Dive Brief:

• Electric vehicle sales are accelerating globally and could triple between 2021 and 2025, according to new analysis from BloombergNEF. But despite the growing adoption of zero-emission vehicles, the world's road transport "is still not on track for carbon neutrality by 2050," the firm said in its BNEF Electric Vehicle Outlook 2022, released Wednesday.
• Sales of plug-in vehicles could reach 20.6 million in 2025, up from 6.6 million sales in 2021. That's faster growth than BNEF anticipated in last year's EV outlook, with the acceleration driven by greater sales in China.
• More charging infrastructure is needed globally but the United States "faces one of the most difficult challenges" and must expand annual public charging installations by six-fold to accommodate consumer interest in EVs, according to the report. 

Dive Insight:

BNEF's annual assessment of electric road transport is a mixed bag, highlighting supply chain constraints and possible equity issues in the transition. However, higher prices and a short supply of raw materials for batteries are expected to have limited short-term impacts.

"The rising cost of batteries does not derail near-term EV adoption," BNEF said in its report. "Some of the factors that are driving high battery raw material costs — war, inflation, trade friction — are also pushing the price of gasoline and diesel to record highs, which is driving more consumer interest in EVs."

By 2025, BNEF anticipates EVs will represent almost a quarter of new passenger vehicle sales globally — in 2021, they were less than 10% of sales.

While EV adoption is rising rapidly, BNEF also said the world is not on track for a carbon-neutral transportation sector in 2050 and that a range of solutions beyond passenger vehicles, including more public transit, will be needed to meet that target.

"Aggressive action from policymakers will be required, especially on heavier vehicles where both batteries and hydrogen fuel cells are vying for a place in the market," the report said. "The window to stay on track for net zero is closing quickly."

U.S. electrification advocates say new policies and incentives are needed to grow the market.

"We need tax credits to send a market signal to U.S. manufacturers that they can scale up knowing that consumer demand will remain strong," Zero Emission Transportation Association Executive Director Joe Britton said in a statement.

"If we don’t invest now, the U.S. will be conceding this opportunity to other economies," Britton said. His group is advocating for Congress to pass a clean energy tax package that would uncap the 30D consumer vehicle credit for EVs and expand the 30C credit on charging infrastructure.

Charging infrastructure in the United States has been held back "largely due to a lack of electric vehicles and therefore companies wanting to invest," Ryan Fisher, an electrified transport analyst at BNEF, said in an email.

But with more EV models hitting the market and $7.5 billion in federal funding designated to help build a national charging network, Fisher said the landscape is changing. The first phase of funding from the federal infrastructure act is focused on highways, however, so there is some risk cities will still lack infrastructure, he said.

"There are supply constraints on the chargers themselves," Fisher said. "I think this will subside but at current the charging manufacturers are small fish compared to other companies trying to get hold of semi-conductors etc, which is probably not helping them."

While rising battery costs wont derail the EV transition, it will have impacts on who buys emissions-free vehicles, according to BNEF.

The report identified a "widening gap between wealthy and emerging economies on EV adoption," and said there is a "growing risk that the transition is not an equitable one, and that many economies miss out on the benefits of better air quality and new investment."

There will be supply constraints on the raw materials to manufacture batteries, according to the report, but the impact will be on the cost of the vehicle rather than limiting the size of the market.

"This is set to push back the point of EV price parity in some segments, but will not derail the global EV market," BNEF said. 

The constraints are not permanent, however. "Automakers are investing in their supply chain and new battery chemistry technologies in order to mitigate the crunch over time," BNEF EV Associate Corey Cantor said in an email. But the disparity in EV adoption may last longer.

China and Europe will account for almost 80% of global EV sales in 2025, Cantor said, compared with about 15% in the U.S. Markets like India, Brazil and Southeast Asia will make up just 2% of sales.

"There will be a disparity in EV access across the globe that is set to increase over the next two decades," Cantor said. "Based on the current trajectory, there will be a bit of a separation between these leading markets and other laggard markets.

The overall EV market is "poised to grow due to consumer demand, policy support and model availability growth in these leading markets," Cantor said. "But in order to reach a net-zero trajectory more work will need to be done in the emerging markets."