Electric vehicle (EV) sales are on pace to reach more than 1.6-million units this year, up from just a few hundred thousand in 2014.
According to Bloomberg New Energy Finance’s (BNEF’s) Electric Vehicle Outlook 2018, there are a number of reasons for this increase, including the fact that lithium-ion battery prices have tumbled in recent years.
BNEF first started tracking EV battery prices in 2010, when average battery pack prices were $1 000/kWh. Fast forward to the end of 2017, and average prices hit a low of $209/kWh – a 79% drop in seven years.
Average energy density (efficiency) of EV batteries is also improving at between 5% and 7% a year.
Governments around the world have also offered generous EV purchase incentives to help get the market rolling, states the Electric Vehicle Outlook 2018 report.
At the same time, tightening fuel economy standards will require significant electrification of the global vehicle fleet.
“China’s ‘New Energy Vehicle’ quota is forcing automakers into EVs faster than most of them would like,” states the report.
In 2017, 21% of all global EV sales were in just six Chinese cities, all of which have significant restrictions on buying and using new internal combustion engine vehicles.
In Europe, the spectre of potential bans is pushing both buyers and automakers away from diesel, notes the BNEF report.
“Urban air quality concerns have quickly become central pillars of municipal policy and EVs sales are benefiting.”
Volkswagen, Daimler, Nissan, Volvo and other global automakers have all made aggressive plans to electrify their vehicles over the next ten years.
The number of EV models available is set to jump from 155 at the end of 2017 to 289 by 2022.
Chinese automakers are going further, with companies like Chang’an committing to sell only electric vehicles after 2025.
The share that EVs have of global auto sales is still small – under 2% in most regions – but some countries are jumping ahead, and the next 20 years will bring major changes, states the report.
“Still, there are challenges. Charging infrastructure remains a barrier in many countries and supply of raw materials like cobalt could create some bumps in the road to cheaper batteries.”
Despite the move to low cobalt chemistries, based on current announcements there will be shortages of cobalt by the early 2020s.
“We view cobalt supply as one of the largest potential risks to EV sales over the next five to seven years,” states the BNEF report.
BNEF’s latest forecast shows EV sales increasing from a record 1.1-million worldwide in 2017, to 11-million in 2025 and then surging to 30-million in 2030 as these vehicles become cheaper to make than internal combustion engine (ICE) cars.
The upfront cost of EVs will become competitive on an unsubsidised basis starting in 2024. By 2029, most segments reach parity as battery prices continue to fall.
China will lead the EV transition, with sales there accounting for almost 50% of the global EV market in 2025 and 39% in 2030.
China also leads on percentage adoption, with EVs accounting for 19% of all passenger vehicle sales in China in 2025.
Europe is next at 14%, followed by the US at 11%.
“In 2040, some 60-million EVs are projected to be sold, equivalent to 55% of the global light-duty vehicle market.”
The number of ICE vehicles sold per year (gasoline or diesel) is expected to start declining in the mid-2020s, as EVs bite hard into their market.
Shared mobility cars will be a small, but growing element.
The advance of e-buses will be even more rapid than that of electric cars, believes BNEF.
Electrified buses and cars are expected to displace a combined 7.3-million barrels per day of transportation fuel in 2040.
The growth of EVs will require a dramatic scale-up in the lithium-ion battery supply chain, states the BNEF report.
Lithium-ion battery manufacturing capacity today is around 131 GWh per year. Based on plants announced and under construction, this is set to jump to more than 400 GWh by 2021 with 73% of the global capacity concentrated in China.
“Further investments will still be needed; by 2030, we expect global EV lithium-ion battery demand to be over 1 500 GWh. All of this is driving up demand – and price – for key battery materials like cobalt, lithium and nickel,” states the report.
This rise in raw material prices is, however, speeding up the adoption of low-cobalt battery chemistries.