Across the globe, momentum is building to increase adoption of light-duty passenger electric vehicles (EVs) and make traditional vehicles — with an internal combustion engine — go the way of the horse and cart.
Decarbonizing transportation is essential to meet climate goals and limit global warming to 1.5 degrees C (2.7 degrees F) above pre-industrial levels by 2050, the limit scientists say is necessary for avoiding the worst impacts of climate change. The transportation sector accounts for 24% of global CO2 emissions, with light-duty passenger vehicles making up nearly half of these emissions. Without policy intervention, Bloomberg New Energy Finance (BNEF) projects CO2 emissions from these vehicles will continue to increase until 2030, then begin to decrease as the EV market grows — though not fast enough to decrease sector emissions substantially by 2050.
Additional action from public, private and civil society actors will be critical to increasing EV adoption globally. The 2020 Climate Action Tracker report, Paris Agreement Compatible Sectoral Benchmarks, projects that to be aligned with the 1.5 degrees C pathway, fully electric vehicles — including battery electric and fuel cell vehicles — will need to account for 75-95% of global annual passenger vehicle sales by 2030 and 100% by 2035. These targets are closely tied with the forthcoming State of Climate Action 2021 Report and the UN High Level Climate Champions’ Race to Zero Breakthroughs campaign.
Given that EV sales only accounted for 4% of new passenger vehicle sales globally in 2020, these benchmarks could seem incredibly ambitious.
However, our understanding of low-carbon technology adoption is evolving quickly and beginning to move away from a linear growth school of thought. Recent data suggests passenger electric vehicles may be poised for exponential growth over the next decade. While this is by no means guaranteed, the trends are encouraging.
Reaching a Tipping Point
EV sales have grown rapidly over the past decade, but this growth has been highly uneven, with sales in major markets like China and Europe excelling while sales in other regions progressing slowly or not at all.
EV sales exceeded expectations in 2020, increasing 67% from 2019 levels, as calculated from BNEF data. This is particularly notable when compared to overall car sales, which contracted 16% — likely due to the coronavirus pandemic.
As EV prices continue to fall and more models become available, it is possible we are nearing a critical tipping point with EVs poised for exponential growth in an increasing number of countries over the next decade under the right conditions. If action continues to build, 2030 and 2035 targets could be within reach.
Historical EV Transformation Timeline
EV adoption has picked up steam in recent years, driven by a confluence of circumstances — from improvements in battery technology to supply and demand side policies, such as EV purchase incentives or requirements for auto manufactures, as well as increased access to enabling infrastructure like charging stations. And, while increasing EV sales cannot be attributed to any single event, these factors may have created positive feedback loops that made EVs more attractive and accessible — lower cost batteries have made EVs cheaper to produce and purchase, an increasing number of countries have committed to phasing out traditional vehicles, and complementary infrastructure has scaled up rapidly.
The graphic below reflects key moments indicative of the systemic shifts taking place in the transportation sector that have opened the door for exponential growth of EVs.
Launch offirst accessible EV passenger vehicle (Tesla Roadster), which had significantly longer range than previous models. This was followed quickly by the Mitsubishi i-MiEV in Japan and later by the Chevrolet Volt and Nissan Leaf.
Lithium-ion battery price falls 50% in five years, primarily due to technology improvements driven by government and private sector investment in research and development.
Mass charging infrastructure grows. Estonia becomes the first country with an EV charging network and nationwide coverage. E.U. mandates minimum charging point coverage.
The Paris Agreement is established and the Zero Emission Vehicle (ZEV) Alliance forms. Coordinated by the International Council on Clean Transportation, ZEV Alliance highlights EVs as a key strategy to solve the climate crisis and encourages further investments in EV technologies. Participants include Germany, the Netherlands, Norway, the United Kingdom, several U.S. States and Canada. Simultaneously, India launches its Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme to increase EV sales.
European Battery Allianceforms to create a competitive, sustainable battery-manufacturing value chain in Europe and establish 10–20 “gigafactories.” China follows in 2018 and establishes battery guidelines to encourage the standardization of battery design, production and verification. In response to increased pressure from China, Japan increases focus on high-performance battery production.
Sales spike in the US, Europe and China as new EV models with improved ranges are added to the market.
California updates ZEV mandate to double number of manufacturers who need to comply with the program and increase the number of EVs that automakers must sell each year. More than 12 states have now adopted California’s ZEV program.
France becomes first country to put traditional vehicle ban into law with a 2040 timeframe, while Colombia adds internal combustion engine phase-out targets to its National Decarbonization Plan. California follows in 2020, banning the sale of conventional vehicles by 2035.
Companies commit to transition global fleets to EVs. DHL, Ikea, Amazon and UPS, as well as ride-sharing companies including Uber, Lyft and Shuttl, set targets to electrify vehicle fleets. In total, more than 100 companies have committed to transitioning to EV fleets by 2030 through convening platforms like EV100 and the Corporate Electric Vehicle Alliance. Governments, including the U.S. and Sri Lanka, have also committed to fleet transitions.
Average EV total cost of ownership becomes lower than traditional vehicles in major European markets and the U.S.
Already, 2021 has been a major year for EV action. Several countries including the U.K., Japan, Norway, Canada, Germany and Sweden have strengthened or implemented new internal combustion engine vehicle bans; Singapore announced a new EV rebate as part of its EV Early Adoption Initiative, to be launched in 2022, and increased investment in charging infrastructure; and India amended its FAME scheme to increase EV purchasing and manufacturing incentives.
