Electric vehicle sales growth is slowing globally. Here’s why

With road transportation accounting for about 15 per cent of greenhouse gas emissions, moving to cleaner vehicles is a linchpin in national efforts to meet climate-change mitigation goals.

Governments have encouraged a transition to electric vehicles (EVs) with massive subsidies, and legacy carmakers are changing their offerings in a slow farewell to the combustion-engine era. EV demand continues to expand, but the rate of growth has slowed. 

1. How are EV sales going?

Global sales of EVs are still rising, but growth is slowing. According to BloombergNEF, sales of all-electric vehicles plus plug-in hybrids that can also be powered by petrol or diesel more than doubled in 2021 and grew 62 per cent in 2022. But the figure was 31 per cent in 2023, when 15 per cent of all vehicles sold were plug-ins. BNEF forecasts that the annual increase will slow again to 21 per cent in 2024.

China, where the government has used generous incentives to expand the nascent carmaking industry and make EVs affordable, is by far the largest market, accounting for 59 per cent of 13.8 million plug-in sales in 2023, excluding commercial vehicles. Europe accounted for 23 per cent and North America for 12 per cent. 

2. Why is EV sales growth slowing?

Several carmakers have signalled that as China’s economy continues to struggle, the country is no longer the reliable source of growth that it was in years past. The greater issue is demand in Europe and the United States.

For the first wave of EVs, carmakers were able to rely on tech enthusiasts and government subsidies for company-car purchases to boost volumes.

But for the next phase, they face more cost-conscious drivers, many of them sceptical of the technology and unwilling to buy vehicles that are more expensive than equivalent fuel-burning cars; on average, all-electric vehicles are 30 per cent and 27 per cent pricier in Europe and the US respectively. The subsidies and tax breaks that helped drive sales are drying up in Europe, and the current incentives in the US are contingent on a local-output threshold, limiting buyers’ choices.

On top of sticker shock, consumers have been put off by an increase in borrowing costs as central banks have moved to rein in inflation. Some consumers are still anxious about charging infrastructure and battery range. The rapid evolution of EV batteries can serve as an argument to postpone a purchase until the technology is better. 

3. How are carmakers reacting to the slowing of EV demand?

Several carmakers, led by Tesla, have cut prices repeatedly over the past year to win customers. Many have also reduced output and staffing to maintain profits.

Manufacturers are racing to introduce several cheaper models. European versions include Stellantis’ e-C3, the Renault 5 and the Volvo EX30.

In the US, where only one electric model sells for less than US$40,000 (S$53,700), GM General Motors is starting to build an electric Chevrolet Equinox starting at US$35,000.

Carmakers are investing heavily in battery technology to win over wary potential buyers. BYD, the top EV brand within China, and Tesla have led the pack in embracing lithium-iron-phosphate (LFP) batteries, which have a lower energy density but cost less, boast a longer life and are perceived as safer than the main alternative – nickel-cobalt-manganese batteries.

Toyota, BYD, and the Chinese battery company Contemporary Amperex Technology are all working on developing solid-state batteries, which use high-voltage, high-capacity electrode materials that boost battery performance and capacity compared to lithium-ion technology. BNEF expects that solid-state batteries will be used more in premium vehicle models in the short term due to higher manufacturing and raw material costs.

4. What’s at stake?

A slowing uptake of EVs could compromise government goals for containing the worst effects of global warming. In 2021, the US set a target of having half of all vehicle sales be electric as of 2030. The same year, the European Union agreed to ban the sale of new fossil-fuel burning cars from 2035. BLOOMBERG