After a record breaking 2022, sales of electric vehicles (EVs) in 2023 are to leap 35%, or nearly one in five cars that will be sold will be an electric model, according to new data from the International Energy Agency (IEA).
Automotive OEMs are ramping electrified models due to several factors such as increasing strain on fossil fuels, government regulations looking to curb climate change and consumer demand as drivers want EVs over traditional internal combustion engines (ICE).
In the next 10 to 15 years, automotive OEMs will either completely phase out ICE-based vehicles such as General Motors, Volkswagen and Volvo. Or automotive OEMs will cut back substantially on ICE vehicles in favor of electrified models such as Ford, Mercedes-Benz, Toyota and Honda.
Surging sales
In 2022, more than 10 million electric cars were sold globally, a record in the automotive market. Sales will surge further this year and will represent a much larger share of the overall car market as the industry continues its largest transition in automotive history.
IEA said it expects another record to take place this year as it grows 35% to reach 14 million. This growth means EVs' share of the overall car market has risen from around 4% in 2020 to 14% in 2022 and is set to increase to 18% this year, IEA forecasts.
“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 Fatih Birol, executive director of the IEA. “The trends we are witnessing have significant implications for global oil demand. The internal combustion engine has gone unrivalled for over a century, but electric vehicles are changing the status quo. By 2030, they will avoid the need for at least 5 million barrels a day of oil. Cars are just the first wave: electric buses and trucks will follow soon.”
China dominates
The main concentration of sales of EVs is held in three markets: China, Europe and the U.S.
However, China is by far the leader with 60% of global EV sales in 2022, IEA said. More than half of all EVs on the road globally are in China with Europe and the U.S. as the second and third largest markets. Both regions increased sales in 2022 by 15% and 55% in 2022, respectively.
Further growth is expected this year as programs are in place to accelerate EV sales like the Fit for 55 package in the E.U. and the Inflation Reduction Act in the U.S. By 2030, the average share of EVs in total sales across China, the E.U. and the U.S. will rise to about 60%.
Positive effects
The automotive transition to electrification is having a positive effect on battery production and raw materials supply chain as IEA forecasts battery manufacturing projects should be more than enough to meet demand for EVs to 2030.
However, manufacturing remains highly concentrated with China dominating the battery and component trade. But the U.S. Inflation Reduction Act places an emphasis on strengthening domestic supply chains for EVs, batteries and minerals.
Because of this, major automotive OEMs and battery makers have been investing in the EV supply chain in North America to the tune of $52 billion since the passing of the act in August of 2022, IEA said.
Automotive OEMs are taking it upon themselves to secure supplies of raw materials for all these new battery manufacturing plants that are being built. Specifically, in April GM invested $50 million in EnergyX, a lithium extraction and refinery vendor and invested $650 million equity investment in Canadian vendor Lithium Americas Corp to secure lithium raw materials.
Mercedes-Benz is also investing battery materials with a new partnership with Rock Tech Lithium, a German-Canadian raw materials startup.
Other regions rising
While EV sales are concentrated in China, the E.U. and the U.S., sales in India and Indonesia more than tripled and more than doubled in Thailand.
In these emerging and developing economies, electric mobility of two- or three-wheel vehicles outnumber four-wheel vehicles. This dynamic won’t change and growing the fleet of these types of vehicles with electrified models is important to the overall automotive transition, IEA said.
The full research can be found in IEA’s Global EV Outlook 2023 report.
