.)

By May, it is likely that we will see 1 week rates for Model 3 exceed 3,000 as Tesla adds a third shift and continues to refine its line. Average total EV production for the month could exceed 20,000 if this ramp is achieved. By June, Tesla is aiming for a peak Model 3 production above 5,000 per week — which would imply a total EV production rate of 7,000 per week.

What all these numbers mean, and what few are reporting, is it appears that Tesla is achieving a break-away rate of electrical vehicle manufacturing. One that other automakers will have major difficulty catching up with. Such large volumes of EVs will displace a significant amount of carbon emitting ICE demand. Fossil fuel luxury and sport vehicles by BMW, Toyota, VW, Volvo, GM and many others will increasingly be replaced by this flood of high quality electrical vehicles. And a signal will be sent to the markets that higher margin ICE sales are taking a serious hit.

(Tesla Model 3 production rates significantly accelerated during early Q2 of 2018. Image source: Bloomberg Model 3 Tracker.)

If Tesla’s ramp continues, it will easily be selling 300,000 to 350,000 EVs per year by 2019 — which is considerably more than Volvo’s annual U.S. sales. This high volume will force other automakers to respond in kind. But since none will likely be able to produce in comparable volume and quality until at least 2020, Tesla is developing a major head start.

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