On June 12th, BloombergNEF (BNEF) released its "Long-Term Electric Vehicle Outlook" report, which stated:
• With continuous improvements in electrification technology and decreasing battery prices, the adoption rate of electric vehicles in all markets will shift from policy-driven to consumer demand-driven;
• In BNEF's base forecast scenario, passenger electric vehicle sales are expected to exceed 30 million units in 2027 and grow to 73 million units per year by 2040;
• However, all segments, except for the small three-wheeled vehicle niche market, still require strong and well-constructed policy support to get on track for net-zero emissions;
• According to BNEF's Net Zero scenario forecast, for the world to achieve complete net-zero emissions from transportation vehicles by 2050, sales of internal combustion engine (ICE) vehicles would need to cease around 2038. In the Economic Transition Scenario forecast, only Nordic countries are on track to fully phase out ICE vehicles before 2038.
• Currently, only the three-wheeled vehicle mode of road transport is fully expected to achieve net-zero emissions by the middle of this century.
The report states that despite the mixed prospects for electric vehicles in the near term, their sales continue to grow. Rapid declines in battery prices, advancements in next-generation battery technology, and the improving relative economics of electric vehicles compared to internal combustion engine vehicles will all continue to support the long-term growth of electric vehicles globally. However, the window to achieve global net-zero emission targets is now narrower than ever before.
The report presents two road transport forecast scenarios: the base Economic Transition Scenario (ETS) and the Net Zero Scenario (NZS) consistent with achieving global zero-emission vehicles by 2050.
In the assumed base case ETS scenario, despite slowed growth in the U.S. and Europe due to regulatory and political changes, and some automakers delaying electric vehicle targets, global electric vehicle sales continue to grow. In the U.S., a lack of low-cost models, along with upcoming presidential election-induced tensions in the electric vehicle market, will lead to a slowdown in the pace of electric vehicle sales this year, while fuel economy targets in Europe will not become stricter until 2025, relieving pressure on automakers active in the region to significantly increase electric vehicle sales.
The report also shows that electric vehicles are no longer just being sold in developed countries; countries like Thailand, India, and Brazil have all experienced record sales due to the introduction of more low-cost electric vehicles for local buyers. China is the global leader in electric vehicles. Despite early signs of saturation in some electric vehicle segments and a more challenging economic outlook, China will maintain its position as the world's largest electric vehicle market.
The fundamental technology of electrification continues to improve, and battery prices keep falling, with the adoption of electric vehicles shifting from policy-driven to market consumer demand-driven. It is expected that by 2027, according to the ETS scenario forecast, electric passenger car sales will exceed 30 million units, growing to 73 million units per year by 2040, accounting for 33% and 73% of global car sales, respectively.
BNEF also found that electrification is now rapidly spreading to all areas of road transport, from rickshaws to heavy trucks. Sales of two-wheelers and three-wheelers in emerging economies continue to grow, and it is expected that by 2040, global electric vehicle sales will exceed 90%. Decarbonization in the commercial vehicle sector, including vans, trucks, and buses, has begun and will accelerate. Rapid adoption of electric vehicles across all segments creates unprecedented market opportunities. By 2030, the cumulative value of electric vehicle sales across all segments could reach $9 trillion by 2030 and $63 trillion by 2050. At least $3.5 billion in investment will be needed in battery and component factories by 2030, although companies' planned investments already exceed $155 billion.
Despite the significant progress in the electric vehicle market, global road transport is not yet on track for net-zero emissions. According to the Net Zero Scenario NZS, which calls for 100% electrification of road vehicles by 2050; under the base ETS scenario, only 69% electrification will be achieved by 2030. This indicates that current technological and economic trends alone are not sufficient to put the transport sector on track to achieve global climate goals, and continued strong regulatory support is still very much needed.
Currently, only the three-wheeled vehicle mode of road transport is fully expected to achieve net-zero emissions by the middle of this century. Heavy and medium-duty vehicles are the farthest from this goal: by 2030, electric and hydrogen fuel cell powertrains will account for only 18% of global truck sales, and only 43% by 2040, which nonetheless signifies significant change for the industry.
