Global electric car sales soar: Market share growth predicted across regions

Posted on 05 May 2024

Electric car sales keep rising and could reach around 17 million in 2024, accounting for more than one in five cars sold worldwide, says a recently published International Energy Agency (IEA) report.

Electric vehicles are steadily advancing towards achieving mass-market status in an increasing number of nations. Despite facing challenges such as narrow profit margins, fluctuating prices of battery metals, elevated inflation rates, and the discontinuation of purchase incentives in certain regions, the industry's growth trajectory remains robust.

Notably, global sales data for electric cars continue to exhibit strength. During the initial quarter of 2024, electric vehicle sales surged by approximately 25% in comparison to the corresponding period in 2023, mirroring the consistent year-on-year growth observed in 2022.

By 2024, electric cars may potentially capture a market share of up to 45% in China, 25% in Europe, and exceeding 11% in the United States. This anticipated growth is supported by intensifying competition among manufacturers, declining prices of both batteries and vehicles, and sustained policy backing.

Expectations for growth in 2024 are buoyed by a remarkable performance in the preceding year. In 2023, the global sales of electric vehicles nearly reached 14 million units, constituting 18% of total automobile sales, up from 14% in 2022. Notably, the sales of electric cars surged by 3.5 million units compared to 2022, marking a substantial 35% year-on-year increase. This trend underscores strong expansion, particularly as several major markets transition from the domain of early adopters to broader acceptance in the mass market.

Last year, electric car sales exceeded 250,000 units per week, surpassing the total annual sales from just a decade ago. Notably, Chinese car manufacturers contributed over half of the global electric car sales in 2023, despite representing only 10% of the total sales of internal combustion engine vehicles worldwide.

The global success of electric cars hinges on how quickly they gain traction in emerging and developing economies beyond China. In 2023, the majority of electric car sales occurred in China (60%), Europe (25%), and the United States (10%). However, when compared to total car sales worldwide, which predominantly occurred in these regions, it's evident that the adoption of electric vehicles remains more concentrated geographically than traditional car sales.

While electric car sales in emerging economies have historically trailed behind those in the three major markets, there was a notable uptick in growth in 2023, particularly in countries like Vietnam (constituting approximately 15% of all cars sold) and Thailand (10%). Although the market shares of electric vehicles in these large car markets within emerging economies remain relatively modest, several factors indicate the potential for further expansion. Policy initiatives, such as purchase subsidies and incentives for electric vehicle (EV) and battery manufacturing, are pivotal in driving this growth trajectory.

In India, where electric cars currently hold a 2% market share, the Production Linked Incentives (PLI) Scheme is bolstering local manufacturing efforts. Meanwhile, in Brazil (with a 3% market share), as well as Indonesia, Malaysia (each with a 2% market share), and Thailand, the adoption of electric vehicles is supported by the availability of more affordable models, predominantly from Chinese brands. In Mexico, the development of electric vehicle supply chains is progressing rapidly, driven in part by access to subsidies provided by the US Inflation Reduction Act (IRA).

Policy support sparks surge in industry investment

According to IEA’s by 2035, electric cars will represent every other vehicle sold worldwide, given the current energy, climate, and industrial policies. This shift will have profound effects on the composition of the global car fleet. By 2030, nearly one in three cars in China, and close to one in five in both the United States and the European Union, are expected to be electric under this scenario.

The widespread adoption of electric vehicles, encompassing cars, vans, trucks, buses, and two/three-wheelers, is projected to mitigate oil demand by six million barrels per day (mb/d) in 2030 and over 10 mb/d by 2035, equivalent to the current oil consumption for road transport in the United States. Recent policy advancements, such as the implementation of new emissions standards in Canada, the European Union, and the United States, further solidify the trend toward rapid electrification.

Moreover, various industrial incentives, including those outlined in the US IRA (Inflation Reduction Act), the EU Net Zero Industry Act, China's 14th Five-Year Plan, and India's PLI scheme, are fostering value addition and job creation throughout electric vehicle supply chains in these economies.

In a scenario where all national energy and climate targets are fully met and on time, as in the Announced Pledges Scenario, electric vehicles could constitute two-thirds of all vehicles sold in 2035, resulting in a reduction of around 12 mb/d of oil consumption.

Recent reports indicate a significant uptick in investment in the electric vehicle (EV) supply chain, fuelled by expectations of robust growth. Between 2022 and 2023, announced investments in EV and battery manufacturing reached nearly USD 500 billion, with approximately 40% already committed. Notably, over 20 leading car manufacturers, accounting for over 90% of global car sales in 2023, have established electrification targets.

When considering the combined targets of these major automakers, the potential exists for more than 40 million electric cars to be sold by 2030. This projection aligns with the anticipated deployment levels under current policy settings.

Investment decisions in battery manufacturing have now met the demands set by both automakers and governments worldwide. Thanks to substantial investments over the past five years, global EV battery manufacturing capacity has far outstripped demand in 2023, reaching approximately 2.2 terawatt-hours and 750 gigawatt-hours, respectively.

Anticipated demand growth is significant, with projections suggesting a sevenfold increase by 2035 compared to 2023 in the Stated Policies Scenario, and even higher increases in other scenarios. However, existing manufacturing capacity seems well-positioned to meet these demands, particularly in scenarios aiming for net-zero emissions by 2050.

This situation offers considerable opportunities for battery and mining companies, including in emerging markets beyond China. Nonetheless, surplus capacity has impacted profit margins and may prompt further market consolidation in the future.

