Pandemic. According to the data of LMC Automotive, global sales of battery electric vehicles increased from 2.1 million in 2020 to 4.5 million last year. Electric cars accounted for 6.3% of global vehicle sales in 2021, tripling their market share from 2019 before the coronavirus pandemic.
Overall passenger car sales remain low, with just under 72 million dealer lots sold worldwide after the pandemic caused a shortage of computer chips that forced many automakers to temporarily close their factories. More than 80 million passenger cars were sold in 2019.
Al Bedwell, global powertrain director at LMC Automotive, told CNN Business that the chip shortage has “perversely boosted” electric vehicle sales: “Definitely, in Europe, and certainly in China… low-emissions, next-generation electrics are often the priority. They were tools because they were needed.” He added that consumers want to buy electric cars and automakers must sell them to meet regulatory targets: “I think it was a huge opportunity for the industry to focus on these,” Bedwell said.
Low interest rates. Low interest rates ultimately allowed more investors to take over this booming industry. These investors supported the research and development of EV companies around the world, pushing the industry to rise even higher and be more reliable.
Along with the low interest rate, governments have offered subsidies for the laundering of electric vehicles as a gesture of goodwill towards the environment.
Green transformation. As global warming is on everyone’s lips these years, governments around the world are turning to the use of renewable and clean energy. Especially after the energy crisis initiated by Russia in the Ukraine War, countries are seriously investing in renewable energies to alleviate the supply gap opened by Russia.
In line with the shift in energy supply, governments have increased pressure on automakers to cut carbon emissions and shift production to electric vehicles, sometimes with a carrot – by offering emissions credits for electric vehicles or paying for charging points – but also with a stick.
For example, the European Union will fine automakers if they do not reduce the average annual emissions of their fleets by 15% by 2025 and by 37.5% by 2030 compared to 2021 levels. It wants to increase that to a 55% reduction as part of the more ambitious proposals accepted last July. By 2035, the bloc wants to impose an effective ban on the sale of fossil fuel-powered vehicles.
Governments have also tried to lure consumers with subsidies and tax breaks. Last year, Germany extended the €9,000 ($10,000) bonus for new electric vehicles up to €40,000 ($45,000) for another four years. The country doubled its share of electric vehicle sales to 14% in 2021.
The impact of high interest rates. The cost of going through a crisis is forcing many to delay switching to a more environmentally friendly vehicle. Rising inflation, rising energy bills, and the expectation of higher remortgage payments added to economic uncertainty, curbing drivers’ shifts to cleaner vehicles.
The percentage of drivers who no longer know when they will switch to electric has increased from 36% to 42% annually, while the percentage of those who expect to buy electric vehicles in the next five years has decreased from 17% to 15%. The rate of those who think that there will be an electric vehicle in a 10-year horizon decreased from 25% to 21%.
“The shortage of household finance caused by the cost of living crisis means that people who want to get into an EV will delay doing so,” said RAC’s Simon Williams.
US-China tension. US officials took action to further separate the Chinese and American semiconductor sectors by visiting Taiwan. This powerful combination of economic, political and military issues will complicate Trans-Pacific trade for years to come.
China’s zero-COVID policies and recent tensions over Taiwan have precipitated this conflict, which could lead to further separation between the US and China. But fundamental problems will likely persist beyond the current crises.
If the US and China decide to pursue a policy of mutual divestment, we should expect a more diverse, less China-centric Trans-Pacific trade. There are other exciting economies in the region, such as Vietnam, the Philippines, Taiwan, Korea, Japan and Indonesia, to which the US is affiliated. As China’s share declines, eastbound freight flows may have more widely distributed origins. Ports such as Busan in South Korea, Port Klang in Malaysia, Kaohsiung in Taiwan and Yokohama in Japan may become relatively more important.
Conclusion? While the population seems to be turning to EVs and green energy, recent geopolitical turmoil has been a step back for the EV market and a factor pushing the green energy transition.
Not only are trade routes endangered by the geopolitical situation, but the supply-demand effect also increases the cost of materials needed to manufacture batteries.
There is a desire to switch to EVs, but the funds are lacking. People who are in recession and faced with a high cost of living have reconsidered their spending in favor of the most essential. But once the economy restarts, we can expect a strong increase in electric vehicle sales if the supply side follows.
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