Electric Vehicle Growth Continues: Outlook for 2023

Electric vehicles (EVs) registered a market disrupting growth through the last decade, more so in the last few years. Clean mobility technology remains one of the most important aspects of energy transition across the globe. The year 2022 was a significant year for EVs, and the expectations are that the trend will continue in 2023.

The car industry has been greatly impacted by the Covid-19 outbreak and Russia’s war in Ukraine, causing significant disruptions to global supply chains. The pandemic’s rapid increase in EV sales has put battery supply networks to the test, and any delays in EV deliveries to customers could impede sales growth. Furthermore, Russia’s role as a major supplier of high-purity nickel, which constitutes 20 per cent of the world’s supply, has added to the tensions. As a result, the war has exacerbated the situation.

How EVs Fared in 2022

The EV market faced several challenges in 2022. Nevertheless, the market endured and continued showing promising growth with prominent automakers like BYD, Tesla, BMW Group, Mercedes-Benz, and Volkswagen Group showing significant growth in EV sales. As anticipated, a total of 10.5 million new BEVs and PHEVs were delivered during 2022, an increase of about 55 per cent compared to 2021 (6.5 million). The EV share further increased to about 14 per cent of the total car sales globally, up from about 9 per cent in 2021.

The market leadership also saw a change last year as BYD tripled its volume compared to 2021 and snatched the #1 spot from Tesla. BYD alone sold over 1.85 million EVs in 2022, about half a million units more than the second-placed Tesla, and had a market share of about 18.4 per cent. While Tesla still leads in the all-electric segment, the American major’s share of 18.2 per cent in the total BEV market saw a decline by some 5 percentage points compared to 2021.

2023 Expectations for EVs

The growth may slow down this year with several barriers setting challenges for EV adoption in 2023. The fewer public fast-charging infrastructure remains one of the main barriers to EV adoption in 2023.

Further, the rising EV batteries cost as a result of shortages of key materials may add to the misery. The battery costs increased in 2022 for the first time in over a decade. This could delay EVs’ run to reach cost parity with ICE vehicles. Furthermore, the end of China’s subsidies, Europe’s energy crisis and the consequent inflation, and recession fears in the US, will also affect the growth of the EV industry adversely.

Growth Will Continue Upward

Despite the several risks for EV sales growth in 2023, long-term EV growth will remain unaffected. As per S&P Global insights, the share of BEVs, PHEVs, and fuel-cell electric vehicles in new light vehicle sales in Europe, mainland China, and the US will rise to 70 per cent, 49 per cent and 47 per cent in 2030, respectively, from an estimated 19 per cent, 18per cent, and 8 per cent in 2022. The automakers worldwide remained quite enthusiastic, with many set to launch new EVs which were unveiled last year. Mercedes, Ford and General Motors unveiled dozens of new electric vehicles and many of these may be launched this year.

Regulation is the most crucial factor that drives EV adoption, and many key regions for automotive sales have implemented policies to promote EV growth, including governments and OEMs alike. For instance, China proposed a new energy vehicle quota for automakers in July 2022 that would increase to 28 per cent in 2024 and 38 per cent in 2025, up from 18 per cent in 2023. In the US, even before the IRA, the Environmental Protection Agency set greenhouse gas emissions standards for vehicles for the 2023-2026 period, with an approximately 8 per cent annual increase in stringency. Additionally, the EU is in the process of finalizing new rules on CO2 emissions that would effectively prohibit ICE vehicle sales by 2035.