Nikolas Soulopoulos, Head of Commercial Transport at BNEF, said, "With strict environmental targets in Europe and the U.S., truck manufacturers are on the verge of a rapid technological transformation. The speed of this change will be unprecedented for the industry, but to meet the net-zero scenario consistent with the Paris Climate Agreement, zero-emission vehicles need to be produced more quickly."
According to the net-zero emission scenario, for the world to achieve a net-zero emission fleet by 2050, sales of internal combustion engine vehicles would need to cease around 2038, with major markets needing to phase out internal combustion engines earlier in the 2030s. In the Economic Transition Scenario, only Nordic countries are on track to fully phase out internal combustion engine vehicles before 2038. As more countries implement industrial strategies to capture value from the transition, climate targets may become even more distant. Governments need to carefully balance competing priorities and avoid policies that reduce competition or make electric vehicles affordable.
Other insights from the "Long-Term Electric Vehicle Outlook" include:
• Global passenger electric vehicle sales continue to grow, but the growth rate in the coming years will be significantly lower than in the past. Over the next four years, in the Economic Transition Scenario, electric vehicle sales will grow at an average annual rate of 21%, compared to an average growth rate of 61% from 2020 to 2023. The share of electric vehicles in global new passenger car sales will jump from 17.8% in 2023 to 33% in 2027. At that time, only China (60%) and Europe (41%) will be above the global average. By 2027, electric vehicle sales in Brazil will increase fivefold, and in India, they will double.
• Electric vehicles drive more than internal combustion engine vehicles. Analysis of driving patterns of electric vehicles in different countries shows that battery electric vehicles travel more miles per year than similar gasoline-powered vehicles. There are significant differences between countries, with the United States being a notable outlier, where electric vehicles travel fewer kilometers.
• By 2030, electric heavy trucks will become economically viable in most application scenarios. In heavier segments, battery electric trucks will initially be mainly used for urban work cycles. But even for long-haul routes, their economics will improve and approach diesel powertrains around 2030. In certain work cycles and some countries, fuel cell trucks remain a viable option, but their prospects are far less certain.
• Overcapacity is a significant issue for battery manufacturers. The planned lithium-ion battery manufacturing capacity by the end of 2025 is more than five times the global battery demand of 1.5 TWh that year. In the base Economic Transition Scenario, the annual demand for lithium batteries grows rapidly, approaching 5.9 TWh per year by 2035.
• Lithium iron phosphate (LFP) batteries are capturing the electric vehicle market. Improvements in lithium iron phosphate (LFP) technology are increasing its market share, especially in China, where battery prices have rapidly declined to $53 per kilowatt-hour so far this year. From this outlook, LFP will surpass 50% of the global passenger electric vehicle market share within the next two years. As a result, nickel and manganese will face the most pressure. Due to the shift to low-cost chemistries, consumption of nickel and manganese will decrease by 25% and 38%, respectively, by 2025.
• The substitution of oil demand by electric vehicles is beginning to increase. Next year, there will be 83 million electric vehicles, trucks, and buses on the road, exceeding 340 million electric two-wheelers and three-wheelers. Within the next three years, the substitution of oil by all types of electric and fuel cell vehicles will more than double from today, reaching nearly 4 million barrels per day by 2027. This figure is slightly higher than Japan's consumption in 2022.
• The global electric vehicle fleet's electricity consumption could be twice the electricity consumption of the United States in 2023. By 2050, in the Net Zero Scenario, a fully electric vehicle fleet will require approximately 8,313 TWh of electricity, which is twice the electricity consumption of the United States in 2023. Despite the significant increase in electricity demand, electric vehicles can help electrify the energy system through smart charging, as grid operators adopt variable pricing and other mechanisms to incentivize flexibility.
To meet the growing electricity demand of electric vehicles, the charging industry needs to mature rapidly over the next decade. By 2050, cumulative investments in charging infrastructure, installation, and maintenance will range from $1.6 trillion to $2.5 trillion, depending on the scenario.
