Electric Vehicle Fleet Set to Hit 100 Million by 2026, but Stronger Push Needed to Stay on Track for Net Zero

BloombergNEF: Urgent policy action needed on heavy commercial vehicles, streamlining charging infrastructure, and building out the battery supply chain

London and New York, June 8, 2023 – EV adoption is set to soar in the coming years, with over 100 million passenger EVs expected on the roads by 2026 and over 700 million by 2040, up from 27 million at the beginning of this year, according to research company BloombergNEF’s (BNEF) latest annual Long-Term Electric Vehicle Outlook (EVO). Electrification is now spreading quickly to all sectors of road transport from rickshaws to heavy trucks and is also picking up in emerging economies like India, Thailand and Indonesia.

As momentum grows, new economic opportunities are taking shape. The cumulative value of EV sales across all segments hits $8.8 trillion dollars by 2030 and $57 trillion by 2050 in BNEF’s base-case Economic Transition Scenario, which assumes no new policies are implemented. EVs and batteries are now a central part of many countries’ industrial policy and competition to attract investment will increase in the coming years.

Despite the rapid progress, urgent action is required from policymakers and industry participants to keep road transport on track for long-term emission targets countries have set. “Direct electrification via batteries is the most efficient, cost-effective and commercially available route to fully decarbonizing road transport. Still, a stronger push is needed on areas like heavy trucking, charging infrastructure and raw material supply” said Aleksandra O’Donovan, head of electric vehicles at BloombergNEF.

The report also includes a Net Zero Scenario consistent with a global zero-emissions-capable fleet by mid-century. Only one segment of road transport – three-wheeled vehicles – is fully on track for this more ambitious scenario, but buses and two-wheeled vehicles are also very close. Commercial vans and passenger cars are gaining momentum as well but will need additional policy support to stay on track. Heavy trucks are far behind the net-zero trajectory and should be a priority focus for policymakers. Grid investments, grid connections and permitting processes also need to be streamlined to support the large number of charging points needed for the trucking transition.

The report flags specific recommendations for governments and industry, including:

• Governments with mid-century net-zero goals should set a phase-out date for sales of new internal combustion vehicles no later than 2035, across all segments. These targets need to be backed by legislation and supported by concrete policy measures with interim targets.

• Fuel economy standards and/or tailpipe CO2 emissions standards need to be made stricter and stretch further in time than current rules. More stringent standards for vans, trucks and other commercial vehicles are needed urgently in all markets.

• Governments should set requirements and standards for the recycling of EV batteries and continue to support research into next-generation battery technologies. Funding and streamlined permitting process can help encourage new supply of raw materials.

• Advancements like sodium-ion batteries, solid-state batteries and next-generation anodes are now entering commercialization. Governments should look at ways to support domestic development of these areas, and continue to support R&D into emerging battery technologies that reduce dependence on critical raw materials.

• Dense public charging networks are required to help reduce the EV range consumers feel they need, which in turn reduces pressure on battery raw material supplies. EV ranges have increased by 10% annually since 2018. Even if this slows to 5% a year from 2023 to 2030 it adds nearly 50% more demand for lithium, nickel and cobalt compared to a base case where BEV ranges remain flat.

• Investment in clean power should go hand in hand with road transport electrification investment. As solar generation increases, more EV charging should be shifted to midday to maximize emissions benefits and lower costs.

Other findings include:

• EV sales rise sharply. In the Economic Transition Scenario, passenger EV sales rise from 10.5 million in 2022 to 22 million in 2025 (26% of sales), 42 million in 2030 (44% of sales) and 75 million in 2040 (75% of sales). Some countries go much faster, including the Nordics, China, Germany, South Korea, France and the UK. By 2030, there are 244 million EVs on the road, rising to 731 million by 2040 (46% of the fleet). The Net Zero Scenario requires a much faster transition, with 298 million EVs on the road by 2030 and 1.1 billion by 2040.

• Oil demand from road transport is very near its peak. The rise of EVs leads to a peak in overall road fuel demand in 2027. Demand in the US and Europe has already peaked, while demand in China is set to peak in 2024.

• Sales of internal combustion vehicles peaked in 2017 and are now in long-term decline. Overall vehicle sales continue to rebound after the pandemic and supply chain challenges, but by 2026 sales of combustion vehicles are 39% lower than their peak.

• Large investments are needed in all areas of the battery supply chain. At least $188 billion needs to be invested in battery cell and component plants by the end of the decade in the Economic Transition Scenario.

• Lithium supply is the most concerning of the battery metals in terms of supply sufficiency, with demand increasing by a factor of 22 times by 2050 in the Net Zero Scenario. However, aggressive uptake of sodium-ion batteries could reduce lithium demand by nearly 40% in 2035 compared to BNEF’s base case scenario.

• Small vehicles are still better than larger ones for climate targets. Consumer preferences for larger vehicles in the US means larger battery packs, which in turn means that upfront price parity in the country is one to three years later than for EVs in Europe.

• Autonomous vehicles are still a wildcard for the global vehicle market. Steady progress is being made on autonomous vehicle (AV) technology and the size of the global passenger vehicle fleet in 2050 varies significantly depending on AV uptake scenario. BNEF’s high adoption AV scenario reduces the global passenger vehicle fleet size to 1.1 billion in 2050, down 30% from the base case scenario of 1.5 billion.

• Additional electricity demand from EVs is part of a broader electrification push to reach net zero. EVs add about 14% to global electricity demand in 2050 in the Economic Transition Scenario, but only 12% in the Net Zero Scenario despite more vehicles on the road. This is because the Net Zero Scenario includes additional electricity demand from electrification of heating, industry and electrolyzer use for hydrogen production used in other sectors.

A comprehensive executive summary with key findings and more information on the Long-Term Electric Vehicle Outlook can be found at: https://about.bnef.com/electric-vehicle-outlook/.

Oktavia Catsaros

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BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
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