Global sales of electric cars are set to surge to yet another record this year, expanding their share of the overall car market to close to one-fifth and leading a major transformation of the auto industry that has implications for the energy sector, especially oil.
The new edition of the International Energy Agency’s annual Global Electric Vehicle Outlook shows that more than 10 million electric cars were sold worldwide in 2022 and that sales are expected to grow by another 35% this year to reach 14 million.
This explosive growth means electric cars’ share of the overall car market has risen from around 4% in 2020 to 14% in 2022 and is set to increase further to 18% this year, based on the latest IEA projections.
“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.”
The overwhelming majority of electric car sales to date are mainly concentrated in three markets – China, Europe and the United States. China is the frontrunner, with 60% of global electric car sales taking place there in 2022.
Today, more than half of all-electric cars on the road worldwide are in China. Europe and the United States, the second and third largest markets, both saw strong growth with sales increasing 15% and 55% respectively in 2022.
Ambitious policy programmes in major economies, such as the Fit for 55 package in the European Union and the Inflation Reduction Act in the United States, are expected to further increase the market share for electric vehicles this decade and beyond.
By 2030, the average share of electric cars in total sales across China, the EU and the United States is set to rise to around 60%.
The encouraging trends are also having positive knock-on effects on battery production and supply chains. The new report highlights that announced battery manufacturing projects would be more than enough to meet demand for electric vehicles to 2030 in the IEA’s Net Zero Emissions by 2050 Scenario.
However, manufacturing remains highly concentrated, with China dominating the battery and component trade – and increasing its share of global electric car exports to more than 35% last year.
Other economies have announced policies to foster domestic industries that will improve their competitiveness in the EV market in years to come. The EU’s Net Zero Industry Act aims for nearly 90% of annual battery demand to be met by domestic battery manufacturers.
Similarly, the US Inflation Reduction Act places emphasis on strengthening domestic supply chains for EVs, batteries and minerals. Between August 2022, when the Inflation Reduction Act was passed, and March 2023, major EV and battery makers announced investments totalling at least USD 52 billion in EV supply chains in North America.