New study shows where the auto industry is primed for the transition to electric vehicles

2018.05.15

Automakers continue to highlight their plans to shift to electric vehicles. Their plans include the launch of hundreds of new electric models within just a few years. This amounts to a massive shift from combustion engines to battery electric technology, and the question is where are these investments going to go?

The International Council on Clean Transportation’s new paper, Power play: How governments are spurring the electric vehicle industry, analyzes this question, including analysis of the leading manufacturing companies and the supporting policies in place to spur those investments.

The study finds that automakers have announced massive plans invest over $150 billion in electric vehicles leading to over 13 million plug-in electric vehicle sales per year by 2025. This amounts to an order-of-magnitude larger electric vehicle industry by 2025 than in 2017, and 35% compounded annual growth rate. The auto industry is on its early steps toward this, with major companies approaching economies of scale with over 100,000 electric vehicles per year.

Overall the study indicates that policy is driving both the electric vehicle market and the industry that produces the vehicles. The three major markets for electric vehicles are China, Europe, and the U.S., and this is where most of the vehicles are produced. Based on battery manufacturing plant announcements to date, most global battery cell manufacturing is expected to be in China. To date, three-quarters of electric vehicles sold were made in the same region they were produced, showing the importance of demand-side policies to reduce barriers and grow the market and regulations and tax policy to simultaneously drive industrial investments. This also indicates the potential to move more battery production to the electric vehicle markets.

These developments underscore efforts around the world to regulate the efficiency and CO2 regulations of vehicles and to promote the necessary industry investments to enable the transition to electric drive. The United States is considers weakening its regulation, even while the growth in the electric vehicle market in California is picking up. The European Union is considering vehicle CO2 regulations through 2030 with electric vehicle benchmarks and is simultaneously working toward much larger battery investments through its EU Battery Alliance.

Nic Lutsey a co-author on the study stated:

“If you want your market to get ahead in the shift to electric cars, you will want policies that break down the consumer barriers, and also to spur major companies to invest. The market is moving fast, and leading governments can ensure their industry is at the forefront with long-term policy on electric vehicles and batteries.”

European Commission Vice President Maroš Šefčovič stated:

"Batteries are at the heart of the industrial revolution and the challenge to create a competitive and sustainable battery manufacturing industry in Europe is immense. We need to move fast in this global race. Therefore, the European Commission will later this week put forward a Strategic Action Plan for Batteries that will contribute to creating this innovative, sustainable and competitive battery ecosystem in Europe. I am convinced that we have what it takes to become the global leader in innovation, decarbonisation and digitisation."

EV battery, sales and production by region
Cumulative global electric vehicle sales versus produced by major region, 2010-2017

 

EV sales and production
Cumulative electric vehicle sales, electric vehicles produced, and battery production, by major region, 2010-2017

Contact

Nic Lutsey, program director, nic@theicct.org, 415-202-5743

Publication details

Power play: How governments are spurring the electric vehicle industry
Author: Nic Lutsey, Mikhail Grant, Sandra Wappelhorst, Huan Zhou
Download: https://www.theicct.org/publications/global-electric-vehicle-industry

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The International Council on Clean Transportation is an independent nonprofit research organization, staffed by experts in light-duty and heavy-duty vehicles, transportation fuels, shipping, aviation, climate science, and health. It is funded primarily by foundations, with additional support from government contracts and international bodies. Major support comes from the ClimateWorks Foundation, the William and Flora Hewlett Foundation, the David & Lucile Packard Foundation, the European Climate Foundation, the Blue Marble Fund, and the Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollutants.

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