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Understanding the disruption of road transportation

The electric vehicle (EV) sector has been awash with good news this year and last, both for passenger and commercial vehicles. While some mainstream media outlets have painted a broadly negative picture about the sector in that time, the actual figures show tremendous growth in electrified cars and a promising uptick in zero-emission medium and heavy-duty truck sales. Read more in our expert article by Lars Lysdahl, Advisory Partner at Rystad Energy.

The electric vehicle (EV) sector has been awash with good news this year and last, both for passenger and commercial vehicles. While some mainstream media outlets have painted a broadly negative picture about the sector in that time, the actual figures show tremendous growth in electrified cars and a promising uptick in zero-emission medium and heavy-duty truck sales.

Electrification of road transportation is a big deal
Road fuel represents around half of total global oil demand, and almost 20% of carbon dioxide (CO2) emissions, not to mention local air and noise emissions from internal combustion engines (ICE). Within road fuels, the two largest segments are passenger vehicles and medium and heavy commercial vehicles, representing about a half and a one-third, respectively, of road fuels. Electrification of these segments will not only massively reduce oil consumption, but also reduce greenhouse gas emissions and improve air quality in our cities.

Passenger EV sales took a large leap in 2023
As per our BatteryMarketsCube, which contains all historical and future vehicle sales by country and power train, we saw the global EV share of new automobile sales reach almost 20% last year. This includes battery electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV). Last year represented a challenging year for auto sales due to high interest rates increasing downpayments for financed cars and high inflation leading to many buyers postponing their car purchases to prioritize other expenses. Also, high interest rates tend to have a larger impact on EVs than their ICE vehicle equivalents since the sticker price of EVs is generally higher. Despite the challenging market, EV sales grew, and this is something we have observed for years. As such, EV sales appear to be on a secular growth path in a cyclical auto market.

EV sales in 2024 are a mixed bag
The three largest auto markets – namely, mainland China, Europe and the US – represent around 80% of global sales, and hence tracking their EV adoption is essential. China is the largest market for cars and electric vehicles, with EV adoption passing 50% for parts of this year, significantly higher than the 30% average last year.

Europe has seen something of a slowdown from 2022 levels, with EV adoption sitting just above 19% last year. Vehicle sales in the European Union increased almost 7% this year from 2023, but the EV share has remained at around 19% as Germany reduced its EV incentives. Price and model availability may also be factors here, as there are few available low-cost EVs, which represent the majority of the market.

The US is a laggard and EV adoption was at 9% last year, while the 2024 numbers are telling the same story. Our analysis shows that the low adoption rates stem mainly from the fact that much of the market is represented by large sports utility vehicles (SUV) and pick-up trucks, where domestic EV model availability, price and supply are still limiting sales.

Electrified trucks making significant in-roads in major markets
Last year saw a large leap in electrification of medium and heavy commercial vehicles in China and Germany, which represent two key markets. China counted around 700,000 vehicles, of which 4% of the vehicles were zero emissions (10% in December). Around 80% of zero-emission vehicles sold in China last year were battery electric and around 20% had a hydrogen fuel cell power train. Another interesting data point was that around half of the battery electric trucks were equipped with battery swap technology, which both increases recharging time and alleviates the need for power grid upgrades for fast charging.

In Germany, a market of around 41,000 units, EV trucks constituted 23% of new sales. This was driven by a governmental funding program agreed in 2021. The program was so successful that the earmarked funds were exhausted and the fund had to be closed down. No fuel cell trucks were registered, which is interesting as many of the German ICE makers have tried to push fuel cell as a decarbonization technology, looking mostly at the limitations of batteries.

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