The International Energy Agency (IEA) has revealed that the transition to battery electric vehicles (BEVs) is still underway despite high prices, rising interest rates and waning electric vehicle demand among consumers. According to the IEA, global EV sales are poised to increase by over one-fifth to hit a whopping 17 million units on the road this year.
Most of this growth will be fueled by Chinese drivers who have access to incredibly affordable electric cars as well as an extensive and relatively reliable network of public EV chargers, unlike drivers in the U.S. market. A recently published IEA report projects that electric vehicles will experience surging demand through the next decade that will “remake” the auto industry and reduce oil consumption in the road transportation segment significantly.
The IEA report expects that up to one-half of all vehicles sold worldwide will be electric by 2035, up from just one in five vehicles this year if charging infrastructure develops at a similar pace. This expectation covers both battery electric vehicles and plug-in hybrid vehicles but is in stark contrast with the current state of the global EV sector. High electric-vehicle prices coupled with rising interest rates have depressed electric vehicle demand greatly in the past several months, resulting in slowed EV sales in most major markets.
The IEA report featuring a surprisingly bullish outlook for the EV market came only a few days after Texas-based electric vehicle giant Tesla cut vehicle prices across the globe in response to reduced sales and escalating competition from Chinese electric vehicle companies. Established automakers such as Ford and General Motors have also scaled back their previously ambitious electrification plans after realizing that they had overestimated market demand for electric cars.
IEA executive director Faith Birol explains that the recent surge in headlines about slowed EV adoption isn’t in line with positive global trends. Rather than a decline in electric vehicle growth, Birol says worldwide trends point to an “extremely robust increase” in global EV sales. Aside from China, the European Union will also contribute significantly to the sales in EV growth. EV sales in the European Union have increased by nearly 4% in Q1 2024 compared to the same period last year, the European Automobile Manufacturers’ Association says, indicating that electric vehicle sales in the EU have also contributed to global EV sales growth.
Even so, most electric vehicle makers are dealing with thinner and thinner profit margins as price discount wars between major companies have caused EV prices to drop worldwide. Tesla and Chinese EV maker Li Auto recently announced price cuts on popular models in China while Tesla also cut prices in the U.S. The American EV maker posted its first annual sales drop in close to four years a few weeks ago, and its stock has fallen by 40% since the start of the year.
It is also possible that other EV makers such as Kandi Technologies Group Inc. (NASDAQ: KNDI) are also struggling to hit their sales targets. The collective industry will therefore need to think up new ways to stimulate demand and accelerate EV adoption by the motoring public.
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