The global passenger car market appears to have rebounded from a two-year slump, with around 36 million cars sold in 1H23, up 10% year-on-year. Electric vehicle (EV) deliveries fought off a sharp decline in January to rebound over the remaining months through to June 2023, aided by price cuts from automakers looking to clear EV inventory across all models. About 4.3 million battery EVs (BEV) were sold in the first half of the year, resulting in the BEV market share continuing to rise, reaching around 14% by the end of June 2023. Rystad Energy maintains its forecast for BEV sales in 2023 to total around 12 million, reaching a market share of 15%, with China leading the market. However, challenges exist along the way, as evidenced by the European market still trying to break away from the stagnation of BEV adoption over the last two years. Rystad Energy’s base case scenario forecasts BEV adoption to reach 44% of new passenger vehicles sold by 2030, rising to 83% by 2040, with close to 100% electrification being reached in advanced economies.

The top 10 markets currently account for over 90% of global BEV sales, with China accounting for over 65% of BEVs sold and holding a market share of around 22%. Seven of the top 10 BEV markets are in the European region where BEV market share has grown above 25%. The German market leads the way, followed by France and then the United Kingdom. However, stagnation has been observed in key markets over the last two years and the withdrawal of subsidies in a number of countries has put the brakes on transport electrification efforts in many key markets.

While the general upward trend of EV sales has been positive for automakers in 2023, the withdrawal of subsidy policies in these major markets led to automakers having to consistently provide discounts to maintain market share. This has led to a reduction in profit margins for almost all automakers, particularly legacy automakers, which are having to absorb losses from the EV business to remain competitive. Competition in the market is largely coming from Tesla Motors, which accounts for 19.3% of the total market share. Over the last few quarters, the company has consistently posted profit margins of close to 25%, despite an increase in raw material prices in 2022, which it managed to do by increasing vehicle prices across all geographies. It is currently difficult for legacy automakers such as Ford Motors, GM, Volkswagen, etc. to sustain their EV business, impacting interim electrification targets set out for 2025 and 2030.

There is undoubtedly emission reduction potential for operating BEVs bought in 2023 over internal combustion engine vehicles (ICEV), even when considering only tank-to-wheel emissions. Even with today’s power mix, BEV operation is almost 56% less CO2 intensive compared to ICEVs. Moving towards the end of the vehicle’s useful life beyond 2040, the increasing share of non-fossil fuel power generation makes BEV operation almost 92% less CO2 intensive. Across their entire lifespan, BEVs in general will only generate half the CO2 equivalent emissions compared to an ICEV, regardless of the country of operation.