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Despite current market conditions leading to amendments in global electric vehicle (EV) forecasts, the market is still expected to improve. Neil King, head of forecasting at EV Volumes (part of J.D. Power), presents the outlook with Autovista24 special content editor Phil Curry.
The global light-vehicle market, made up of passenger cars and light-commercial vehicles (LCVs) grew by 10% year on year in 2023. However, the numbers were still below those seen in 2019. This highlights the ongoing impact of the COVID-19 pandemic, supply shortages and the cost-of-living crisis.
While there was double-digit growth in Europe and North America (combining the US and Canada), gains were more subdued in China and the non-Triad region. Retail sales in China recovered from a sharp decline in 2022. The country’s government is seeking to stimulate an economy suffering from a struggling property sector, a lacklustre stock market, and high youth unemployment.
Global EV demand to improve
EV demand, made up of battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), continues to grow despite economic currents. Global volumes grew 35% year-on-year in 2023 to reach 14.2 million units, equating to a market share of 16.7%, up from 13.6% in 2022. For the first time since 2020, PHEVs (up 47%) grew faster than BEVs (up 30%).
In 2024, EV Volumes expects 16.6 million EV sales, equating to a 19.2% share of the light-vehicle market. Therefore, plug-in deliveries are forecast to grow by 17%, while the total market is only expected to improve by 1%.
However, the global EV share forecast has been lowered, with EV Volumes expecting 1.2 million fewer sales than in its previous outlook. This is largely due to a more cautious prediction for China and the slow development of EV uptake in North America. This translates to around 470,000 fewer EV sales in each region compared to previous outlooks.
Additionally, EV forecasts for Europe and the non-Triad region are each around 130,000 units lower. In the case of Europe, subsidy cuts have led to expectations of a lower EV share.
In the non-Triad region, the downgrade is due to weaker overall market growth. This stems from economic fragility in Japan and Korea, which is having a knock-on effect across other Asian economies.
Lower future volume increase
Global EV sales volumes are forecast to more than double in the coming years. According to the latest data, this will take levels from 14 million units in 2023 to 29 million units in 2027.
Yet the global EV share is predicted to be lower between 2024 to 2028 than previously expected, reaching 22.6% in 2025 and 35% in 2028. From 2029, the EV share is expected to be higher than previously forecast.
This is due to healthier assumptions of EV uptake in the non-Triad region. Alongside this, there has also been a correction to historic light-vehicle sales*, which has increased the EV share in the region.
Between 2023 and 2027, EV Volumes forecast that annual traction battery demand will rise from 0.7TWh to 1.9TWh, up 163%. This will be driven by the desire for longer electric ranges in all vehicle segments. An additional influence is the electrification of the full-size SUV and pickup markets in North America.
However, the trend for larger batteries is slowing as efficiency increases. Lower costs also facilitate their use in smaller vehicles, the electrification of which has been hindered by comparatively tighter profit margins.
Challenges in Europe
In Europe, the new light-vehicle market grew by 13.9% year-on-year in 2023. The sector was aided by improving supply, which reduced order backlogs created by component shortages in previous years.
The EV market faced challenges in several countries throughout last year. France saw its subsidies reduced. Meanwhile, Germany ended incentives for business purchases in September, and abruptly for private buyers in December. Even Norway, considered the leading market in Europe for EVs, announced it was ending VAT exemption for plug-ins.
Nevertheless, EV registrations in Europe increased by 17.3% year-on-year in 2023, to 3.15 million units. This allowed the technology to take a joint 21.3% share of all light-vehicle deliveries, up from 20.7% in the previous year.
There are more challenges ahead in 2024 as order intake is subdued because of high-interest rates. With no more incentives in Germany, the country’s EV market will experience its first full year without financial aid for buyers. In France, subsidies for company buyers have now concluded and EV models exported into Europe are no longer eligible for incentives.
EV Volumes expects European EV deliveries to grow by 18% year on year, to 3.7 million units, accounting for around a quarter of all light-vehicle sales. The growth will be predominantly driven by BEVs, volumes of which are forecast to grow by 23.5% this year, but PHEVs are also forecast to improve in 2024, with 5.6% growth.
The European market share of BEVs and PHEVs combined is forecast to reach 29% in 2025 and 58% in 2029.
China growth continues
In China, the EV boom continued in 2022 with the powertrain’s share rising to 26.7% from 13.9% in 2021. Volumes of EVs, including LCVs, ended close to 6.2 million units. This was a year-on-year increase of 82% in a total light-vehicle market that contracted by 5.3%.
