Electric Vehicle Outlook: 2018
Setting the scene
By Colin McKerracher, BNEF
The global auto market is changing rapidly. Once derided as toys, electric vehicle sales are on pace to reach over 1.6 million this year, up from just a few hundred thousand in 2014. There are several important factors driving the market forward:
Lithium-ion battery prices have tumbled in recent years. BNEF first started tracking EV battery prices back in 2010, when average battery pack prices were $1,000/kWh.
Fast forward to the end of 2017 and average prices hit a low of $209/kWh, a remarkable 79% drop in seven years. Average energy density of EV batteries is also improving at around 5-7% per year.
Policy support. Governments around the world have offered generous EV purchase incentives to help get the market rolling. At the same time, tightening fuel economy standards will require significant electrification of the vehicle fleet, and China’s ‘New Energy Vehicle’ quota is forcing automakers into EVs faster than most of them would like.
But, this is not only being driven at a national and state level. In 2017, 21% of all global EV sales were in just 6 Chinese cities, all of which have significant restrictions on buying and using new internal combustion engine vehicles.
In Europe, the spectre of potential bans is pushing both buyers and automakers away from diesel. Urban air quality concerns have quickly become central pillars of municipal policy and EVs sales are benefiting.
Rising commitments from automakers. VW, Daimler, Nissan, Volvo and other global automakers have all made aggressive plans to electrify their vehicles over the next 10 years.
The number of EV models available is set to jump from 155 at the end of 2017 to 289 by 2022. Chinese automakers are going further, with companies like Chang’an committing to sell only electric vehicles after 2025.
The share that EVs have of global auto sales is still small – under 2% in most regions – but some countries are jumping ahead, and the next 20 years will bring major changes.
Still, there are challenges. Charging infrastructure remains a barrier in many countries and supply of raw materials like cobalt could create some bumps in the road to cheaper batteries.
BNEF’s EV Outlook explores these changes and the impacts they will have across energy, automotive and mining.
By Salim Morsy, BNEF
Our latest forecast shows sales of electric vehicles (EVs) increasing from a record 1.1 million worldwide in 2017, to 11 million in 2025 and then surging to 30 million in 2030 as they become cheaper to make than internal combustion engine (ICE) cars.
China will lead this transition, with sales there accounting for almost 50% of the global EV market in 2025 and 39% in 2030. China also leads on percentage adoption, with EVs accounting for 19% of all passenger vehicle sales in China in 2025.
Europe is next at 14%, followed by the U.S. at 11%.
"In 2040, some 60 million EVs are projected to be sold, equivalent to 55% of the global light-duty vehicle market."
The number of ICE vehicles sold per year (gasoline or diesel) is expected to start declining in the mid-2020s, as EVs bite hard into their market.
‘Shared mobility’ cars will be a small but growing element. The advance of e-buses will be even more rapid than that of electric cars (read further in the report for a deeper view on e-buses).
While BNEF’s long-term outlook remains similar to last year’s predictions, our forecast sees the short-term growth in EV sales and market share grow rapidly.
The outlook for EV sales in the long term will be influenced by how quickly charging infrastructure spreads across key markets, and also by the growth of ‘shared mobility’.
While we’re optimistic on EV demand over the coming years, we see two important hurdles emerging: a risk of cobalt shortages in the early 2020s that could slow down the rapid battery cost declines seen recently, and the challenge of charging infrastructure.
Highlights from the forecast
By 2040, 55% of all new car sales and 33% of the global fleet will be electric.
China is and will continue to be the largest EV market in the world through 2040.
EV costs. The upfront cost of EVs will become competitive on an unsubsidized basis starting in 2024. By 2029, most segments reach parity as battery prices continue to fall.
E-buses. Buses go electric faster than light duty vehicles.
Displacement of transport fuel. Electrified buses and cars will displace a combined 7.3 million barrels per day of transportation fuel in 2040.
