July 04, 2024

The Future of EV Sales: Growth Amidst Challenges

Electric Vehicle (EV) sales are poised for continued growth despite a mixed near-term outlook, according to BloombergNEF's Long-Term Electric Vehicle Outlook (EVO) report. Here’s a deep dive into why EV sales will keep climbing and the challenges the industry faces.

1. Rapid Technological Advancements

One of the primary drivers behind the sustained growth of EV sales is the rapid decline in battery prices and advancements in next-generation battery technology. As these technologies become more affordable and efficient, the relative economics of EVs compared to internal combustion engine (ICE) vehicles improve significantly. This trend is expected to underpin long-term growth in the EV market globally.

2. Global Sales Trends

While global passenger EV sales are set to continue growing, the pace will be slower over the next few years compared to the rapid growth seen between 2020 and 2023. BloombergNEF’s Economic Transition Scenario predicts an average annual growth rate of 21% for electric car sales over the next four years, compared to an impressive 61% during the previous period. By 2027, global passenger EV sales are expected to exceed 30 million annually, reaching 73 million per year by 2040.

3. Regional Variations

The EV market will see significant regional variations in growth. By 2027, EVs are expected to make up 33% of global new passenger vehicle sales, with China (60%) and Europe (41%) leading the way. Countries like Brazil and India will also see substantial growth, with EV sales quintupling in Brazil and tripling in India by 2027.

4. The Decline of ICE Vehicles

The era of ICE vehicles is nearing its end. Sales of ICE vehicles peaked in 2017 and are projected to be 29% lower by 2027. EVs are increasingly seen as the primary method for decarbonizing road transport, although hybrids will play a significant role in the near term, especially in markets with stringent fuel-efficiency regulations. Hybrid vehicle sales could range from 5% to 45% of the market by 2030, depending on regional factors.

5. Economic Viability of Electric Heavy Trucks

The economics of electric heavy trucks are expected to become viable for most use cases by 2030. Initially, battery-electric trucks will dominate urban duty cycles, but improvements in battery technology will make them competitive even for long-haul routes, approaching the cost-effectiveness of diesel powertrains. However, the outlook for fuel-cell trucks remains uncertain.

6. Dominance of LFP Batteries

Lithium-iron-phosphate (LFP) batteries are increasingly dominating the EV market, particularly in China, where cell prices have dropped rapidly to $53/kWh. LFP batteries are projected to capture over 50% of the global passenger EV market within the next two years. This shift towards lower-cost chemistries is expected to reduce the consumption of nickel and manganese by 25% and 38%, respectively, by 2025 compared to previous forecasts.

7. Charging Infrastructure Investment

To meet the growing demand for EV electricity, the charging industry will need to mature rapidly over the next decade. BloombergNEF estimates that between $1.6 trillion and $2.5 trillion in cumulative investment will be required in charging infrastructure, installation, and maintenance by 2050, depending on the scenario.

8. Overcapacity in Battery Production

A significant challenge facing the EV industry is the overcapacity in battery production. Planned lithium-ion cell manufacturing capacity by the end of 2025 is expected to be over five times the 1.5 TWh global battery demand projected for that year. Nonetheless, annual lithium-battery demand is expected to grow rapidly, reaching nearly 5.9 terawatt-hours by 2035 in the Economic Transition Scenario.

9. The Path to Net-Zero

Despite the progress in EV adoption, achieving a global zero-emission fleet by 2050 will require a much faster transition. By 2035, BloombergNEF projects 476 million EVs on the road, increasing to 722 million by 2040, which would account for 45% of the global vehicle fleet. However, to meet the net-zero by 2050 target, these numbers need to reach 679 million by 2035 and 1.1 billion by 2040.

The journey towards widespread EV adoption is filled with both opportunities and challenges, but the long-term outlook remains promising.

Source: BloombergNEF's