Electric vehicle sales are expected to grow by 50 percent in 2021, accounting for 5 percent of total vehicle sales globally, Anna-Marie Baisden, head of autos analysis at Fitch Solutions told Al Arabiya.
Electrification of passenger transport has been a target for government policies globally aimed at combatting climate change, with manufacturers moving to support the nascent market amid changing regulation.
“This year for example we expect EV sales to grow a further 50 percent. And I think to give it more context we expect that to be around 5 percent of total vehicles sales. Which I think it is actually better to look at it in terms of the penetration rate rather than the growth rate; because in many aspects we still talking about such a small market,” Baisden said in an interview with Al Arabiya’s Naser El Tibi.
Baisden explained that the causes behind this growth can broadly be divided into two different categories – organic and inorganic. Organic demand refers to purchase decisions made by customers who would have bought an electric car because of environmental concerns or interest in a particular model, while inorganic demand are purchases which are driven by policy decisions, such as incentives for electric vehicles or deterrents from internal combustion engines.
“We see some cities banning the use of combustion engines, whole countries saying they will ban them within a certain number of years. So that is more people who may have been changing their vehicle being swayed by policy rather than it is a purchase they would have made anyway, and that is the side of demand we are seeing accelerating at the moment,” she said.
While sales have been growing, barriers remain, chief among which is the high cost of entry. Car makers have responded to this challenge with attempts at bringing costs down, whether that be in decreasing the cost of battery packs or reducing complexity of production.
Baisden also noted that significant developments are being made in reducing electric vehicles’ total cost of ownership (TCO). Examples of this include the lower cost of charging a vehicle and other initiatives, such as free parking or tax breaks, that reduce the cost of the vehicle over its lifetime compared to a typical combustion engine vehicle.
Governments are already reporting successes with these tactics. Last month, the Dubai Electricity and Water Authority (DEWA) announced that the number of registered electric vehicles in the emirate had jumped following an initiative by the company to install around 300 free-to-use charging stations for non-commercial electric vehicles.
The future for electric vehicles
Manufacturers have been pivoting more investment into the electric vehicle market, making big bets on the growing sector. Earlier this year Volvo, announced it would only make electric vehicles by 2030, with the company’s chief technology officer declaring that “there is no long-term future for cars with an internal combustion engine.”
This announcement came amid a slew of other pledges by manufacturers to move towards electric production.
Baisden said, however, that the timelines for this shift varied significantly depending on the size of manufacturer, with larger firms putting a date further out in 2030s, while smaller, more premium brands announcing earlier timelines.
“2025 seems to be a real kind of watershed year, we have got the likes of Audi, Porsche, Volvo, Jagua, all saying that they are either going to have 50 percent of their sales or around that being electric, Jaguar saying it will be a fully electric brand by that time,” Baisden said.
“By having a smaller number of models and smaller level of output in general they can be a little bit more nimble and of course they are selling higher margin products as well so they can recoup some of the costs a little bit better,” she added.
China has become a leader in electric vehicle adoption, with some of the country’s biggest firms announcing pivots into the market. The Asian giant’s lead is unlikely to change over the next 10 years, Baisden said, although she did note that the European Union’s plans for de-carbonization are likely to significantly help drive electric vehicle adoption.
“What is driving this really is policy; because China has been the leader for some years now because it had a very broad policy in terms of incentives to both consumers and manufactures, a really wide charging network which we know is really important,” Baisden explained.
In response to the pandemic, however, the EU has tied its recovery plans to hitting climate goals, using various funds to support a greener recovery.
“We have seen the EU take steps towards more of that broad ranging policy now through these recovery funds. And certain amount of it will come down to individual countries of course and what they can do in terms of incentives, how much they can afford. But certainly, that’s really helping to give Europe a boost in terms of adoption,” she said.