EV sales remain in top gear with China in the driving seat

In 2021 electric vehicle sales doubled to a record 6.6 million from 2020 but mineral supply constraints are looming, the IEA’s Global Outlook 2022 reports.

In 2021 nearly 10% of global car sales were electric, four times the market share in 2019, and bringing the number of electric vehicles (EVs) on the world’s roads to about 16.5 million, the latest annual Outlook finds.

Moreover, global sales of EVs have kept rising strongly in 2022, with 2 million units sold in the first quarter, up 75% from the same period in 2021.

With this growth few areas in the world of clean energy are as dynamic as the EV market, the Outlook says, attributing its success primarily to sustained policy support with public spending on subsidies and incentives for EVs nearly doubling in 2021 to almost $30 billion.

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Other factors attributed were the growing number of countries that have pledged to phase out internal combustion engines or have ambitious vehicle electrification targets for the coming decades, while also more new EV models were available – in total, around 450 – increasing the attractiveness for consumers.

China leads EV sales

According to the Outlook, the increase in EV sales in 2021 was primarily led by China, which accounted for half of the growth. Indeed more vehicles were sold in China in 2021 – 3.3 million – than in the entire world in 2020.

Sales in Europe showed continued robust growth, up 65% to 2.3 million, after the 2020 boom, and also they increased in the United States, to 630 000, after two years of decline.

In China, EVs are typically smaller than in other markets, which along with lower development and manufacturing costs, has contributed to decreasing the price gap with conventional cars. In 2021, the sales-weighted median price of EVs in China was only 10% more than that of conventional offerings, compared with an average 45-50% in other major markets.

China also accounted for 95% of new registrations of electric two- and three-wheeler vehicles and 90% of new electric bus and truck registrations worldwide, with the former now accounting for half of the country’s sales.

In addition the speed of charging infrastructure rollout in China is faster than in most other regions.

In contrast, while EV sales increased in for example India, they are still lagging in other emerging and developing economies, where the few models that are available remain unaffordable for mass market consumers. For example, in Brazil, India and Indonesia, fewer than 0.5% of car sales are electric.

Focus on critical minerals

The recent rapid increase in EV sales has tested the resilience of battery supply chains and prices of raw materials such as cobalt, lithium and nickel have surged, the Outlook says. For example, in May 2022, lithium prices were over seven times higher than at the start of 2021.

However, given the current oil price environment the relative competitiveness of EVs remains unaffected.

Today’s battery supply chains are concentrated around China, which produces three-quarters of all lithium-ion batteries and is home to 70% of production capacity for cathodes and 85% of production capacity for anodes – both key components of batteries.

Europe is responsible for over one-quarter of global EV production, but it is home to very little of the supply chain apart from cobalt processing at 20%. The United States has an even smaller role in the global EV battery supply chain, with only 10% of EV production and 7% of battery production capacity.

Governments in Europe and the United States have bold public sector initiatives to develop domestic battery supply chains, but the majority of the supply chain is likely to remain Chinese through 2030. For example, 70% of battery production capacity announced for the period to 2030 is in China.

Pressure on the supply of critical materials will continue to mount as road transport electrification expands to meet net zero ambitions. Additional investments are needed in the short term, particularly in mining, where lead times are much longer than for other parts of the supply chain.

Accelerating electric vehicle uptake

The Outlook closes with five recommendations to accelerate the global uptake of EVs.

1. Maintain and adapt support for electric cars with for example taxing of inefficient internal combustion engine vehicles to finance subsidies for low emissions or EVs purchases and vehicle efficiency and/or CO2 standards.
2. Kickstart the heavy-duty market with for example policy-led deployment such as zero emission vehicle sales mandates, purchase incentives and CO2 standards.
3. Promote adoption in emerging and developing economies with for example prioritisation of two/three-wheelers and urban buses as the most cost competitive vehicle type.
4. Expand EV infrastructure and smart grids through continued government support and for example incentivising and facilitating the installation of home chargers and mandating EV charging readiness for new buildings, while coordinated plans on grid expansion and enhancements can ensure that EVs can become a resource for grid stability.
5. Ensure secure, resilient and sustainable EV supply chains with for example governments leveraging private investment in sustainable mining of key battery metals and ensuring clear and rapid permitting procedures, incentivising battery ‘right-sizing’ and the adoption of smaller cars, strengthening cooperation between producer and consumer countries and ensuring traceability of key EV components.