Affordability key to speed of electric vehicle adoption

As competition intensifies, electric cars are becoming more affordable, particularly in China. However, they still tend to be pricier than traditional internal combustion engine vehicles in other markets. To swiftly transition to electric vehicles, it's crucial to introduce more cost-effective models to the market.

In China, over 60% of electric cars sold in 2023 were already cheaper than their average combustion engine counterparts. Yet, in Europe and the United States, electric cars typically range from 10% to 50% more expensive than their combustion engine counterparts, depending on the country and car type.

In 2023, around two-thirds of available electric models globally were larger cars, pick-up trucks, or sports utility vehicles, which contributed to higher average prices. While the exact timing of price parity depends on various market factors, current trends suggest it could be achieved by 2030 in major electric vehicle markets outside of China for most models.

The pricing strategies adopted by car manufacturers will play a pivotal role in making electric vehicles more affordable, alongside the pace of decline in EV battery prices.

In 2022, disruptions in battery metal markets caused the first price hike for lithium-ion packs, making them 7% more expensive compared to 2021. However, by 2023, prices of key metals used in battery production had dropped, resulting in a nearly 14% decrease in pack prices year-on-year.

While China continues to offer the cheapest batteries, prices worldwide are aligning as batteries become a global commodity. Notably, lithium-iron phosphate batteries, known for their affordability compared to other types, accounted for over 40% of global EV sales by capacity in 2023, more than double their share in 2020.

Looking forward, ongoing technological innovation will be essential for expanding novel designs and chemistries like sodium-ion batteries, which could potentially cost up to 20% less than lithium-based batteries, without relying on lithium resources.

In developing economies outside China, the arrival of more affordable electric car models is on the rise, while the future of electric two- and three-wheelers appears promising.

In 2023, a significant portion (55% to 95%) of electric car sales in major emerging and developing economies consisted of large, costly models, limiting widespread adoption among average consumers. However, the introduction of smaller and much more affordable models in 2022 and 2023 quickly gained popularity, particularly those offered by Chinese carmakers expanding their reach abroad.

Additionally, affordable electric two- and three-wheelers are already making a positive impact, contributing to improved air quality and emissions reductions. In 2023, approximately 1.3 million electric two-wheelers were sold in India and Southeast Asia, accounting for 5% and 3% of total sales, respectively. Furthermore, one in every five three-wheelers sold globally in 2023 was electric, with nearly 60% of these sales occurring in India, driven by the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) subsidy scheme.

As the electric vehicle market continues to evolve, there will be a broader availability of second-hand electric cars. In 2023, the market for used electric cars reached approximately 800,000 in China, 400,000 in the United States, and over 450,000 across France, Germany, Italy, Spain, the Netherlands, and the United Kingdom.

The prices of used electric cars are declining rapidly, making them more competitive compared to traditional combustion engine vehicles. Looking ahead, there's an anticipation of increased international trade in used electric cars, extending to emerging and developing economies beyond China.

The battery recycling industry is gearing up for the 2030s with a focus on sustainability and security within the supply chain. Many technology developers are eyeing the electric vehicle (EV) end-of-life markets, although their planned locations don't always align with where EV retirement might occur.

By 2023, global battery recycling capacity had already reached 300 gigawatt-hours. If all the announced projects come to fruition, this capacity could skyrocket to over 1,500 gigawatt-hours by 2030, with 70% of it situated in China. However, globally, the announced recycling capacity exceeds three times the supply of batteries that could potentially be recycled by 2030, especially as EVs reach the end of their life cycle in the Announced Pledges Scenario.

Despite this surplus, EV battery retirement is expected to see a rapid increase from the latter half of the 2030s onward.

Public charging infrastructure must match EV sales growth

The global installation of public charging points witnessed a significant 40% increase in 2023 compared to 2022. This growth was particularly notable for fast chargers, which outpaced the expansion of slower charging options.

In major electric vehicle (EV) markets, the deployment of charging infrastructure is advancing steadily, thanks to targeted policies. This concerted effort aims to ensure broad and affordable access to public charging, a crucial requirement for transitioning to electric transport on a mass scale and facilitating longer journeys. However, it's worth noting that despite this growth, the majority of charging still occurs in private residential and workplace settings.

To achieve the projected EV deployment levels outlined in the Announced Policies Scenario, a significant expansion of public charging infrastructure is imperative. By 2035, it is estimated that public charging needs to increase sixfold to accommodate the growing demand for electric vehicles.

As the number of electric heavy-duty vehicles like trucks and large buses grows, the demand for dedicated and adaptable charging solutions becomes increasingly pressing. In 2023, electric buses represented 3% of total bus sales, while electric truck sales surged by 35% compared to 2022, constituting about 3% of truck sales in China and 1.5% in Europe.

Under current policy frameworks, it's projected that the stock of electric buses will multiply sevenfold by 2035, with electric trucks experiencing a thirtyfold increase. This growth is supported by stricter emissions standards in regions like the United States and European Union.

Meeting this level of deployment will necessitate a significant twentyfold expansion in charging capacity by 2035. This expansion must not only cover depots but also extend along main transit routes to facilitate long-distance trucking.

Expanding heavy-duty charging infrastructure carries substantial implications for the expansion and operation of electrical grids. However, it also presents opportunities for enhanced flexibility and integration of renewable energy sources.

To achieve this ambitious goal while ensuring grid stability and affordability, policy support, meticulous planning, and effective coordination will be paramount. These measures are essential to guarantee a secure, cost-effective, and low-emission electricity supply without overburdening local grids.

Image courtesy: IEA