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Global EV Transportation Report


The progress achieved in electric vehicle penetration presents new challenges of sustaining and stabilizing it. There are several moving parts on both demand and supply sides which must run in tandem to realize the opportunity. The consumer preferences, shaped in part by the generous subsidies, would now require competitive market pricing and a wider portfolio of choice. Cheaper yet higher capacity batteries are needed to fulfill the rising demand – for which battery manufacturing must scale up closer to demand centers. The announced nameplate capacities indicate a three-fold jump by 2025. It will entail commensurate capital expenditures in the upstream segment of lithium mining, refining and production. In parallel, there is an upcoming build-out of charging network aiming to match the foreseen demand.

The global electric bus market has a far higher penetration (in terms of share in new vehicle sales) than observed in passenger vehicles.

Electric Vehicle Penetration

The case for EV is set out by the policy roadmaps across markets. It is driven primarily by the transition to a lower emission transportation framework and the related technological and investment growth in supporting elements of battery and charging infrastructure. The transitory phase in powertrain is getting stronger in most of the leading automotive markets – electric vehicles sales outperformed the overall market level.

Passenger electric vehicles’ segment attracts the maximum attention in policy framework. Such vehicles are likely to account for a rising share of new vehicle sales, reaching over a third of new vehicle sales by 2035. In this regard, many of the electric vehicle markets worldwide are approaching a tipping point – a level where the electric vehicle adoption can be at parity with that of conventional powertrains and are no longer a premium offering.

Note: The above projections from IEA are based on announced policy targets
Source: IEA (Global EV Outlook 2022)

The commercial electric vehicles’ segment starts from a very low base and is expected to gain traction on the strength of technological maturity as well as the stringent fuel economy standards that actuate automakers to expand their offerings. To be sure, 99% of this market relies on the internal combustion engine drivetrain and is thus unlikely to take a drastic change to a new platform when the support infrastructure is yet to be fully ready. This is more likely the case for heavy commercial vehicles such as trucks and related freight transport. Light commercial vehicles such as vans have had a better performance due to continued availability of purchase subsidies and the expanding product line-up.

The global electric bus market has a far higher penetration (in terms of share in new vehicle sales) than observed in passenger vehicles. This is a reflection of policy-level push at the transition of public transport fleets for gradual electrification. The segment is likely to maintain its momentum as various national and city-level authorities extend public funding for bulk fleet-replacement procurement. At the same time, the anticipated demand from public authorities is driving major automakers (notably Daimler and Volvo) to set up local manufacturing facilities for competitive offering.

Decarbonization and net zero objectives will play a greater role in shaping the policy for the respective electric vehicle segments. For instance, even as the emerging and less developed economies lag in their transport sector electrification, progress has been impressive in the segment of two- and three- wheeler vehicles. With growth in penetration of passenger vehicles and light commercial vehicles, the focus could shift to the heavy-duty trucking segment where the progress has been relatively insignificant and thus inconsequential for emission mitigation.

Projected Transition to Net-Zero in Road Transport

Segment Share in road transport CO2 emissions Zero-emission vehicle fleet share by 2050 Estimated global fleet Extent of policy intervention required for Net-zero by 2050
Two and Three Wheeled Vehicles 5% 1.1 billion Two-wheelers: 74%
Three-wheelers: 94%
Minor additional measures
Municipal Buses 1% 3.8 million 84% Minor additional measures
Passenger Vehicles 53$ 1.3 billion 69% Moderate additional measures
Light Commercial Vehicles 11% 160 million 75% Moderate additional measures
Medium and Heavy Commercial Vehicles 30% 80 million 29% Strong additional measures urgently
Source: BNEF (projections as of June 2022)

Charging Infrastructure

The rapid growth in charging infrastructure is just a foregone conclusion. It is the timeliness of getting the required capacity that is of paramount importance for all the leading electric vehicle markets. As the BNEF projections indicate, Home Charging segment will have the fastest growth in capacity, followed by Work and publicly accessible slow chargers. Compared across the transportation modes, the passenger electric vehicles hold the maximum share of the demand for charging facilities.

The annual spending on charging infrastructure is poised for a sharp acceleration. The trend shows the momentum picking up in recent years. BNEF estimates for the investment in 2022 suggest it doubled over previous year’s level. By the end of 2023, the investment growth could be even higher. Further ahead, as the projections indicate, the next $100 billion of spending after 2023, could be within three years. Such an outlook is shaped by the varied segments and drivers of the investments underway, whether at a policy-level or private enterprises.

Note: The above refers to BNEF’s ‘Economic Transition Scenario’ projection
Source: BNEF (projections as of June 2022)

Much of the rise in projected spend derives from the fast and catch-up mode of growth in markets, such as those of the US and China. European region comparatively has a mature base, and thus a relatively low incremental growth requirement in the outlook period. Policy funding measures such as the US Inflation Reduction Act’s $7.5 billion for charging stations are major boosters for the investment flow in this space. The ramp up in private spending is discernible from the recent major announcements from automakers such as Mercedes planning 10,000 ultra-fast chargers or the hydrocarbon majors (Shell and BP) aiming a massive build out of fast-charging to match it with the widespread motor fuel distribution chain.

Though home chargers constitute over three-quarters of the physical capacity, the predominant share of investment will be in public charging infrastructure. This is because of the higher cost of such equipment. Also important is that with capacity expansion underway in most of the regions, the charging equipment supply chains are likely to benefit from economies of scale. The cost of capital would thus be proportionately lower in the projected period.