BNEF clients have access to the full EV Outlook and the underlying charts and datasets.
Visit the EVO website to learn more about the Outlook and access related content.
What share do you think EVs will have of global vehicle sales in 2030?
China will lead the transition
By Nannan Kou, BNEF
China will lead the transition from internal combustion engines to electric cars, with EV sales accounting for almost 50% of the global market from now to 2025 and 39% in 2030.
China is also leading the charge on e-buses, with several major Chinese cities on track to fully electrify their e-bus fleets by 2020 and some even sooner. China’s push is as much about industrial policy as it is about environmental or energy security concerns. China is building national champions and an e-mobility ecosystem for what it sees as a major strategic industry over the coming decades.
National, regional and municipal policies in China are all pushing the EV market forward. National subsidies are being phased out by 2020, but beginning in 2019 automakers will be forced into EVs through the ‘New Energy Vehicle’ credit system. Similar to a program in California, the system effectively acts as an EV quota, requiring automakers to generate credits through the sale of EVs. Automakers who do not sell enough EVs are forced to buy credits from competitors.
This is the single most important piece of EV policy globally and is shaping automakers' electrification plans. We expect China to increase the quota in order to hit its 2025 target of EVs representing 20% of vehicle sales in the country.
City level policies will also play a major role; we expect more cities to add restrictions on buying and using ICE vehicles over the coming years.
EVs reach almost 10% of total Chinese passenger vehicle sales in 2022 in our forecast, 19% in 2025, then 41% by 2030 and 60% by 2040.
We expect the market to slow down in the 2030s due to infrastructure constraints, particularly in high density cities where opportunities to charge at home are limited. By 2040, we expect China to have 200 million EVs on the road.
Which country do you think will have the most EVs on the road in 2040?
Batteries and material demand
By Logan Goldie-Scot, BNEF
The growth of electric vehicles will require a dramatic scale-up in the lithium-ion battery supply chain.
Lithium-ion battery manufacturing capacity today is around 131 GWh per year. Based on plants announced and under construction, this is set to jump to over 400 GWh by 2021 with 73% of the global capacity concentrated in China.
Further investments will still be needed; by 2030, we expect global EV lithium-ion battery demand to be over 1,500 GWh. All of this is driving up demand – and price – for key battery materials like cobalt, lithium and nickel.
Demand for the components that make up lithium-ion batteries (electrodes, electrolytes) will also increase, from almost 0.7 million metric tons in 2018 to over 10 million metric tons in 2030.
Manufacturers are pursuing different strategies, with some opting to manufacture everything from the active materials to finished battery packs in-house. Others prefer to buy electrode active materials or electrode rolls from external suppliers and simply manufacture the cells in-house.
Raw material prices are set to rise, speeding up the adoption of low-cobalt battery chemistries. NMC batteries contain 70% less cobalt than some current batteries and will be adopted quickly as a result of the increase in the prices of cobalt and lithium.
This will help to drive down the cost of battery packs, but for battery pack prices to fall significantly below $100/kWh, a step change in technology will likely be needed.
Cobalt supply still looks challenging. Despite the move to low cobalt chemistries, based on current announcements there will be shortages of cobalt by the early 2020s. Recycling and reductions from other sources of cobalt demand can help alleviate but not fully eliminate some of these constraints.
We view cobalt supply as one of the largest potential risks to EV sales over the next 5-7 years. In the longer term we expect high prices to bring on new supply and accelerate the adoption of new battery chemistries.
Lithium supply will not be a risk to EV adoption in the near-term. High lithium prices over the last few years have led to significant increases in investment in new capacity.
While we do not expect all of this capacity to come online on schedule, we foresee sufficient supply to meet our demand forecast for at least the next 5-7 years. Further investment will be needed in the 2020s.
How much do you expect average lithium-ion battery prices to fall between now and 2025?
