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Energy Economics Weekly Briefings

2030 Global Electrified Vehicle Outlook

Written by: Ellen Hughes-Cromwick

Electrified vehicle (plug-in electric and battery electric) sales continue to grow at a rapid rate. In the U.S., EV sales hit 361,000, up 81% from the prior year. Global EV sales were over 2 million units last year, with nearly one-half of this in China.

Last week, the International Energy Agency (IEA) released an update of their Global EV Outlook which projects that the industry will continue to grow substantially through 2030. Three main forces are driving this growth: declining costs for battery packs, investments in new EV-focused businesses, and policies designed to reduce greenhouse gasses and address the climate crisis.

Declining costs for battery packs

Market fundamentals for EVs have improved. Since 2016, the battery pack cost has declined by a cumulative 39%– down to the $175 per kWh range in 2018, according to Bloomberg New Energy Finance (BNEF). If similar progress is achieved by 2020, pack costs will be close to $100 per kWh; a benchmark considered competitive with conventional internal combustion engine vehicles and the likely threshold for a positive profit margin for automotive manufacturers.

 

Investments in EV-focused companies are driving competition

The second major force boosting EV sales is that some companies, like Tesla and many of the China startups, are making EV manufacturing their primary segment. These companies are establishing facilities to solely produce EVs and develop a bottom-up approach that has many investors anticipating future earnings growth.

In an industry once dominated by several global companies, this second force is important because the increased investment creates competition for longstanding manufacturers and provides an incentive to become more active in expanding EV product development.

Climate policies are encouraging EV growth

Finally, the third force driving EV sales growth is the recognition that climate change and the social cost of greenhouse gas emissions has prompted many countries to implement policies that incentivize the transition to electrified transportation.

China and Norway have been the most aggressive in using policy to boost electrified transportation by providing substantial cash rebates, tax credits, registration fee exemptions, and supply-side support. These policies, some of which can be economically inefficient as compared to a straight-up carbon tax, garner a faster uptake of EVs, encourage the buildout of charging infrastructure and battery cell research, as well as manufacturing.

Looking Forward: The Global EV Outlook by 2030

These three forces have combined to contribute to the significant growth in the number of EVs in operation (VIO) globally. This week, the International Energy Agency (IEA) released an update of their Global EV Outlook which examines recent developments in electric mobility across the globe and uses historical analysis to make projections on the industry’s future.

By IEA’s count, the EV VIO exceeded 5 million units last year and is on track to grow substantially by 2030. To make this projection, the IEA explored two futuring scenarios which extend out to 2030:

  • The New Policies Scenario incorporates existing and announced policies for upcoming years to craft a forecast of EV sales of 23 million and EV VIO of 130 million (see table below).
  • The EV30@30 Scenario builds in an assumption that several countries will achieve their pledge to reach 30% EV market share by 2030. This scenario projects that the EV VIO will reach 250 million units by 2030, nearly double the projection of the New Policies Scenario.

 

Lastly, IEA projects that even under the EV30@30 Scenario, oil demand is estimated drop of 4.3 million barrels per day (MMBD) by 2030, or roughly 4% of current oil demand of 100 MMBD.

Summary

To recap, the IEA’s 2019 Global EV Outlook report includes updated projections for two EV scenarios and includes country breakouts, with China leading the way in terms of EV VIO and policy stimulus. Norway has achieved nearly 50% EV market share, fostered by substantial policy incentives and target setting. The report reinforces the challenges and opportunities ahead for a true transformation toward EVs and a cleaner energy future.