‘Unprecedented market opportunity’: Global EV market on track for record year, despite slower sales growth

The global electric vehicle (EV) market is on track to enjoy record levels of demand again this year, as improvements in technology and falling battery prices mean adoption is being driven increasingly by consumer demand rather than policy interventions.

That is according to the latest BloombergNEF (BNEF) Long-Term Electric Vehicle Outlook, which today details how rising demand for EVs means sales of internal combustion vehicles peaked in 2017 and are on track to be 29 per cent below their peak by 2027. In contrast, sales of passenger EVs are expected to exceed 30 million in 2027 under BNEF’s base case scenario, rising to 73 million a year in 2040.

But the report also confirms that EV sales growth is slowing, especially in industrialised economies. The influential analyst firm predicts the global EV market will see average annual growth of 21 per cent over the next four years, compared to an average of 61 per cent between 2020 and 2023.

As such, the report warns the sector is not in line with the decarbonisation trajectory needed to deliver on  international climate goals, arguing further policy interventions are likely to be required to meet targets set under the Paris Agreement. 

The analysis explores two scenarios: an Economic Transition Scenario in which EV adoption is shaped by current techno-economic trends and no new policy interventions are introduced; and a a Net Zero Scenario consistent with reaching a zero-emission global fleet by 2050.

Under the Economic Transition Scenario, EV sales are forecast to reach 73 million units a year in 2040, as EVs come to dominate the global auto market. However, BNEF’s modelling shows this trajectory would only achieve 69 per cent electrification of the global fleet, suggesting that current trends alone are not enough to get the transport sector on track to meet global climate goals. 

The Net Zero Scenario mapped out in the report requires a significantly faster transition to zero emission models, with a projected 1.1 billion EVs on the roads by 2040. Moreover, for the world to achieve a totally zero-emission vehicle fleet by 2050 sales of new internal combustion vehicles would need to be halted by around 2038 – a target BNEF predicts only the Nordic countries will reach under current techno-economic trends.

The report claimed that as things stand three-wheeled vehicles are the only road transport segment fully on track to reach net zero by mid-century, adding that heavy- and medium-duty vehicles are the furthest off course.

It also confirmed growing demand for hybrids and plug-in hybrids, but warned their role in the net zero transition remains unclear.

In light of the forecasts, BNEF said governments would need to carefully weigh up competing priorities and avoid policies that reduce competition or hamper access to more affordable EVs.

“Governments trying to champion domestic manufacturing at the cost of faster decarbonisation should consider very carefully what they are prioritising, as reaching net zero road transport emissions by 2050 is still possible, but much faster progress is needed,” said Aleksandra O’Donovan, head of electric vehicles at BNEF.

The US government recently slapped new import tariffs on EVs made in China – a move designed to boost investment in domestic US manufacturing capacity, but which is expected to push up prices for EV customers.

However, the report also points to huge growth opportunities for EV manufacturers and growing evidence that the market is expanding both geographically and in terms of the size of vehicles on offer. 

“Electrification is now spreading quickly to all sectors of road transport, from rickshaws to heavy trucks,” the report states. “Two- and three-wheeled vehicle sales continue to rise in emerging economies and electric sales are expected to exceed 90 per cent globally by 2040. The decarbonisation of the commercial vehicle sector – including vans, trucks and buses – has already started and is set to accelerate. The rapid adoption of EVs across all vehicle segments creates an unprecedented market opportunity.”

It adds that the cumulative value of EV sales across all segments could hit $9tr dollars by 2030 and $63tr by 2050 in BNEF’s base scenario.

Meanwhile, concerns over supply chain bottlenecks look increasingly unfounded, with battery-cell and component plants $155bn of investment already planned by companies.

The market for heavy EVs is particularly primed for growth, according to Nikolas Soulopoulos, head of commercial transport at BNEF. “Truck manufacturers are about to undergo a rapid technological transformation on the back of strict environmental targets in Europe and the US,” he said. “The speed of that change will be unprecedented for the industry, but meeting a Paris-aligned scenario requires even faster production of zero-emission vehicles.”

 The report also suggests growing demand for EVs is starting to impact fossil fuel demand. “With 83 million electric cars, trucks, and buses on the road next year, and over 340 million electric two-and three-wheelers, in the next three years oil demand displaced by electric and fuel-cell vehicles of all types more than doubles from today, to almost four million barrels per day by 2027,” the report states. “This is slightly more than the volume Japan consumed in 2022.”

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