Electric vehicle sales set to surge, IEA predicts

London | Electric vehicles could account for one in five cars sold this year, the International Energy Agency says, shrugging off perceptions of a slowdown.

The engine of EV sales growth – and of falling prices – will still be China, which will lead the way in exports and domestic sales, keeping European and US rivals on the defensive.

A Xiaomi SU7 electric vehicle on display in a Shanghai showroom. Almost half of car sales in China are likely to be EVs this year. Bloomberg

The IEA’s Global EV Outlook 2024, released on Tuesday, suggests that EV sales growth worldwide is still motoring along, and the electric-car segment is set to continue eating into the market share of the combustion engine.

In the first three months of 2024, EV sales were 25 per cent higher than a year ago, the IEA says, and are on track to hit 17 million this year.

Almost half of car sales in China are likely to be EVs this year, and one-quarter in Europe. In the US, one in 10 cars leaving the showroom in 2024 will be electric. By 2030, every second car sold worldwide will probably be an EV, the IEA says.

The IEA says growth is coming from strong competition among carmakers, falling battery and car prices, and generous dollops of taxpayer support.

Government subsidies have been particularly profuse in China, where Chinese producers are now churning out more than half of all EVs sold worldwide. Unlike elsewhere, most Chinese models are cheaper than the average combustion engine equivalent.

Chinese EV exports totalled more than 1.2 million last year, 80 per cent more than the previous year. The target markets were in Europe and the Asia-Pacific region, including Australia.

The IEA says Beijing’s hefty support for China’s car industry has led to significant excess capacity among the EV producers.

The biggest sellers have about one-third of their capacity sitting idle, and China has “far more EV companies ... than can possibly survive in a competitive market”.

“As shrinking margins push the least profitable out of the race, China’s EV industry is consolidating around a smaller number of robust champions – and they are looking abroad for expansion,” the IEA says.

Even high tariffs and the threat from Brussels of anti-dumping actions have not stopped Chinese EV makers from out-competing the Europeans on price, the IEA says.

“They could be well-placed to capture market share in the near term, especially in the small-car segment,” it says.

“In early 2024, for example, BYD chartered its first cargo ship, with a capacity of 7000 cars sailing to Europe.”

This could prompt European and US carmakers to team up against the Chinese disruptors, the IEA says, or to take stakes in Chinese companies – as Stellantis has done at Leapmotor.

Domestically, China registered 8.1 million new EVs in 2023, a 35 per cent increase on 2022. Combustion-engine car registrations shrank 8 per cent.

This growth came even though Beijing is no longer handing out a subsidy to consumers who bought EVs, although tax exemptions and non-financial support remain in place, as do some province-level support.

In Germany, the government phased out subsidies for EV buyers, which sapped momentum in Europe’s biggest market. But about a quarter of car sales in France and Britain were electric, and almost one-third in the Netherlands and two-thirds in Sweden.

In the US, there was a 40 per cent increase in new EV registrations last year from a year earlier. This was a slower pace than previously, but the IEA expects new subsidies to propel further growth.

In Europe and the US, EVs are 10 to 50 per cent more expensive than a standard car, but the IEA predicts many models would reach price parity by 2030 – particularly thanks to the falling cost of inputs such as lithium, and also the development of cheaper sodium-ion batteries.

Growth would also rely on countries keeping up the rollout of public charging points.

The IEA says a sixfold increase in charging points is required by 2035 if governments are to reach their EV growth targets. The rate of expansion in charging points worldwide in 2023 was 40 per cent.

An increasing number of electric buses and trucks will hit the road in coming years, so more charging points will be needed along highways for long-distance trucking.

The IEA warns that this could put stress on electricity grids, unless carefully planned.

It says two-thirds of the EV models on the market are SUVs, because these offer better margins for the manufacturers and longer range for the drivers.

“Electric cars are following the same trend as conventional cars, and getting bigger on average,” the IEA report says.