Electrification of vehicles is picking up pace

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Electric vehicles are set to account for around one in five car sales globally by the end of the year according to the International Energy Agency (IEA), a sea change in the automotive landscape.

The pace of the electric transformation is remarkable – in 2020, electric vehicles (EVs) held just 4% of the global car market. In 2022, that figure rose by ten percentage points, with the 2023 share expected to hit 18%.

By 2030, the IEA predicts that 60% of all cars sold will be electric, marking a precipitous fall in the dominance of the internal combustion engine.

At least 5 million barrels of oil per day will be saved thanks to the global shift away from combustion engine vehicles, the IEA forecasts.

While EVs remain more expensive than other cars at present, by around the middle of this decade the price of smaller EVs should reach parity with their fossil fuel counterparts, according to the energy agency’s estimates.

Of course, discrepancies exist between regions when it comes to the EV revolution.

China has emerged as the global EV powerhouse. Over half of electric vehicles on the road are operating in China, with the country responsible for almost two-thirds of EV sales in 2022.

The Asian nation also dominates electric battery manufacturing and has established itself as the world’s hub for the raw materials needed for their production.

When it comes to EV uptake, Europe and the United States are in second and third place respectively.

While the “invisible hand” of the market played its part, the decisions of policymakers on both sides of the Atlantic helped to ensure the growing market share of EVs, according to the IEA.

The US’s Inflation Reduction Act, which provides subsidies for EV production, and the EU’s CO2 standards for vehicles, which mandates the end of new fossil fuel car sales from 2035, sent strong signals to the market and consumers.

“Electric vehicles are one of the driving forces in the new global energy economy that is rapidly emerging – and they are bringing about a historic transformation of the car manufacturing industry worldwide,” said IEA Executive Director Fatih Birol.

“The internal combustion engine has gone unrivalled for over a century, but electric vehicles are changing the status quo.”

In other parts of the world, electrification is growing at a slower rate.

In India, which recently overtook China as the world’s most populous nation, the share of electric vehicles rose to 1.5%, with a similar share in Indonesia, a country of almost 274 million people.

In developing economies, two or three-wheeled vehicles tend to outnumber cars, making them a prime target for electrification.

The overall EV picture suggests that countries whose manufacturers embraced electric vehicles are set to benefit, while those who eschewed the technology are set to lose out.

Chinese EV brands, such as BYD, are making inroads into global markets, while Japan, an automotive powerhouse that bet largely on hydrogen fuel cells to decarbonise driving, is expected to struggle.

Europe was also slow to embrace electrification, though the industry is undergoing a rapid shift (thanks in no small part to EU regulation). Whether it will be enough to keep its dominant position in an increasingly competitive global marketplace is yet to play out.

– Sean Goulding Carroll – Transport Brief