Prospects for Electric Vehicles look increasingly good

Electric vehicles update

Indicators emerging over the last 18 months increase the likelihood of plug-in vehicles becoming predominant over the next 20 years. However, continuing strong policy support is necessary to achieve this.

Several indicators have recently emerged for longer term sales of plug-in vehicles (electric vehicles and plug-in hybrids). These include targets set by governments and projections by analysts and manufacturers.

The chart shows these indicators compared with three scenarios for the growth of plug-in vehicles globally if policy drivers are strong. (The scenarios are based on those I published around 18 months ago, and have been slightly updated for this post – see the end of this post and previous post for details.) The green lines show the share of sales, and the blue lines show the share of the total vehicle stock. Other indicators are marked on the chart as diamonds, shown in green as they correspond to the green lines. I’ve excluded some projections from oil companies as they appear unrealistic.

The scenarios show plug in vehicles sales in 2040 at between just over half and nearly all of new light vehicles. However the time taken for the vehicle fleet to turn over means that they are a smaller proportion of the fleet, accounting for between a third and about three quarters of the light vehicle fleet by 2040. The large range of the scenarios reflects the large uncertainties involved, but they all show plug-in vehicles becoming predominant over the next 20 years or so.

The indicators shown are all roughly in line with the scenario range (see detailed notes at the end of this post), giving additional confidence that the scenario range is broadly realistic, although the challenges of achieving growth towards the upper end of the range remain formidable. Some of the projections by manufacturers and individual jurisdictions are towards the top end of the range, but the global average may be lower.

Chart. Growth of sales of Plug-in light vehicles

The transition will of course need to be accompanied by continuing decarbonisation of the power sector to meet greenhouse gas emissions reduction goals.

Maintaining the growth of electric vehicle sales nevertheless looks likely to require continuing regulatory drivers, at least for the next 15 years or so. This will include continuing tightening emissions standards on CO₂ and NO_x and enabling charging infrastructure. If these things are done then the decarbonisation of a major source of emissions thus now seems well within sight.

Adam Whitmore – 13^th October 2017

Background and notes

This background section gives further information on the data shown on the chart. In some cases it is unclear from the reports whether projections are for pure electric vehicles only or also include plug-in hybrids.

Developments in regulation

Policy in many countries seems increasingly to favour plug-in vehicles. Some recent developments are summarised in the table below. These policy positions for the most part still need to be backed by solid implementation programmes. Nevertheless they appear to increase the probability that growth will lie within the envelope of the projections shown above, which are intended to correspond to a world of strong policy drivers towards electrification.

Policy developments

Jurisdiction	Policy commitment
UK	Prohibit sale of new cars with internal combustion engines by 2040[1]
France	Prohibit sale of new cars with internal combustion engines by 2040[2]
Norway	All new sales electric by 2025[3]
India	All cars electric by 2030 (which appears unrealistic so goal may be modified, for example to new cars)[4]
China	Reportedly considering a prohibition on new petrol and diesel. Date remains to be confirmed, but target is for 20% of the market to be electric by 2025.[5]

Sales

The market is currently growing rapidly from a low base. Total vehicle sales were 0.73 million in 2016, compared with 0.58 million in 2015. Six countries have reached over 1% electric car market share in 2016: Norway, the Netherlands, Sweden, France, the United Kingdom and China. Norway saw 42% of sales being EVs in June 2017

Manufacturers’ projections

Several manufacturers have issued projections for the share of their sales they expect to be for plug-in vehicles. Some of these are shown in the table.

Manufacturers’ projections for sales of plug-in vehicles

Manufacturer	Target/expectation for plug-in vehicles
Volkswagen	20-25% of sales by 2025[6]
Volvo	All new models launched from 2019[7]
PSA ( Peugeot and Citroen brands)	80% percent of models electrified by 2023[8]

Clearly individual manufacturers’ projections may not be achieved, and to some extent the statements may be designed to reassure shareholders that they are not missing an opportunity. So far European manufacturers have been slow to develop EVs. Also these manufacturers may not representative of the market as a whole. Other companies may progress more slowly.

However others may proceed more quickly. As has been widely reported, Tesla has taken over 500,000 advanced orders for its Model 3 EV, itself equivalent to almost the entire market for electric vehicles in 2015. And in line with the Chinese Government’s targets manufacturers in China are expected to increase production rapidly.

Projections by other observers

Projections by other observers are in most cases now in line with the scenairos shown here.

Morgan Stanley project 7% of global sales by 2025[9]
BNP Paribas project 11% of global sales by 2025, 26% by 2030[10]
JP Morgan profject 35% of sales by 2025 and 48% of sales by 2030[11]
Last year Bloomberg’s projections showed growth to be slower than with these projections. However they have since updated their analysis, showing 54% of new cars being electric by 2040[12].
DNV.GL recently published analysis showing EV’s accounting for half of sales globally by 2033, in line with the mid case in this analysis.

In contrast BP predicts much slower growth in their projections[13]. However BP’s view seems implausibly low in any scenario in which regulatory drivers towards EVs are as strong as they appear to be. Exxon Mobil gives lower projections still, while OPEC’s are a little above BP’s but still well below the low case shown here.[14].

Notes on changes to projections since May 2016

These projections are updated from my post last year but the differences over the next 15 years are comparatively minor. The projections are for light vehicles, so exclude trucks and buses. Note that percentage growth in early years has been faster than shown by the s-curve model – however this is likely to prove a result of the choice of a simple function. What matters most for emissions reductions is the growth from now and in particular through the 2020s.

Assumption change	Rationale
Higher saturation point	Continuing advances in batteries reduce the size of the remaining niche for internal combustion engine vehicles
Longer time to saturation	The higher saturation point will need additional time to reach.
Somewhat slower growth in total numbers of vehicles	Concerns about congestion and changed modes of ownership and use are assumed to lead to lower growth in the total vehicle stock over time. This tends to make a certain percentage penetrations easier to achieve because the percentage applies to fewer vehicles.