In 2012, about 130 000 electric cars were sold worldwide. Today, that same amount is moved in the space of a single week, says a new International Energy Agency (IEA) report, authored by Clean Energy Technologies analyst Leonardo Paoli and Energy Technology Policy Division head Timur Gül.

In this report, electric vehicles (EVs) refer to electric light-duty vehicles, which include passenger cars and light commercial vehicles. It also includes battery electric and plug-in hybrid vehicles.

The report notes that EV sales have “been particularly impressive” over the last three years, even as the global pandemic shrank the market for conventional cars, and as manufacturers started grappling with supply-chain bottlenecks.

In 2019, 2.2-million EVs were sold, representing 2.5% of global car sales. 

In 2020, the overall car market contracted, but EV sales bucked the trend, rising to 3-million and representing 4.1% of total car sales.

In 2021, EV sales more than doubled to 6.6-million, representing close to 9% of the global car market, and more than tripling their market share from two years earlier. 

More importantly, all the net growth in global car sales in 2021 came from EVs, states the IEA report.

“We estimate there are now around 16-million electric cars on the road worldwide, consuming roughly 30 terawatt-hours of electricity per year, the equivalent of all the electricity generated in Ireland.”

China Leads
China led global growth in EV markets in 2021 as sales nearly tripled to 3.4-million units. In other words, more EVs were sold in 2021 in China alone, than were sold in the entire world in 2020. 

This yearly increase is the fastest EV market growth in China since 2015, significantly outpacing the more gradual recovery of the country’s overall car market. 

EVs’ share of the overall market on a monthly basis leaped from 7.2% in January, to around 20% in December. 

The Chinese government’s official target is for EVs to reach a market share of 20% in 2025, and their performance in 2021 suggests they are well on track to do so, says the IEA.

“The government extended EV subsidies for a further two years after the pandemic broke out, albeit with a planned reduction of 10% in 2021, and 30% in 2022. 

“The growth in 2021 sales, despite the scaled-back subsidies, suggests China’s EV market may be starting to mature. 

“But, it could also reflect customers rushing to secure subsidies at 2021 levels before they declined at the start of 2022.”

Another important factor was the expanded range of small-car offerings, notes the IEA report.

“The tiny Wuling Hongguang Mini EV is not eligible for subsidies, but was still among the bestselling models in China last year, with just under 400 000 units sold,

offering an affordable entry point to the market for new customers.”

Europe and SA
In Europe, EV sales increased by nearly 70% in 2021, to 2.3-million, with about half these plug-in hybrids. 

This is significant to South African vehicle manufacturers, as Europe is the country’s main new-vehicle export market.

The surge in EV sales in Europe last year was partially driven by new carbon dioxide (CO2) emissions standards. 

Purchase subsidies for EVs were also increased and expanded in most major European markets. 

Monthly sales in 2021 were the highest in the last quarter of the year, peaking in December when European sales of EVs surpassed diesel vehicles for the first time, with a 21% market share.

In absolute terms, the largest EV market in Europe in 2021 was Germany, where more than one in three new cars sold in November and December was electric. 

Overall, electric cars accounted for 17% of total European sales in 2021, but there were significant differences across markets. 

Norway at 72%, and Sweden and the Netherlands at 45% and 30% respectively, sat atop global rankings. 

At 25%, Germany had by far the highest market share among large European markets, followed by the UK and France (both around 15%), Italy (8.8%) and Spain (6.5%).

The US made an impressive return to the EV market in 2021 as sales more than doubled to surpass half-a-million units, notes the IEA.

“The overall US car market recovered as well, but electric cars doubled their share to 4.5%.”

The US electric car market is still mostly dominated by Tesla, which accounts for more than half of all EVs sold. 

Overall, China, Europe and the US account for roughly two-thirds of the overall car market, but around 90% of electric car sales. 

In most other markets, EVs account for less than 2% of overall sales, and in large developing economies such as Brazil, India and Indonesia, the share is still below 1%, without any significant increase over the past year. 

“While sales of electric scooters and buses are expanding in these countries, the price premium attached to electric cars and a lack of charging infrastructure are key reasons for the sluggish uptake,” says the IEA.

In Japan, electric car sales also barely increased, with their market share remaining below 1% over the past three years. 

