How have global EV forecasts reacted to strong headwinds?

29 July 2024

Global electric vehicle (EV) sales are experiencing turbulence, but is this enough to affect market trajectories? Neil King, head of forecasting at EV Volumes (part of J.D. Power), presents the latest outlook with Autovista24 special content editor Phil Curry.

Covering both passenger cars and light-commercial vehicles, the latest light-vehicle forecast from EV Volumes expects a 0.5% rise in total sales this year when compared with 2023.

This follows a weaker outlook in the non-Triad region, as well as downgraded expectations for Europe and North America. However, China did help compensate for this with an improved outlook.

Focusing on powertrain performance, the EV market has faced headwinds this year. Public opinion has suffered with talks of registration slowdowns, the cancelling of incentives and the implementation of provisional import tariffs.

Combined battery-electric vehicle (BEV) and plug-in hybrid (PHEV) volumes grew by 35% globally in 2023, reaching 14.2 million units. This equated to a 16.7% market share, up from 13.6% in 2022.

EV demand to increase

EV Volumes has held its plug-in share forecast for 2024 at 19.2%, with year-on-year growth of 16%. This means EVs are predicted to outperform the overall light-vehicle market. Factoring in the EU’s provisional import tariffs on Chinese-built BEVs, the forecast 16.49 million global EV sales in 2024 is only 9,000 units lower than predicted in June.

However, the global EV outlook for 2025 onwards is up to 100,000 units lower than previously predicted. The global EV share is forecast to reach 22.1% in 2025, then 44.9% in 2030, increasing to 69.7% in 2035. Global volumes are set to increase from 14.2 million in 2023 to 71.6 million units in 2035.

Annual battery demand is expected to increase from 0.7TWh in 2023 to 5.2TWh in 2035. This will be driven by the desire for longer electric ranges across all vehicle segments. The electrification of popular full-size SUVs and pickups in North America will also increase demand.

However, the trend for larger batteries is slowing as efficiency increases and costs fall. This will enable the electrification of smaller vehicles, which have tighter profit margins.

EV Volumes also forecasts a considerable delay in the electrification of the total light-vehicle fleet in operation. There are 1.33 billion light vehicles on the world’s roads at present. The current forecast for EV growth means it will take until 2042 for half of the market to be electric. This is assuming normal vehicle scrappage rates and replacement.

Europe’s pace slows

Europe’s new light-vehicle market expanded by 13.2% year-on-year in 2023. Supply improved after the COVID-19 pandemic and ensuing component shortages.

However, current order intake has now fallen because of high interest rates and the cost-of-living crisis. EV Volumes now forecast that the market will grow by 2.6% in 2024. This is lower than its March 2024 forecast, when expected growth sat at 3.1%.

The end of the year will see 15.1 million new light vehicles delivered, falling far short of the 18 million units registered in Europe in 2019. EV Volumes does not see the European market returning to this level during the current forecast scenario, up to and including 2035.

The European EV market entered 2024 facing some considerable challenges. France amended its incentive scheme to refuse subsidies to certain models and Germany cut incentives entirely last year. Norway ended its VAT exemption for the powertrains, and Switzerland removed the 4% import tax exemption for BEVs.

However, not all countries have taken this approach to subsidies. Italy recently introduced a new incentive scheme. Spain allocated €200 million of funding to extend its MOVES III scheme. Additionally, Poland is considering the revision of EV purchase subsidies.

More affordable BEVs such as the Citroen e-C3 are rolling out too. Global EV-leader BYD has expansion plans for the region as well, alongside other Chinese OEMs.

Tariff impact?

In July, provisional import tariffs on BEVs made in China came into force. This means additional costs for carmakers shipping vehicles into the region. Duty levels are based on the level of government subsidisation and cooperation with the EU investigation. These tariffs are in addition to existing import duties of 10%.

The tariffs remain provisional and are subject to further change as discussions continue. Furthermore, OEMs have only had to provide bank guarantees at this stage. No additional duties are to be collected until they become definitive in November.

Only Tesla confirmed a price increase following the announcement, with the made-in-China Model 3 costing around €1,500 more in some European countries. Meanwhile, Nio and Xpeng have stated they will not change prices in the EU. BYD is expected to absorb the tariffs without increasing prices. Finally, MG-parent SAIC stated that it has sufficient stock to supply the market until the tariffs become definitive in November.

Falling lithium prices are also allowing OEMs to hold prices steady.  EV Volumes assumes that prices will largely be unchanged until a final decision is made in November. There is also a possibility that final tariffs will drop at that point too.

Minimal disruption

So, the impact on the 2024 BEV sales forecast for Europe appears negligible. However, price changes and variations in demand have been considered in adjusting the forecast.

EV Volumes now expects European EV sales to rise a further 4.9% this year. This is despite the anticipated slower growth of the wider light-vehicle market. Plug-in vehicles would therefore make up for 21.8% of all light-vehicle sales in the region. BEV volumes are forecast to grow by 5.5%, accounting for 68.7% in the 2024 EV market.

PHEV sales should grow by 3.7%, benefitting from any BEV price increases while offering a stepping stone to full electrification. Incentive changes mean BEVs have already lost their price advantage in Germany, for example.