EVs and the S-Curve
Similar to other value-creating technologies in the past, experts agree that growth in sales of electric vehicles is likely to follow an S-Curve or market diffusion curve. Progress along an S-curve comes in stages. At first, when the technology is newly invented, growth is slow and uncertainty is high. However, as technology costs fall and complementary infrastructure is developed, a tipping point may be reached which causes adoption to grow exponentially. As more actors gain confidence in and adopt the new technology, growth reaches its top speed, then slows and levels out as the new technology becomes dominant in the market.
EVs are still early in this projected growth trajectory, with some exponential growth occurring but not yet at top speed. This early on, it is impossible to project the future trajectory, but we can do a simple exercise to illustrate the power of potentially exponential growth.
Since 2015, the global share of new passenger EVs has increased at an average of around 50% per year, a stupendous amount of growth. If growth this rapid continues, EVs would make up 50% of all light-duty vehicles sales by 2026 and 100% by 2028. Of course, EV sales won’t follow this simple exponential growth pattern exactly, and sales are likely to slow and level off before reaching 100%. This growth trajectory suggests that, while reaching 100% EV sales isn’t likely by 2028, it could be by 2040 with the right enabling factors in place, which are discussed in more detail below.
While we don’t yet know what the top speed is for global EV sales growth, since not enough countries have reached that top speed, Norway could offer an indication. EV sales grew from less than 1% of the market share in 2010 to 54% of the market share in 2020. It reached a tipping point, likely through a series of incentives that made EVs cheaper than traditional vehicles. The EV market has developed significantly since 2010 and as EVs approach price parity with traditional vehicles, other countries may need to employ fewer incentives to reach a similar tipping point and could even transition EV sales more quickly than Norway.
The graphic below presents one possible S-curve pathway for what would need to happen for EV sales to reach the target of 100% EV sales by 2035. This is just using a simple formula and not the only shape an S-curve could take to meet the targets, but it gives a general sense of what’s needed.
Ongoing Action Is Essential to Meet Climate Goals
EV adoption is currently at a critical point. While passenger EV sales could be on the brink of entering the steepest exponential growth phase of the S-curve in many countries, progress made so far is not so advanced that it cannot be reversed. Strengthening policy, increasing investment and implementing equitable adoption incentives will be critical. Increasing EV sales alone will not be enough — reaching Paris Agreement targets will also require systemic changes to individual transport, such as rethinking in city planning and increasing public transport availability.
Efforts to shift vehicle sales from traditional to electric may have the greatest systemic impact when paired with strategies to reduce the overall need for passenger vehicles by increasing zero or low-carbon transport options such as public transit, bike lanes and walking paths. Lowering passenger vehicle demand may also make EV sales targets easier to achieve.
Shifting government and corporate fleets to EVs also has high impact potential — in Europe, for instance, 60% of new vehicles are purchased through corporate subsidy programs. EV sales were supported by existing policy measures and buoyed by COVID-19 economic stimulus measures that supported purchases in a number of countries. Several countries on the continent including Spain, France, Germany and Italy integrated EV sales into stimulus measures by increasing or extending EV purchase subsidies and increasing traditional vehicle buy-back amounts. China also extended EV purchase subsidies for another two years and invested significantly in charging infrastructure development.
Though EV purchasing incentives have faced criticism for being regressive, supporting the automotive industry has been a cornerstone of historic economic recovery plans, and the noticeable shift in focus to EV promotion is indicative of a larger sea change. Strategies like loan-loss guarantees, vouchers for low-income consumers, and instant rebates can help increase equity and ultimately the efficacy of purchase incentives.
As details of long-term economic recovery strategies come to light, the EV value chain has also emerged as a backbone of job creation in a post-pandemic green economy. Earlier this year, the EU announced a plan to create over 4 million battery manufacturing jobs by 2025 as part of its Green Deal; the American Jobs Plan, parts of which are being adapted into a U.S. budget reconciliation bill, could generate more than 800,000 EV manufacturing jobs by 2025; India’s plan to increase EV manufacturing is also expected to create 5.8 million jobs over the next five years. Installation of charging infrastructure also has significant job creation potential.
The Road Ahead for EVs
Experts agree that EV sales are on the precipice of revolutionizing the auto industry. But although sales are going in the right direction, additional action is needed to fully capitalize on current momentum and push EV adoption into the exponential growth rate needed to reach the tipping point where change is irreversible. Investments in infrastructure and research and development, strong policy support at national and municipal levels, and coordinated global action taken today will determine if EVs can reach their full potential in the next decade.
Though the task appears daunting, tools are available and targets are within reach. The forthcoming State of Climate Action 2021 Report, produced by WRI, Climate Analytics and the New Climate Institute, delves into how EVs and other low-carbon technologies are stacking up against exponential growth patterns and discusses systemic changes necessary to accelerate climate action. The UN High Level Climate Champions’ Race to Zero Breakthroughs campaign provides a roadmap that stakeholders can use to measure the state of the EV transition across public and private sectors, civil society and financiers.
EV sales have consistently out-performed year-on-year growth expectations in the past. The question remains if EV adoption rates can continue to defy the odds to make 2030 and 2035 targets a reality.