Korea and Australia show the greatest dynamism among smaller markets. In Korea, electric car sales more than doubled in 2021 after two years without growth, increasing their market share to 8%. 

Electric car sales in Australia also more than tripled in 2021, albeit from a low baseline, bringing their market share above 2%.

“Government policies remain the key driving force for global electric car markets, but their dynamism in 2021 also reflects a very active year on the part of the automotive industry. 

“Announcements, targets and new model launches have helped strengthen the view that the future of cars is electric.”

Manufacturers Embracing the EV Era
EVs have become the road transport technology of choice for many governments and the automotive industry, says the IEA.

The US government in November announced an ambitious 50% electrification target for new cars by 2030, supported by the announcement of the installation of 500 000 charging points to help increase consumer confidence. 

In Europe, the EU Commission proposed to bring the CO2 emission standard for new cars to zero by 2035. 

At the same time, several automakers announced electrification targets. 

For example, Volkswagen said that half of its sales would be electric by 2030. Ford said it expects 40% to 50% of its sales to be electric by the end of the decade. 

Another significant milestone in 2021 was the statement by Toyota, the largest car manufacturer in the world, announcing new investments aimed at achieving electric car sales of 3.5-million units a year by 2030. 

“As manufacturers sharpen their electrification strategies to compete for market share rather than considering EVs mostly as policy compliance vehicles, we will see more resources devoted to advertising, increasingly aggressive pricing and the development of ever more attractive electric models,” states the IEA report.

Supply Challenges
The future looks bright for EVs, but there are warning signals coming from the supply chain, with bulk material prices increasing for the entire auto industry, states the IEA report.

In 2021, the price of steel rose by as much as 100%, aluminium around 70%, and copper more than 33%, affecting both conventional and electric cars. 

For electric cars, additional challenges were posed by increased prices for materials needed to manufacture batteries – the price of lithium carbonate increased by 150% year on year, graphite by 15%, and nickel by 25%, to name just a few. 

For the time being, and perhaps surprisingly, volume weighted average battery prices have not increased since 2020. 

Three factors explain the steady prices, says the IEA.

Firstly, battery prices are on a long-term decline trajectory, and continued technological progress helps offset the higher raw material costs. 

Secondly, there is a time lag between material price spikes and battery price increases, as costs take time to work their way through the value chain. 

Thirdly, the use of lithium ferrophosphate chemistries in batteries has increased, reducing the impact of some of the price rises. 

However, if battery metal prices continue to rise, battery prices will be affected, warns the IEA.

Several automakers also faced microchip shortages in 2021 that held back output. 

The background to the microchip shortage is complex, but, in general, a faster-than-anticipated rebound of automobile sales and other microchip-reliant products was met by a tight supply of microchips. 

The shortage is problematic for EVs, which require around twice as many chips as equivalent conventional vehicles, mostly owing to additional power electronics components.

It is possible that without these disruptions, EV sales could have been even higher in 2021.

While some of the supply constraints of 2021 will ease as the market rebalances, others may linger this year, says the IEA.

Looking Ahead
The EV value chain proved to be robust in 2021 as it managed to deliver on higher-than-anticipated demand. But, for EVs to continue their current growth trajectory, battery supply chains and EV production capacity will have to expand at a rapid rate, says the IEA.

“Both short-term demand and longer-term ambition have skyrocketed over the last two years, but supply chains have struggled to keep pace.”

The world faces potential shortages of lithium and cobalt as early as 2025, unless sufficient investments are made to expand production. 

Further growth of EVs requires not only an expansion of the extraction of key minerals, but also of the entire EV value chain, says the IEA.

This spans battery metal processing and refining, cathode and anode manufacturing, separator manufacturing, cell production, battery assembly and, finally, the assembly of EVs. 

Each of these industries, some of which are nascent, need to expand rapidly to avoid bottlenecks that would slow down the transition to full electric mobility. 

The IEA advises that policy action must adapt and provide the market with clear long-term signals to facilitate investments in further supply-side expansions. 

The latest US infrastructure Bill aimed at stimulating investments in battery raw materials, or the European Union’s Important Projects of Common European Interests emphasis on batteries, are examples of such a new focus.