The impact of the new BEV tariffs will be greater in 2025 and beyond. EV Volumes expects that Europe will see up to 120,000 fewer BEV sales annually compared with its June update. Yet the PHEV sales outlook has been modestly increased.

The EV market share is now forecast to reach 25.6% next year, from 25.9% forecast in June. It is then expected to hit 61.9% in 2030, down from 62.3% forecast in June. This is expected to hit 95% by 2035, down from 94.1% forecast in June.

China boom

China’s EV boom continued in 2022 with the powertrain’s share hitting 26.7% from 13.9% in 2021. The government’s target for new energy vehicles (NEVs), including BEVs, PHEVs and FCEVs, to make up 20% of sales by 2025 was therefore reached three years ahead of time.

Growth was less dramatic in 2023, at 36%, but with 8.4 million units delivered, the EV share climbed to 33.9%. PHEVs have taken the lead, accounting for 18% of EVs sold in 2021 to 25% in 2022, then 32% in 2023.

Chinese OEMs continue to roll out new PHEVs, which will boost their appeal. EV Volumes forecasts the powertrain will capture 40% of the country’s EV mix by 2024.

Given the challenging economic situation in China, the government is attempting to stimulate consumer demand and address deflation. This should also bolster state-owned OEMs amid a price war.

Accordingly, EV Volumes slightly increased the light-vehicle market forecast for 2024 to 24 million units. However, this still equates to a 3.2% year-on-year decline.

The government is also planning to provide additional fiscal support to encourage the adoption of cleaner technology, including EVs. Therefore, EV Volumes has increased the EV share outlook to 2035, and expects BEVs to gain ground from 2025 onwards.

In the medium and long term, the China forecast is not restricted by share targets or capacity limitations. EVs are now forecast to account for 44.5% of light-vehicle sales in 2025, growing to 68.5% in 2030, and reaching 84% in 2035.

North America

EV sales in the US and Canada increased by 48% year on year in 2022, following 100% growth in 2021. Growing plug-in demand in 2023 mirrored 2022, although 1.64 million units meant EVs accounted for 9.4% of light-vehicle sales in 2023, up from 7.2% in 2022.

The overall automotive market recovery continues in 2024, albeit at a slightly slower pace than anticipated in March. EV Volumes has also lowered its EV share and volume forecasts as growth has stalled.

The Inflation Reduction Act (IRA) supports further, rapid EV growth in the US. This is even with compliance with forthcoming battery and material-sourcing requirements still unclear for many carmakers.

Incentives for producing vehicles and batteries in the region remain strong but also imply handicaps for imported brands and models. The IRA is assumed to remain until 2032 but this could change depending on the outcome of the US election later this year.

The 100% import duty to be levied on EVs imported from China comes into force from 1 August 2024. This should not have a dramatic impact as it only affects a few models. Nevertheless, the Volvo EX30 rollout has been postponed until 2025 and the new Mini Cooper Electric until 2026.

Brands producing EVs in China, such as Lynk&Co, Nio and Smart will not launch in North America until they can relocate production.

EV Volumes forecasts that the EV share of light-vehicle sales in North America will reach 11.3% in 2024, increasing to 15% in 2025. This will increase to 41.2% in 2030 and 73.3% in 2035.

BEVs are expected to account for 78% of the electric vehicle market this year, down from 79.8% in 2023. This share is forecast to rise to 82.9% in 2025, growing to 93.6% in 2030, and 97.2% in 2035.

Non-Triad

EV numbers in the non-Triad markets rose sharply for the third consecutive year in 2023, albeit from a low base. EV demand is increasingly supported by a wider availability of products, higher incentives, and lower import tariffs in some countries.

Combined EV sales in the non-Triad markets reached 554,000 units in 2022 and exceeded one million units in 2023, with growth of 91% and 81%, respectively. Volumes grew by more than 100% in markets including Australia, Thailand, Brazil, Turkey, Malaysia, and Mexico in 2023. Meanwhile, India and Japan recorded growth of 50%.

Nevertheless, the combined EV share was only 3.6% in 2023, albeit up from 2.1% in 2022. Large vehicle markets like India, Japan, Brazil, and Mexico still sell very few EVs relative to their market size. This also pulls down the global average EV share, as non-Triad countries accounted for a third of global light-vehicle sales in 2023.

The growth forecast for all light vehicles in 2024 has been lowered to only 1.2% due to weakness in countries such as Japan and South Korea. However, governments are introducing measures to strengthen their currencies and stimulate consumer demand, which should support future vehicle sales.

Smaller shares

EV Volumes has slightly reduced its EV share forecast for the non-Triad market in 2024 and 2025. However, it has maintained it in the medium and long-term outlooks. This is backed by India incentivising localised EV production and Japan advancing with the development of solid-state batteries.

For 2024, EV Volumes expects an EV share of 4.8% in the non-Triad countries, equating to around 1.4 million sales. This will be boosted by discounting in Thailand, for example. The EV share is predicted to rise to 6.4% in 2025, hitting 17.7% in 2030. This should increase to 42.5% in 2035, trailing global EV adoption by about six years.

Many developing countries impose high tariffs on vehicle imports. Unless EVs are exempt, they will need to develop local industries to catch up with the adoption in mature markets.