Electrification of mobility: the point of no return

Electrification of mobility: the point of no return

The environmental targets and investments of the world's major manufacturers make it clear that the transition to electric cars is irreversible. According to the International Energy Agency, global sales of this type of vehicle should reach 17 million units by 2024 and lead to a reduction of up to 12 million barrels of oil per day by 2035.

Car brands continue to present new 100% electric models, but there is still a question in some circles as to whether this is just a passing ‘fad’. After all, there's no sign of ‘petrol stations’ becoming extinct, and they're still just around the corner.

The latest indicators, however, reinforce that this shift towards electric mobility is an irreversible structural movement that is here to stay.

The document ‘Global EV Outlook 2024’ by the International Energy Agency (IEA) emphasizes that sales of electric cars are continuing to grow and could reach around 17 million units by 2024, already accounting for more than one in five cars sold worldwide.

More than 20 major vehicle manufacturers, which will account for more than 90% of global sales in 2023, have set themselves electrification targets. ‘If we consider the targets of all the major car manufacturers together, more than 40 million electric cars could be sold by 2030, which would correspond to the level of deployment projected with current policy settings,’ points out the IEA analysis.

Looking further ahead, the IEA underlines that in some regions of the globe, such as Europe, all new cars sold in 2035 will be electric, based on current energy, climate, and industrial policies.

Electric cars in more and more countries

Another observation: electric cars are becoming a mass market product - and in a growing number of countries. In this respect, the IEA report provides interesting and even demystifying data, since there is a bit of an idea that it is in Europe that electric cars are being introduced with more vigor, due to more demanding regulations, including in environmental policy.

According to the ‘Global EV Outlook 2024’, the market share of electric cars could reach up to 45% in China this year, 25% in Europe, and more than 11% in the USA, among other factors sustained by competition between manufacturers, falling car prices and continued political support. What's more, the vast majority of electric car sales in 2023 were made in China (60%), Europe (25%), and the US (10%).

Emerging countries will accelerate

It is in these regions - China, Europe, and North America -, which account for around 65% of total car sales worldwide, that electric cars continue to be most concentrated, but even that is changing. The IEA indicates growth in 2023 in countries such as Vietnam (around 15% of all cars sold) and Thailand (10%). In Brazil (3% market share), Indonesia, Malaysia (2% market share each), and Thailand, cheaper models, mainly from Chinese brands, are starting to be well accepted.

The combination of several factors (purchase subsidies and incentives for the manufacture of electric cars and batteries) will, in a relatively short time, accelerate the electrification of transport in these emerging nations. A few examples: in India (where 100% electric vehicles have a 2% market share), the incentive scheme linked to production supports domestic manufacture. In Mexico, electric vehicle supply chains are developing rapidly, stimulated by access to subsidies from the US Inflation Reduction Act (IRA).

The strong consensus among politicians

From the IEA's perspective, recent political developments continue to reinforce expectations of rapid electrification, such as the new emissions standards adopted in Canada, the European Union, and the US last year.

At the IEA's 2024 ministerial meeting in Paris last February, which also marked the 50th anniversary of the agency's creation, representatives from around 50 governments, business leaders, investors, and civil society figures reached a strong consensus on the need for more ambitious action and greater global cooperation to transform the world's energy system and combat climate change.

At the meeting, the IEA Ministerial Communiqué 2024 was adopted by the IEA's 32 member countries, setting out the agency's strategic orientations in the field of energy security, the fight against climate change, and the mobilization of financial flows for clean energy transitions.

More electrification, less oil

According to the IEA, the rapid uptake of electrics of all types - cars, commercial vehicles, trucks, buses, and two and three-wheelers - will mean a decrease in demand of 6 million barrels of oil per day (mb/d) under a fixed policy scenario in 2030 and more than 10 mb/d in 2035, which is equivalent to the amount of oil currently used in road transport in the US. But ‘if all the national energy and climate targets assumed by governments are met in full and on time, as in the announced commitments scenario, two-thirds of all vehicles sold in 2035 could be electric, avoiding around 12 mb/d of oil,’ emphasizes the IEA.

Industrial incentives in some of the world's major powers - such as those provided for in the US IRA, the European Union's Net-Zero Industry Act (NZIA), China's 14th Five-Year Plan, and India's Production Linked Incentive Scheme (PLI) - also encourage the creation of added value and jobs in electric vehicle supply chains in these economies.

Electric supply chain boost

As a result, the strong growth in the energy transition is driving investment in the entire electric vehicle supply chain. The IEA says that between 2022 and 2023, investment announcements in the manufacture of electric vehicles and batteries totaled almost 500 billion dollars (around 460 billion euros), of which around 40% has already been authorized.

Battery manufacturing capacity is aligning with the goals of car manufacturers and governments worldwide. Thanks to high levels of investment over the last five years, global battery manufacturing capacity for electric vehicles has reached 2.2 terawatt hours, far exceeding demand in 2023, with around 750 gigawatt hours. The IEA estimates that demand will increase around seven times by 2035 compared to 2023 and 12 times in the Net Zero Emissions scenario by 2050, the target set for the energy sector by the middle of the century.

In the IEA's analysis, ‘committed and existing’ battery manufacturing capacity appears to be able to keep pace with demand, opening up significant opportunities throughout the supply chain.

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