Note: The data for 2022 is an estimated one
Source: BNEF

The rapidly evolving business of electric vehicle charging offers a major potential in revenue and profitability, helped in large part by a significant and inelastic demand. Bain’s projections in this context reflect the step up in investments together with the rise in market players such as the electric utilities, standalone charging service providers, technology providers and original equipment manufacturers, among others. Further, the role of smart charging and energy management systems is expected to play a bigger role, as complex networks necessitate advanced tools. For instance, about a third of the charging business by 2030 could be based on the bidirectional or vehicle-to-grid technology in major power transmission and distribution networks.

Projected Revenue and Profitability in Electric Vehicle Charging Business

Source: Bain & Company

There is a range of business offerings in the electric vehicle charging value chain. The capacity provision will change based on the demand segment before a market player. For instance, the long-distance transit charging segment requires high capital expenditure segment and its profitability is contingent on supply of fast-charging (150kW and above) convenience. BP (through the brand BP Pulse) indicated the same in 2022, with many of its fast-charging stations approaching margins closer to those of petrol stations.

The next stage of the shift in charging services will be through the transition to software, in terms of smart energy services for consumers. These technologies are vital due to the changing energy mix of grid power supply (due to rising share of intermittent solar and wind power) and utilities’ need for system balance without compromising reliability. Energy management services for work and home locations would be key.

PEvolving Business Offerings in Work and Home-based Charging Services

Source: Bain & Company

The next stage of the shift in charging services will be through the transition to software, in terms of smart energy services for consumers.

Battery Supply

The price of Lithium is in a phase of moderation. This comes after a spike till the end of 2022. Many of the underlying factors of 2022, such as demand against lagging supply and inflationary pressure still hold true. Yet, the price correction was triggered since early 2023 from the weakening Chinese demand (a fallout of the rationalization in subsidies). Some of the major battery suppliers, such as CATL have followed it up with discounts in their offerings – a rarity earlier considering the demand pressure and pricing power. Other automakers anticipate a relatively weaker demand than the phase of 2022.

Anticipated expansion in Lithium supply added to the downward pressure on Lithium Carbonate prices. Some of the major capacities are expected to come onstream by end of 2023, though there are doubts if all of them can be operational. Most battery manufacturers and automakers have already locked-in their sourcing requirements during 2021-2022, with the result that they are likely to be insulated from price volatility in the upstream part.

Source: DBS
Cheaper batteries are critical for industry. Localized battery sourcing is vital to the supply chain efficiency of various leading automakers. Global capital flow is progressively seeking North American and European manufacturing locations to be closer to the demand. Government subsidies and tax credits help make this viable. The US Inflation Reduction Act and the planned Canadian industrial incentives, together seek to pull the investment capital for battery manufacturing that is otherwise dependent on China. The upcoming investments, led by the scale of Gigafactories, would however not radically change the global balance in Lithium-Ion battery supply.
Source: McKinsey
The upcoming battery manufacturing capacities present an attractive market for the recycling business. With cell manufacturing scrap’s share at 30% in the early stages of the battery production process, the market opportunity is gradually becoming an important one even for the new factory launches in the works (Northvolt-Hydro venture among the prominent examples). Global supply of batteries for recycling is likely to be mostly led by the production scrap till 2030, after which it is ‘end-of-life’ batteries. The push for battery recycling is expected to be across the chain – for battery, cell and automotive manufacturers, the considerations will be not just stability of supply chain but also the ethical and decarbonized sourcing.

Source: McKinsey

Regulatory incentives or norms constitute the other market driver – for instance the US Inflation Reduction Act provides tax credits in this regard. European regulatory norms require automotive manufacturers to take back the owners’ end-of-life batteries.

Source: McKinsey

Transition from Subsidy-led Push to Market Demand Pull

Global EV penetration is led by China, Europe and the US. The emerging markets in other regions, while promising, do not yet carry a substantial weightage in the global transport electrification ecosystem. The shaping of the global electric vehicle market continues to be led by just the three countries/regions. It is partly a reflection of the policy and regulatory framework adopted in this regard.

Direct purchase subsidies, while demonstrably successful in promoting electric vehicle adoption, are also a strain on the public finances. For countries with rapid and credible progress in electrification, there is a rethink on subsidy support. Chinese and Norwegian market experience highlights this. Both rationalized their subsidies in the timeline announced beforehand and a short-term dip in sales is part of the equation. In December 2021, UK similarly announced a reduction in the purchase grants offered for passenger battery electric vehicles and vans. The decision in this case was justified as a means to free up the budget for larger decarbonization objectives.

Evolving Policy Structure for Electric Vehicle Market

Source: BNEF

The globally leading markets of China and Europe are thus progressively shifting to adoption of supply-side policies. Fleet-wide fuel economy targets are gradually gaining traction. Both markets have some of the most stringent standards in place and their compliance effectively means expansion in the sale of electric vehicles. As a result, there has been a multitude of electric vehicle models with varied price points by the automakers to expand the sales footprint. Such a policy position is likely to set the template for other markets as well. Most important in this context, is the role of climate and energy policy targets that the governments devise. The European Union’s targets are a case in point. Similarly in the US market, stringent Corporate Average Fuel Economy (CAFE) standards might be difficult to adhere to without having a higher share of electric vehicle sales.