IHS Markit forecasts global EV sales to rise by 70% in 2021

When a final tally is confirmed, global sales of battery electric vehicles (BEV) and other EVs are expected to have reached nearly 2.5 million in 2020, according to IHS Markit, and then rise by about 70% in 2021.

For 2021, China and Europe will account for the largest market shares by far, with China at about 44% and Europe at nearly 28%. Lagging behind are North America with a 16% share, and a combined Japan/South Korea share of 11%.

In 2025, global sales will top 12.2 million, indicating annual growth of nearly 52% (compounded), IHS Markit said in its December forecast.

In Europe, EV sales have been, and will continue to be, boosted by regulations that set a requirement for each manufacturer's light-duty fleet to average carbon emissions of no more than 95 g/km CO₂. Because companies can earn and trade credits, sales of EVs are critical to balancing emissions from other vehicles. In the most recent month for which full data are available, October 2020, IHS Markit reported that Europe BEV sales climbed to nearly 7% of the total, which is "aiding all major car manufacturers in minimizing potential gap-to-compliance."

More European regulatory support for zero-emission vehicles is coming, said Vijay Subramanian, IHS Markit CO₂ compliance director, automotive. "Under the Green Deal framework, the 2030 passenger car carbon dioxide target is expected to get more stringent compared with the current legislative requirement of 37.5% carbon dioxide reduction from 2021 levels," he said.

Looking more closely at one of the top markets for EVs in Europe, the German Federal Motor Transport Authority (KBA) reported on 7 January that EVs, plug-in hybrids, fuel cell, natural gas, and hydrogen vehicle sales accounted for 22% of the overall market in 2020. The number of registered BEV passenger cars more than tripled year on year (y/y) to 194,163 units.

Volkswagen achieved the highest overall BEV market share in 2020 of 17.4% (up 609% y/y), followed by Mercedes-Benz with a share of 14.9% (up 500%) and Audi (9.0% share, up 608%), KBA said in a release. In terms of BEV passenger cars, VW had the largest share of new registrations, at 23.8%, followed by Renault (16.2%) and Tesla (8.6%).

"In terms of the overall market picture, the share of passenger cars with alternative drives increased from 2.4% in 2019 to a share of 3.6% in 2020…. For pure BEVs, this trend was even more pronounced, with market share rising from 0.5% in 2019 to 1.2% in 2020. The combined 2020 market share for cars with an electric drive (battery-electric, plug-in, fuel cell) in Germany stood at a record high of 13.5%," KBA said.

Chinese growth to ramp up again

China's growth in EVs is driven by general economic demand and by the phasing in of new energy vehicle requirements since 2018. IHS Markit said the regulations enable Chinese automakers to meet their annual new vehicle efficiency standards by purchasing emissions credits that are generated by the sale of EVs, with the rate of credit higher for vehicles with advanced performance such as greater battery efficiency or range, but lower for plug-in hybrids.

While the COVID-19 pandemic slowed sales growth in 2020 to a modest 3% gain, IHS Markit said that double-digit gains will return in 2021 and beyond. "In 2025, [China's] BEV production volumes are expected to reach 4.8 million units, taking a market share of 17%, while plug-in hybrid vehicles volumes are forecast to reach around 1.6 million units, taking a market share of 6%," wrote Abby Chun Tu, IHS Markit principal research analyst.

One possible damper on growth in 2021 and going forward is a policy announced in late December by China's Ministry of Finance that will see tax breaks for buyers of EVs reduced by 20% from last year's level, or about $550 on average.

Japan to boost investment

Japan announced on 8 January new support for EV production and sales as it seeks to implement a mandate that all new car sales beginning in 2030 be EVs, a key step in meeting its 2050 net-zero carbon emissions pledge.

The Green Growth Strategy includes an R&D fund of 2 trillion yen (about $19 billion) for investments to advance battery technology and reduce the cost of manufacturing batteries to 10,000 yen/kWh ($96) or less by 2030. Carmakers would be one of 14 targeted industries to receive tax incentives for the transition. Recognizing that the plan to transform transportation and manufacturing to all-electric service (where possible), the Green Growth Plan also includes investments to meet rising need for electricity, which Japan said will increase from 2020 levels by 30-50% by 2050.

US awaits Biden policies

US EV sales are harder to forecast because of the change in administration to President-elect Joe Biden. The Trump administration's policies generated "headwinds" for EV sales, Xi Wang, IHS Markit powertrain analyst, wrote in the company's forecast report. This included the US Environmental Protection Agency's April 2020 Safer Affordable Fuel-Efficient Vehicles Rule, which rolled back Obama administration rules finalized in 2012 that carbon dioxide emissions from cars and light trucks would have to be reduced by 5% per year. The Trump rule requires carbon dioxide reductions of 1.5% annually for model years 2021-2026, which can be met with much lower numbers of EV sales than automakers have used to meet fleet targets.

Also, Biden is expected to withdraw from a lawsuit over California's vehicle emissions standards that are more strict than federal standards, and thus incentivize EVs. Under the federal Clean Air Act, California can apply for a waiver of federal preemption that prohibits states from enacting tougher emissions standards, and if that waiver is approved, other states can choose to adopt California's standards. The Trump administration revoked a previous waiver—the first time that's been done—and California has sued to have it reinstated.

"With the incoming Biden administration, the possibility of the US rejoining the Paris Climate Agreement and California waivers being reinstated may well incentivize BEVs in the US market sooner rather than later," said Wang.

On the other hand, California showed this month that it potentially can have a significant impact on the EV sales curve regardless of federal policy. On 6 January, California Governor Gavin Newsom proposed a fiscal year 2021 budget that includes $4.5 billion of new spending to help the state recover from the economic recession caused by the COVID-19 pandemic. One-third of that total, or $1.5 billion, would consist of tax breaks for individuals and businesses to purchase EVs or hydrogen vehicles and equipment, and to invest in the construction and maintenance of electric charging and hydrogen fueling infrastructure.

The spending bill also includes up to $300 million to install EV chargers at every state-owned facility where vehicles are parked or serviced.

California already is committed to ending sales of new light-duty internal combustion engine vehicles in 2035.

Posted 19 January 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit