The International Energy Agency’s (IEA) prediction that almost one in five cars sold globally this year will be electric is an optimistic outlook for the electric vehicle market. The IEA’s annual outlook on EVs also indicates that prices for smaller EV models will drop to become competitive with combustion engine cars in North America and Europe by the mid-2020s.
The IEA’s EV sales forecast has been raised due to the U.S. Inflation Reduction Act, which supports green industries and subsidizes consumers’ purchases of EVs. This has resulted in a significant increase in EV adoption rates in North America. China is a significant player in the EV market, accounting for half of the total number of EVs on the road globally, including battery-electric cars and plug-in hybrids. Last year, 60% of EV sales occurred in China. The IEA’s energy technology policy head, Timar Guell, reported that China has also seen a decrease in the prices of some smaller EV models, making them more affordable for consumers. The IEA’s report highlights a positive trend in the global transition towards electric vehicles, with increasing EV adoption rates and competitive pricing.
EV sales surge
According to the report, the global sales of electric cars are expected to increase by 35% this year to reach 14 million, which will account for 18% of the passenger car market. This is a significant increase from the 4% share that electric cars held in 2020. The report also predicts that small and medium-sized electric cars in North America and Europe will achieve price parity in the mid-2020s. However, larger cars like SUVs and pickups are likely to take longer to reach purchasing parity, possibly not until the 2030s.
The push for electric car expansion is driven by environmental concerns, industrial policy, and the goal of reducing oil dependency. As a result of this transition, demand for oil is expected to decline by 5 million barrels a day by 2030, according to Birol. In China and Europe, nearly two-thirds of electric vehicles are SUVs and large cars, and in the United States, a greater proportion of electric vehicles fall into this category. The study reveals that in developing and emerging economies, there is a higher prevalence of two or three-wheel electric vehicles as compared to cars. The report indicates that in 2022, more than half of the three-wheeler registrations in India were electric.
New global energy economy
“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 trends we are witnessing have significant implications for global oil demand. The internal combustion engine has gone unrivaled 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.”
The Fit for 55 packages in the European Union and the Inflation Reduction Act in the United States are among the ambitious policy programs expected to drive the market share of electric vehicles higher in the coming decade and beyond. According to the report, the average share of electric cars in total sales across China, the EU, and the United States is set to increase to about 60% by 2030. These positive trends are also having a ripple effect on battery production and supply chains. The study notes that the number of announced battery manufacturing projects is sufficient to meet the demand for electric vehicles until 2030, in line with the IEA’s Net Zero Emissions by 2050 Scenario. However, battery and component manufacturing remains highly concentrated, with China dominating the market and increasing its share of global electric car exports to over 35% in the previous year.