Falling battery costs and strong policies drive record year for electric vehicles

2017 saw record levels of electric and plug-in hybrid cars on roads worldwide, with numbers exceeding 3mn – a 54% increase on 2016 – according to the International Energy Agency’s (IEA’s) latest Global Electric Vehicles Outlook.

China remained the largest electric vehicle (EV) market in the world, accounting for half sold – or nearly 580,000 – last year; a 72% increase from 2016. The US claimed the second highest market, with around 280,000 cars sold in 2017; up from 160,00 in 2016.

Nordic nations remain the world leader in the market share of EVs, with electric cars accounting for 39% of new car sales in Norway – making it the global leader. New EV sales in Iceland made up 12% of the total, while the share reached 6% in Sweden. Germany and Japan also experienced strong growth, with sales more than doubling in both countries from their 2016 levels.

Electric buses also enjoyed strong growth last year, with the stock of EBs rising to 370,00 from 345,000 in 2016, while electric two-wheelers reached 250mn. This growth has been driven almost entirely by China, which accounts for more than 99% of both EBs and two-wheeler stock, however, registrations in Europe and India are also growing.

Charging infrastructure is keeping pace with electric vehicle growth. In 2017, the number of private chargers at homes and workplaces was estimated at almost 3mn worldwide. In addition, the number of publicly accessible chargers worldwide reached around 430,000 in 2017 – a quarter of which were fast chargers. Fast chargers play an ‘especially important’ role in densely populated cities, states the report, as they serve an essential role in boosting the appeal of EVs by enabling easy long-distance travel.

The report attributes the surge in EV usage largely to government policy, including public procurement programmes, financial incentives reducing the cost of purchase of EVs, and ‘tightened’ fuel-economy standards and regulations on the emission of local pollutants, combined with a variety of local measures, such as restrictions on the circulation of vehicles based on pollutant emission performances.

Another significant contributor to the rapid uptake of EVs is progress made in recent years to improve the performance and reduce the costs of lithium-ion batteries. However, further battery cost reductions and performance improvements are essential to boosting the appeal of EVs, states the report. This can be achieved through a combination of increased production scale and battery sizes, while further improvements are possible with the transition to technologies beyond lithium-ion.

Innovations in battery technology will also be needed to sustain growth, owing to supply issues with core elements that make up lithium-ion batteries, such as nickel, lithium and cobalt. Cobalt supply is subject to such risks as almost 60% of its production is based in the Democratic Republic of Congo. In addition, the capacity to refine and process raw cobalt is highly concentrated, with China in charge of 90% of refining capacity. 

Despite ongoing developments in battery technology, cobalt demand for EV use is expected to rise to between 10 and 25 times that of current levels by 2030.

The report also examines the increasing uptake of EVs and their impact on meeting social and environmental sustainability goals, by emphasising the need for adoption and enforcement of minimum standards on labour and environmental conditions. The environmental sustainability of batteries also requires the improvement of end-of-life and material recycling process, it says.

Looking at future prospects, the continued growth in the EV market is likely to be driven by supportive policies and cost reductions. IEA’s New Policies Scenario, which takes into account current and planned policies, projects the number of electric cars to reach 125mn units by 2030. This figure could rise to 220mn in 2030, according to the EV30@30 scenario, should policy ambitions rise even further to meet climate goals.