Growth was less dramatic in 2023, at 36%, but with 8.4 million units delivered, the EV share climbed to 33.9%. PHEVs had a stronger share of the EV market, from 18% in 2021 to 25% in 2022. This continued in 2023 with PHEVs accounting for 32% of EV registrations in the year. This was largely caused by the high sales growth of BYD PHEVs and Li Auto EREV SUVs.
Unsurprisingly, other Chinese OEMs are rolling out countless new PHEVs, which will exacerbate their appeal. EV Volumes forecasts that this powertrain will capture a higher share of the EV market in 2024. However, this is mitigated by a BEV price war, meaning the all-electric share is expected to gain ground from 2025 onwards.
Given the challenging economic situation in China, the government is seeking to encourage consumers to spend instead of save. This will support state-owned OEMs in the process, but not necessarily their EV offerings. EV Volumes has reduced the plug-in share outlook, especially in the coming years.
However, in the medium and long term, the China forecast is not restricted by target shares or capacity limitations. EVs are forecast to account for 43% of light-vehicle sales in 2025, rising to 62% in 2029.
Uncertainty apparent in North America
North American EV sales increased by 48% year-on-year in 2022, following a 100% improvement in 2021.
The Inflation Reduction Act (IRA) supports further EV growth in the US. The incentives for producing vehicles and batteries in the also region remain strong but place roadblocks in front of imported brands and models. Furthermore, recent strikes by the Union of Auto Workers (UAW) highlighted the risks that EVs may pose to domestic OEMs and US jobs in the automotive sector.
With 1.64 million units sold in 2023, the EV share of light-vehicle sales rose to 9.4%, up from 7.2% in 2022. The overall market recovery continues, albeit at a slower pace than previously anticipated. Therefore, EV Volumes has lowered its EV share and volume forecasts in the short term as OEMs push back on electrified versions of popular models.
The forecast has also been lowered in the medium and longer term as the Environmental Protection Agency (EPA) has approved emissions targets that are lower than originally proposed.
OEMs must have a light-duty fleet average of 170g CO2 per mile in 2027, compared to 152g per mile in the draft proposal. This lowers to 85g per mile in 2032, instead of the proposed 82g per mile. The final targets also call for a 49% reduction in emissions by 2032 compared to 2026, instead of the 56% proposed.
The IRA is assumed to stay effective until 2032, but even that could change depending on the outcome of the US election. EV Volumes currently forecasts that the plug-in share of light-vehicle sales will reach 12.7% in 2024, then 16.5% in 2025 and 35% in 2029.
BEVs are expected to account for 81% of the EV market this year, rising to 85% in 2025 and 93% in 2029.
Tricky conditions in non-Triad markets
EV numbers in the non-Triad markets rose sharply for the third consecutive year in 2023, although this was compared to low figures. Demand is increasingly supported by a wider availability of products, higher incentives and lower import tariffs in some countries.
The recovery of the wider light-vehicle market since 2020, which gathered pace again in 2023, has also supported volume growth. Combined EV sales in the non-Triad markets amounted to 292,000 units in 2021, reached 554,000 units in 2022, and exceeded one million units in 2023, with a yearly growth of 91% and 81% respectively.
Volumes of EVs grew by more than 100% in some markets last year. This includes Australia, Thailand, Brazil, Turkey, Malaysia, and Mexico. Meanwhile, India and Japan saw growth of above 50%. Nevertheless, the combined EV share was only 3.5% in 2023, albeit up from 2.1% in 2022. Markets such as India, Japan, Brazil, and Mexico still sell very few EVs relative to their size.
This also pulls down the global average EV share, as the non-Triad countries accounted for a third of global light-vehicle sales last year. EV Volumes has broadly maintained its EV share forecast in the coming years, but has increased the potential in the longer term with India incentivising localised EV production and Japan forging ahead with the development of solid-state batteries.
For 2024, an EV share of 4.9% in the non-Triad countries is expected, with around 1.4 million sales, boosted by various factors such as discounting in Thailand, for example. The EV share is predicted to rise to 6.5% in 2025 and 14.5% in 2029, trailing global EV adoption by about six years. Many developing countries impose high tariffs on vehicle imports and unless they exempt EVs, they will need to develop their own EV industry to catch up with adoption in mature markets.
*Global light-vehicle market volumes have been corrected historically as they previously included double-counting of Chinese exports. This also inflated the non-Triad total market volumes, which are calculated by subtracting Europe and Northern America volumes from the global volumes. This means EV Volumes EV shares are higher globally and in the non-Triad region, both historically and in the forecast, than previously reported. However, the volumes of EVs are unaffected.