By Aleksandra O'Donovan, BNEF
Key findings in the report, Electric Buses in Cities: Driving Towards Cleaner Air and Lower CO2, authored by BNEF on behalf of the C40 Cities Climate Leadership Group, highlight e-buses’ competitiveness with conventional diesel and CNG fueled buses.
Growing pains. Air quality is a growing concern in many urban environments and has direct health implications for residents. Tailpipe emissions from internal combustion engines are one of the major sources of harmful pollutants such as nitrogen oxides and particulates.
Diesel engines in particular have high nitrogen oxide emissions and yet these make up the majority of the global bus fleet.
As the world’s urban population continues to grow, identifying sustainable, cost effective transport options is becoming more critical.
Electric buses are one of the most promising ways of reducing harmful emissions and improving overall air quality in cities. There are already well over 300,000 e-buses on the road globally, with the vast majority of them in China.
Many Western cities are also making aggressive commitments to electrifying their municipal bus fleets over the next decade.
Total cost of ownership: E-buses vs conventional buses. E-buses have much lower operating costs and can already be cheaper, on the basis of total cost of ownership, than conventional buses today.
The TCO of all electric bus configurations that we modelled improves significantly in relation to diesel buses as the number of kilometers traveled annually increases.
For example, a 110kWh battery e-bus coupled with the most expensive wireless charging reaches TCO parity with diesel bus at around 60,000km traveled per year (37,000 miles).
This means that a bus with the smallest battery, even when coupled with the most expensive charging option, would be cheaper to run in a medium sized city, where buses travel on average 170km/day (106 miles).
Despite the potential operational savings, there are still some challenges for electric buses, with their high upfront cost compared to equivalent diesel buses being one of the biggest obstacles.
To tackle this, new business models are emerging, involving battery leasing, joint procurement and bus sharing.
Our EV Outlook this year includes a full e-bus forecast, some highlights include:
1. By 2030, we expect 84% of all municipal bus sales globally to be electric. China has led this market in spectacular style, accounting for 99% of the world total last year.
The rest of the world will follow, and by 2040 we expect 80% of the global municipal bus fleet to be electric.
2. By 2040, we expect around 2.3 million e-buses on the road globally.
3. E-buses add to oil displacement and battery demand impacts over the next five years but are dwarfed by light duty EV sales once that market gets going from the mid-2020s onwards.
Download the full report here.
By David Doherty, BNEF
The rapid expansion of electric vehicles has a profound effect on global oil consumption. As electric vehicle sales surpass 50% of all new vehicles sold by 2040, we expect 7.3 million barrels per day of transport fuel will be displaced.
As the most prevalent fuel consumed by the global light duty vehicle fleet, gasoline accounts for 94% of transportation fuel displaced by passenger EVs and intelligent mobility.
By 2040, diesel represents around 5% of displaced fuel demand, the majority of which in Europe. Additionally, we expect passenger EVs and intelligent mobility to displace over 60 kbpd of LPG demand by 2040.
China accounts for almost 2.5 mbpd of this eroded demand, followed by the U.S. and Europe at 2.3 and 1.1 mbpd, respectively.
In the short-term, the majority of curbed demand stems from diesel consumption, with gasoline taking over from 2023.
By 2040, diesel accounts for just under 10% of displaced volume of fuel, while gasoline demand displaced by electric vehicles will be in excess of 6.4 mbpd.
Over the long-term passenger EVs (including those used in intelligent mobility applications like car sharing and ride hailing), begin to make a material impact on the demand outlook, displacing almost 6.9 mbpd of liquid fuel consumption by 2040.
Although passenger EVs and intelligent mobility have a limited impact in the short to medium-term, e-buses are already starting to make a dent in oil consumption. This is the case particularly in China, where we expect to see close to 240 kbpd of oil demand displaced in 2018.
While gasoline dominates the displacement of fuel in the passenger market, diesel does so in the bus fleet.
Who do you think is best positioned to capture value from EV charging infrastructure?
- Electric utilities
- Oil companies
- Pure play operators