Near-term outlook to 2025

The outlook for EV adoption is getting much brighter, due to a combination of more policy support, further improvements in battery density and cost, more charging infrastructure being built, and rising commitments from automakers. Passenger EV sales are set to increase sharply in the next few years, rising from 3.1 million in 2020 to 14 million in 2025.

Globally, this represents around 16% of passenger vehicle sales in 2025, but some countries achieve much higher shares. In Germany, for example, EVs represent nearly 40% of total sales by 2025, while China – the world’s largest auto market – hits 25%.

China and Europe continue to be the dominant EV markets out to 2025, driven primarily by Europe’s vehicle CO2 regulations, China’s fuel economy regulations and the new-energy-vehicle credit system. Policy changes in the U.S. will have limited impact in 2021 but will start to increase adoption in 2022 and beyond as more compelling local models come to market, particularity in the pick-up truck segment.

By 2025, the global auto market is already very fragmented, with electrification running far ahead in China, Europe, and some smaller markets. This presents challenges for automakers with global portfolios. Low levels of adoption in emerging economies reduce the global adoption rate, as automakers focus their passenger EV efforts on the markets with the most stringent regulations.

Plug-in hybrid sales rise quickly in Europe in the near term to meet tightening vehicle CO2 targets, but then fade as battery prices continue to fall. There is growing evidence that plug-in hybrids are often not charged, and the current favorable policy treatment could change quickly. PHEVs do not gain any significant share in other markets beyond Europe and Japan, and nearly 80% of global plug-in vehicles sales by 2025 are battery electrics.

The combination of a gradual recovery in overall vehicle sales from the Covid-19 pandemic and faster EV adoption means that combustion vehicle sales in the passenger segment have almost certainly passed their peak (in 2017) and are now in permanent decline. There are currently 12 million passenger EVs on the road, representing 1% of the global fleet. This rises to 54 million by 2025.

Other segments of road transport are already much further along on EV adoption. Some 44% of global two- and three-wheeler sales and 25% of the existing fleet are already electric. China accounts for the bulk of two-wheeler electrification to date, but sales are growing rapidly in markets like Taiwan, Vietnam and India.

The global EV adoption rate in the two- and three-wheeler segment slows in the next 3-4 years as the Chinese market saturates, but then starts rising quickly from 2025 as sales pick up in other markets. Rising manufacturer interest in high-powered models, and rapidly improving economics push two- and three-wheeler electrification significantly higher.

There are currently almost 600,000 e-buses on the road globally, representing 39% of new sales and 16% of the global fleet. China accounted for the vast majority of all e-bus sales in 2020, with over 74,000 units sold, and continues to account for 98% of the global e-bus fleet.

This share begins to decrease as some Chinese city bus fleets start to saturate and adoption picks up in Europe, North America, South Korea, South East Asia, India and South America. By 2025, e-bus sales outside of China hit 14,000, up from 5,000 in 2020. Buses and two- and three-wheelers are the biggest near-term opportunity for electrification in emerging economies.

"Electrification is also making inroads into heavier vehicles. In urban duty cycles, battery electric trucks of any size become the cheapest option for several use cases in the 2020s."

Electric Vehicle Outlook 2021, BloombergNEF

Adoption of EVs in the commercial van and truck market is further behind, but is picking up speed. The combination of more models available, corporate fleet commitments, favorable economics and rising concern about urban air quality are set to tip the light commercial-van segment over to electrification in the next few years.

Electrification is also making inroads into heavier vehicles. In urban duty cycles, battery electric trucks of any size become the cheapest option for several use cases in the 2020s. That is due to a combination of factors, including rapidly declining battery costs, modest driving ranges, and the relatively large efficiency penalty of diesel trucks in urban traffic, which tend to consist of congested and recurring start-stop operation.

Heavy-duty electric trucks are already economically attractive in urban duty cycles by the mid-2020s. Megawatt-scale charging stations and the emergence of much higher energy density batteries by the late 2020s result in battery electric trucks becoming a viable option for heavy-duty long-haul operations, especially for volume-limited applications.

Shared mobility is set to rebound to 2019 levels within the next two years globally, and by the end of 2021 in most major markets. By 2025, shared mobility’s share of annual passenger vehicle kilometers traveled globally exceeds 6% for the first time.