What the IEA Global EV Outlook 2018 Report says about electric vehicles

 In EV Industry

Around the world, electric vehicles are generating quite the buzz.

In 2017, for the first time ever, the number of electric vehicles worldwide surpassed 3 million, representing an increase of more than 1 million from the year before.

This is according to the International Energy Agency (IEA) Global EV Outlook 2018 report. Released on May 30, the IEA report looks at the factors behind the explosive growth in electric and plug-in hybrid cars in 2017.

Factors driving this growth included decreasing global battery prices, stricter CO2 emission standards, and policies aimed at promoting electric car adoption, including taxes, mandates, and procurement programs.

The Numbers

Much like in past years, electric vehicle growth was led by China, Europe, and the United States (more specifically, California), but the report also found that other countries, such as India, have begun to emerge as key players in the electric vehicle market.

Last year, India announced plans to introduce an all-electric car fleet by 2030. It also launched its National E-Mobility Programme, with the aim of ensuring 30% of vehicles countrywide are electric by 2030.

Overall, the greatest number of electric vehicles was in China, where an estimated 40% of electric vehicles worldwide are located. Last year alone, China saw about 580,000 electric vehicle sales.

Nordic countries — especially Norway, Iceland, and Sweden — continued to lead the way in terms of electric vehicle market share. Nearly 40% of new car sales in Norway in 2017 were electric vehicles. Iceland and Sweden also saw a large proportion of new car sales for electric cars, representing 11% and 5% of their country’s market share in 2017, respectively.

Of the 3.1 million electric vehicles worldwide, about two-thirds were battery-powered and one-third were plug-in hybrid electric. (You can read more about the difference between battery-powered and plug-in hybrid electric on the FleetCarma website.)

In addition to these battery-powered and hybrid electric cars, another 250,000 electric light commercial vehicles were operating worldwide in 2017, with the lion’s share of them (68%) also in China.

Policies Supporting Electric Vehicles

Last year, China, India, and Europe took steps forward in promoting electric vehicle adoption, while the United States took a step backward, the report found.

In September of last year, China announced a new energy vehicle (NEV) credit mandate, which took effect on April 1, 2018. This policy is aimed at increasing the production of electric vehicles, by requiring manufacturers and importers of passenger cars to earn a certain number of credits each year for electric vehicle sales. Under the policy, credits are awarded based on the overall performance of the car sold, with the most credits going toward zero-emission vehicles. China aims for these electric vehicle credits to exceed 12% of the market share by 2020.

This policy was developed to mirror a similar initiative called the California Zero Emission Vehicle (ZEV) mandate, which has now been adopted in 10 US states.

India also took steps to spur its electric vehicle market in 2017. It outlined a procurement plan that aims to ensure an all-electric vehicle fleet by 2030, released a White Paper calling on all new vehicle sales to be electric by 2047 and improved charging infrastructure to pave the way for further electric vehicle development.

But the report also noted that India’s “lack of consistency” in its policy ambitions for electric vehicles meant the country still needs “greater coordination in defining its electric vehicle policy as it moves forward.”

European countries continued their steady progress on electric vehicle adaptation. The European Commission released an ambitious emissions targets proposal in November of last year, which called for a 15% reduction in CO2 emissions per kilometer for new vehicles by 2025 and 30% reduction by 2030. The report noted that in order to hit these targets, EU countries would have to significantly increase the number of low- and zero-emission vehicles.

Individual European countries also implemented policies favorable to electric vehicle production. This has come in the form of quotas for new electric car sales, including in Slovenia and Ireland, where policymakers are aiming to completely ban new fossil fuel cars in the next 12 years, as well as proposed bans on production of internal combustion engine vehicles, including in Norway by 2025; Ireland, the Netherlands, and Slovenia by 2030; Scotland by 2032; and France and UK by 2040.

But the report found that one of the most effective policies remains, ensuring financial and tax incentives for electric vehicle purchases.

In Norway, for example, electric vehicles are eligible for value-added tax subsidies and exempt from vehicle registration taxes and public tolls — three of the most important factors Norwegians cited for buying an electric vehicle, according to an IEA survey.

The report said that as electric cars continue to be adopted, however, policymakers are increasingly moving “away from financial support towards standards, regulations and mandates,” such as those being implemented in China and proposed in the EU. These include distance-based pricing, tailpipe CO2 emissions regulations, public procurement programs, and other policies that penalize manufacturers that fail to meet emissions standards.

In the United States, a relaxation of Environmental Protection Agency (EPA) greenhouse gas emissions standards will likely lead to a reduction of electric car adoption on a national scale, the report found. Some states, however, such as California, have nonetheless vowed to implement ambitious electric vehicle policies.

In 2018, California Governor Jerry Brown signed an executive order to call for 5 million zero-emission vehicles by 2025. The state has also invested heavily in charging infrastructure.

The report cautions that as some states follow California’s lead and others do not, the EPA’s new policy could effectively divide the US into two markets.

Looking Forward

The Global EV Outlook 2018 report outlines two global scenarios for electric car adoption by 2030.

The first, the “New Policies Scenario,” assumes steady electric vehicle adoption in line with current and prospective policies. The second, the “EV30@30 Scenario,” represents a best-case scenario wherein countries exceed electric vehicle production goals.

Under the “New Policies Scenario,” the report estimated that by 2030 there would be 13 million electric vehicles on the road by 2020 and 130 million vehicles by 2030. In the “EV30@30 Scenario,” this number would be 228 million electric vehicles by 2030, or almost double.

IEA recommends several policies that would help countries achieve the higher-end EV30@30 Scenario, including removing still-existing fossil-fuel subsidies, increasing public procurement programs, ceasing manufacturing of cars with internal combustion engines, and cities implementing low, ultra-low and zero-emission zones, to name a few.

Overall, IEA sounded out a hopeful note about the future of electric vehicles, writing: “On-going support and commitments for increased deployment of [electric vehicles] from policymakers and the automotive industry suggest that this trend is not going to abate in the coming decade.”

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