In many developing economies, two- or three-wheelers offer a cost-effective way to access transportation, making their electrification essential to fostering sustainable development.
Electric car sales are expected to reach yet another record level globally this year, increasing their market share to close to one-fifth and bringing about a significant change in the auto industry that will have an impact on the energy sector, particularly oil.
In emerging and developing economies, two- or three-wheel vehicles, which outnumber cars, are the most dynamic form of electric mobility. For instance, more than half of three-wheelers in India in 2022 were electric vehicles, indicating their rising popularity, according to the latest edition of the IEA's (International Energy Agency) annual Global Electric Vehicle Outlook.
Two- or three-wheelers provide a reasonably priced means of accessing transportation in many developing economies, making their electrification crucial to promoting sustainable development. "India aims to boost domestic manufacturing of electric vehicles and batteries through Production Linked Incentive (PLI) schemes," notes the report.
The report reveals that more than 10 million electric vehicles were sold globally in 2022, according to the latest edition of the IEA's and projects their sales to increase by another 35% this year to reach 14 million. According to the most recent IEA predictions, this fast growth has resulted in an increase in the share of electric cars in the entire auto market from 4% in 2020 to 14% in 2022 and is expected to reach 18% this year.
“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 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.”
Three markets—China, Europe, and the United States—have seen the vast bulk of electric car sales to date. China is the market leader, accounting for 60% of all electric vehicle sales worldwide in 2022. China currently has more electric vehicles on the road than any other country. The second- and third-largest markets, Europe and the United States, both had rapid growth in 2022, with sales rising by 15% and 55%, respectively.
This decade and beyond, it is anticipated that ambitious governmental initiatives in major economies, like as the Fit for 55 package in the European Union and the Inflation Reduction Act in the United States, will significantly raise the market share for electric vehicles.
Around 60% of all new automobiles sold in China, the EU, and the US are expected to be electric by the year 2030.
The promising developments are also having positive spillover effects on supply chains and battery manufacturing. According to the IEA's Net Zero Emissions by 2050 Scenario, the announced battery manufacturing projects would produce more than enough batteries to meet demand for electric vehicles until 2030. China dominates the battery and component trade and increased its share of the world's exports of electric cars to more than 35% last year, but production remains heavily concentrated.
Other nations have made plans to support local sectors that will increase their ability to compete in the EV market in the coming years. Nearly 90% of the annual battery demand is expected to be satisfied by domestic battery producers, according to the EU's Net Zero Industry Act. Similar to this, the US Inflation Reduction Act emphasises the development of domestic supply chains for minerals, EVs, and batteries. The Inflation Reduction Act was passed in August 2022, and between that time and March 2023, major EV and battery producers announced investments in North American EV supply chains worth at least USD 52 billion.
Despite the fact that manufacturing and sales of electric vehicles are concentrated in a small number of major markets, other areas are showing promise. Despite starting from a low base, electric car sales more than tripled in India, Indonesia, and Thailand last year. In Thailand, it increased to 3% of all sales, while it increased to 1.5% in India and Indonesia. Future increases in these shares are probably due to a combination of efficient policy and private sector investment. In India, the government's USD 3.2 billion incentive plan, which has drawn USD 8.3 billion in investments, is anticipated to significantly increase battery manufacturing and EV rollout in the upcoming years.