HomeSmart EnergyGlobal Electric Vehicle sales will continue to rise in 2022

Global Electric Vehicle sales will continue to rise in 2022

Policy support and flood of new models underpin sales in major markets, but greater efforts are needed to anticipate supply chain bottlenecks and boost critical mineral production.

According to the International Energy Agency, electric car sales powered through 2021 and have remained strong so far in 2022, but ensuring future growth will necessitate greater efforts to diversify battery manufacturing and critical mineral supplies to reduce the risks of bottlenecks and price increases.

Sales of electric cars (including fully electric and plug-in hybrids) doubled in 2021 to a new record of 6.6 million, with more now sold each week than in the whole of 2012, according to the latest edition of the annual Global Electric Vehicle Outlook. Despite strains along global supply chains, sales kept rising strongly into 2022, with 2 million electric cars sold worldwide in the first quarter, up by three-quarters from the same period a year earlier. The number of electric cars on the world’s roads by the end of 2021 was about 16.5 million, triple the amount in 2018.

Electric car sales in China are expected to nearly triple to 3.3 million in 2021, accounting for over half of the global total. Sales also increased significantly in Europe (by 65 percent to 2.3 million) and the United States (more than doubling to 630 000). Chinese electric vehicles are often smaller than those found in other markets. Along with cheaper production costs, this has resulted in a significant reduction in the price gap with traditional cars. In China, the median price of an electric automobile was just 10% higher than that of conventional cars, compared to 45-50% higher in other key markets. In contrast, electric vehicle sales are languishing in most emerging and developing economies, where only a few models are frequently available at unaffordable rates for mass-market consumers.

Sustained policy support has been one of the key reasons for robust electric car sales in many areas, with overall public spending on subsidies and incentives expected to more than double to about USD 30 billion by 2021. A rising number of countries have ambitious targets for vehicle electrification in the next decades, and many automakers have plans to electrify their fleets that go beyond regulatory requirements. In 2021, there were five times as many electric car models available globally as in 2015, with 450 available by the end of the year.

“Few areas of the new global energy economy are as dynamic as electric vehicles. The success of the sector in setting new sales records is extremely encouraging, but there is no room for complacency,” said IEA Executive Director Fatih Birol. “Policy makers, industry executives and investors need to be highly vigilant and resourceful in order to reduce the risks of supply disruptions and ensure sustainable supplies of critical minerals. Under its new Ministerial mandate, the IEA is working with governments around the world on how to strategically manage resources of critical minerals that are needed for electric vehicles and other key clean energy technologies.”

In the immediate term, the most significant barriers to continued strong EV sales are rising prices for several important minerals needed in battery manufacturing, as well as supply chain bottlenecks caused by Russia’s war on Ukraine and ongoing Covid-19 lockdowns in some parts of China. Longer-term efforts are needed to provide enough charging infrastructure to support the predicted surge in electric car sales, according to the paper.

Prices for lithium, a critical material for car batteries, were more than seven times higher in May 2022 than at the start of 2021, and cobalt and nickel prices soared as well. If all else remains constant, the cost of battery packs might rise by 15% if prices remain stable, reversing several years of declines. Russia’s invasion of Ukraine has added to the pressure, as Russia supplies 20% of the world’s battery-grade nickel.

As more than half of all lithium, cobalt, and graphite production and refining capacity is situated in China, governments in Europe and the United States have encouraged industrial policies geared at domestic growth of EV supply chains. Furthermore, China makes three-quarters of all lithium-ion batteries and has 70% of the capacity for cathodes and 85% of the capacity for anodes, both of which are critical components of batteries. In 2021, China will have produced more than half of all electric vehicles, and the country is prepared to continue its manufacturing dominance.

While nearly 10% of all cars sold worldwide in 2021 were electric, the figure for global truck sales was just 0.3%. This share would need to increase to around 10% by 2030 in a scenario aligned with the climate pledges and targets announced to date by countries worldwide – and to 25% by 2030 in the IEA’s Net Zero Emissions by 2050 Scenario. Electric trucks have so far been substantially deployed only in China, thanks to strong government support. But other countries have announced plans for heavy truck electrification, and manufacturers are widening their choice of models. Long-range trucks require high-power charges that are currently expensive and often require grid upgrades. The new IEA report recommends greater government support and planning for public charging infrastructure.

Other recommendations include using stringent vehicle efficiency and carbon dioxide emission standards to underpin demand for EVs; prioritising two- and three-wheelers and urban buses to kick-start EVs in emerging and developing markets; and promoting more investment in critical mineral extraction while respecting environmentally and socially sustainable practices to ensure sufficient supplies to power the clean energy transition.

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