Why Is the Electric Vehicle Market Taking Off?

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Why Is the Electric Vehicle Market Taking Off?

In a world where pressure is mounting to reduce emissions and pollution, electric vehicles (EVs) are ever more appealing. For eco-conscious car buyers, EVs have even been termed the “technology of choice.” However, their appeal is not limited to only environmental benefits; government regulations and policies increasingly favor this type of vehicle. 

Read on to discover why the electric vehicle market is growing, and predictions for its future.

In this article:

- The current electric vehicle market
- Why is the market growing?
          - Shifting to sustainability
          - Incentivizing through grants and regulations
          - Alleviating consumer concerns
- The outlook 

The Current Electric Vehicle Market

There are 3 main types of electric vehicles determined by the degree that electricity is used as their energy source:

  • Hybrid electric vehicles (HEVs) are powered through fuel as well as electricity, and the battery is charged through the car’s braking system (known as regenerative braking.)
  • Plug-in hybrid electric vehicles (PHEVs) also combine fuel and electricity and recharge their battery through regenerative braking. However, PEVs can additionally be “plugged into a socket," and run for some distance purely on electricity. 
  • Battery electric vehicles (BEVs) are fully-electric with rechargeable batteries and no combustion engine.

According to the International Energy Association, China is the world’s largest electric car market, followed by Europe and the United States. In recent years, consumers are more inclined towards BEVs because these vehicles run without fuel, such as diesel and gasoline, and have lower maintenance costs. Globally, Statista reports that in 2019 there were almost 4.8 million BEVs in use. 

Why Is the Market Growing?

Statista reports that in 2019 alone, 1.5 million new BEVs were added to the worldwide fleet. But what is fueling such staggering growth?

Shifting to sustainability

With transportation recognized as a major source of worldwide greenhouse gas emissions, increasing focus is being given to sustainable travel modes that can mitigate this. In the last 10 years, this shift has moved drivers away from private cars and to more sustainable travel modes such as ride-hailing and micromobility. However, for individuals that need a private car, EVs provide a more environmentally friendly solution than that of a traditional vehicle. For instance, unlike conventional combustion engines that rely solely on fuels created from crude oil, BEVs rely exclusively on electricity, which can be generated through a variety of means. With oil reserves estimated to only last another 50 years, the sourcing of alternative fuels is an increasing priority.

Although far less polluting than their combustion engine counterparts, the amount of emissions produced by EVs depends on several factors, predominantly relating to the country they are produced and driven. Across Europe, electric vehicles are responsible for considerably lower emissions over their lifetime than conventional combustion engine vehicles. For example, in the UK, the lifetime emissions per kilometer of driving a Nissan Leaf EV in 2019 were about 3 times lower than for the average conventional car. 

However, due to the high carbon footprint created in generating the energy in the first place, in countries with electricity generation dependent on coal, the environmental benefits of EVs are significantly reduced. Additionally, the extraction and manipulation of earth metals for the electric vehicle battery can contribute to carbon emissions. Although Forbes, reports that this again depends on the country that the battery is produced as well as its composition.

Undoubtedly, as electric vehicle technology becomes more mainstream, and more electrical energy is generated from renewable sources, EVs will become even more efficient and sustainable.

Incentivizing Through Grants and Regulations

In the past, one of the limiting factors in the growth of electric vehicles has been the higher upfront costs. The market is, however, being accelerated by government subsidies and regulation. Market-leader China has local subsidies for EVs that are among the world’s highest. Such subsidies reduce consumer concerns about the comparatively high starting costs. Similarly, in the EU, 20 member states offer incentives (such as bonus payments or premiums) to buyers of electric cars. For instance, in Germany—Europe’s leading market, buyers are eligible for an “innovation bonus” worth €9,000 when purchasing a battery electric vehicle.

Additionally, the Chinese government has introduced green license plates for new electric vehicles. These license plates can be registered in unlimited quantity, while conventional plates for combustion engine cars are released with strict quotas. 

As another measure of incentive, a number of cities around the world have made plans to ban gasoline and diesel cars. Paris aims to do so by 2030, and London is in the process of rolling out “zero-emission zones.”

Alleviating Consumer Concerns

In order for the market to truly grow, consumer concerns must be overcome. According to research by Deloitte, the 4 major customer concerns of owning an EV relate to: the driving range of the vehicle, the cost premium, issues with infrastructure, and the time to charge. Deloitte’s research also highlights that customer concerns vary from country to country. For example, 44% of Italian respondents stated that the lack of infrastructure was a concern, compared to 16% of French respondents. However, when asked about the driving range, only 4% of Italians stated this was a worry, compared to 31% of respondents in Belgium.

With technological innovation, the above issues will be alleviated. The next-generation vehicles will have increased driving ranges, which also removes infrastructure anxiety as owners can rely on charging at home and work. Carmakers are now, more than ever, focusing on the EV market and spurring innovation. Volkswagen has pledged to spend more than $30 billion on electric cars, and Volvo has committed to releasing a new EV every year for the next 5 years, part of the company's plan to become fully climate neutral by 2040.

The Market Outlook

Despite the COVID-19 pandemic, the number of electric vehicles on the road is expected to increase this year. Some studies have even suggested that the improved air quality seen as a result of lockdowns means that even more buyers are considering the switch. The International Energy Association's 2020 outlook suggests EV sales are expected to reach similar levels to 2019. This is in contrast to the broader passenger car market, which is predicted to fall by 15% from its 2019 level. 

Overall, electric car sales are estimated to account for 3% of global car sales in 2020. Yet, In the next decade, the EV market is predicted to accelerate. By 2030 over 55% of all new car sales could be fully electrified, with the European and Chinese markets representing the majority of passenger sales.  

Conclusion

The electric vehicle market is growing, and it is so rapidly. Government policies, coupled with an increasing vehicle range, and better availability of charging infrastructure are and will drive purchases. The added focus on reducing pollution and improving air quality as a result of the coronavirus pandemic may too cause sales to soar, and the coming years will see more electric cars available to buy than ever before. 

Is the future electric? Yes, it seems so.

Discover HERE Mobility’s smart transportation technologies today >
 

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