No sign of EV slowdown

Worldwide sales of passenger EVs are on pace to hit 14mn this year, up 36pc from 2022, a figure which a new report from consultancy Bloomberg NEF (BNEF) characterises as showing “no signs of an EV slowdown”.

However, a drop-off in previously sustained national and regional government action to incentivise EV adoption threatens the future growth path of EV market share, BNEF finds.

Talk of a slowdown in EV demand has reverberated around the industry after the third quarter of the year, with high-profile OEMs such as Detroit’s Ford and GM both announcing plans to hold off EV production targets to match production to market demand. Reasons for concern include a relative plateau in EV penetration rates in the US and Europe, and specific examples such the UK recording a year-on-year drop in new BEV sales in November and Norwegian BEV volumes lagging last year after 10 months.

However, the BNEF report argues that demand remains healthy and that any plateau is in part just symptomatic of the current global EV model line-up, with some first-generation vehicles at risk of obsolescence in a rapidly developing technological field. The report in particular cites legacy automakers’ electric versions of existing ICE models continuing to suffer in sharp contrast to EV pure plays’ purpose-built cars.

“Sales might be less than some manufacturers were hoping for, but they are in line BNEF’s forecast from the beginning of the year, and most industries would be very happy with that kind of growth rate,” the consultancy says.

“A slowdown could still be coming, but for now this looks much more like a winnowing down of who is competitive in the market than a general drop-off in demand,” the report continues, adding that “many legacy automakers have launched products that are not competitive on price, range or features and will have to go back to the drawing board”.

In the meantime, however, EV pure plays are primed to sweep up any market share legacy players surrender through uncompetitive rehashed offerings. “Pure-play EV automakers like Tesla, BYD and Li Auto will capture 7pc of the global vehicle market this year, up from just 1pc in 2020,” BNEF finds.

Policy help

Legislation in major automotive markets directed at incentivising EV adoption and phasing out ICE vehicles have catalysed significant growth in EV market penetration. But BNEF’s report says that further policy help at all levels of government is needed to sustain this growth.

It credits the US Inflation Reduction Act with attracting over $100bn in investment into the battery supply chain, including into the areas of manufacturing, components, and recycling. And the report also cites state and municipal level ICE phase-out legislation, such as recent policies announced in US states such as New Jersey and the Swedish capital Stockholm, as models of effective non-national government efforts to support EV growth.

“The importance of regional ICE phase-out targets should not be underestimated,” the report concludes.

Since the EU’s introduction its 2035 ICE phase-out target, however, “progress has stagnated since then with only a few minor additions to the list over the last two years”, BNEF cautions.

“There has been a clear and noticeable slow-down in national ICE phaseout announcements. The EU-wide target was first announced in 2021 and finalised in 2023. The last country to announce an ICE phase-out target was Vietnam, in 2022,” the report says.

But BNEF calculates that — even with no new targets set of late by countries with material auto sales markets — OEMs’ stated commitments to ICE phase-out targets still do not match the scale of national government goals. All the automakers who have announced a 2035 phase-out together add up to only 25pc of the 2022 global passenger vehicle market.

However, the cumulative passenger vehicle markets accounted for by all countries to have announced a phase-out up to and including 2035 adds up to 42pc of global sales. That leads BNEF to conclude that “automotive manufacturers’ ICE phase-out targets by 2035 are still less ambitious than the goals set by governments”.