Speed bumps for electric cars
Early this year, a flood of bad news about electric cars created a widespread impression that the transition to these vehicles was at risk of stalling. What is really happening, we think, is a phenomenon we predicted in this report last year: as electric cars become a larger share of the overall market, the rapid growth of recent years is slowing down.
With countries rejigging or withdrawing their subsidies, electric-car sales in Europe were up only 1 percent in the first half of 2024.1 Much of the bad news came from the United States, however. Tesla, the electric-car pioneer, was forced to slash prices and lay off workers as demand for its cars weakened. Since Tesla has long commanded half the electric-car market in the United States, its woes have a big effect on overall sales numbers there. Much of the damage seems to be self-inflicted: Tesla has been slow to refresh its model line-up, and many potential buyers appear to be waiting for the new versions of the cars. The erratic behaviour of its chief executive Elon Musk has likely put off some potential buyers. The established American car-makers had their own problems: Ford and others slowed some of their planned electrification investments amid soft demand. In addition, higher interest rates have made their plans more costly to execute. General Motors discontinued its popular Bolt car in late 2023, a year before it plans to bring a replacement to market.
Yet, as the year has unfolded, it has become clear that the American situation is likely a blip.2 Sales of cars with plugs were still up 40 percent in the American market in 2023 — a slowdown from the 57 percent growth of the year before, but a healthy figure nonetheless. In two years, electric car sales in America have more than doubled. The International Energy Agency forecasts that cars with plugs will represent 11 percent of all new-car sales in the United States in 2024, up from practically nothing a decade ago.3
Worldwide, sales of electric cars rose by 35 percent in 2023, and they now represent 18 percent of the world’s new-car market. China has become by far the largest marketplace for the cars; in July, for the first time, cars with plugs took more than half the Chinese market. The cars were more than 20 percent of the market in Europe last year, including shares of roughly 25 percent in Germany, France and the United Kingdom. Norway continues to lead the world, with 93 percent of the new cars sold there having plugs.4
So, while the percentage sales growth for 2023 was lower in some major markets than in 2022, we do not think that is particularly surprising in a maturing industry. And developments now under way in the marketplace mean that a broader embrace of electric cars, beyond enthusiastic early adopters, may be about to materialise. For one thing, the cars are steadily getting cheaper. That Tesla was forced into price cuts may have been bad news for Tesla, but it was good news for the car-buying public. General Motors is on the verge of introducing a wave of new models specifically designed to appeal to American buyers, at reasonable prices. Chinese manufacturers have flooded their domestic market with hundreds of well-built, affordable electric car models, and these Chinese cars are now being exported to many parts of the world at prices below $20,000. Up to now, sales of electric cars have been concentrated in China, Europe and North America, but we are starting to see growth elsewhere, including parts of Latin America, Africa and Southeast Asia.
Moreover, electric cars have now been out long enough that a robust market in used ones is beginning to develop. This is critically important, for in markets across the world, the majority of people do not buy new cars; they buy used. Electric cars are now holding their value better than they did a few years ago, a sign of how much the cars themselves have improved. And in many of the world’s vehicle markets, it is becoming entirely possible to pick up a used electric model for $15,000 or less.
A couple of years ago, many people were panicking about whether enough metals like lithium, cobalt and manganese would be available to support the electrification of the vehicle fleet. But the price spikes that accompanied that panic brought a flood of new supply to the market, and metals prices have come off their recent peaks. The metals situation certainly remains complex and worrying for the long term, part of a geopolitical struggle for advantage that we will discuss later in this report. But in the near term, falling commodity costs are allowing battery manufacturers to cut their prices, making electric cars more affordable. Businesses are starting up to recycle lithium batteries, and we think that will become an important source of future supply.
The cars are still being subsidised in many markets, including a new $7,500 subsidy for many models sold in the United States, as well as tax abatements and other incentives in European countries. But more and more governments, including China, are withdrawing these subsidies as no longer necessary, or they are realigning the subsidies to support domestic manufacturers, meaning fewer car models and fewer buyers are eligible. The good news is that many governments are turning their focus to the single most critical issue: building robust national charging networks. This may be the final hurdle to mass adoption of electric cars: reaching a point where drivers on long trips are confident the cars can be charged as easily as petrol cars can be refuelled. Worldwide, the number of public charging stations rose by 40 percent last year, but the network is still far from adequate; at least another decade of breakneck construction will be required to create a dense network.
Countries are converging on 2035 as the date they want to end sales of cars with petrol engines. More and more of them are writing this deadline into law, sending a clear signal to industry that a full transition is coming. We have seen some unfortunate backsliding on targets of this kind — the United Kingdom, for instance, moved its target for the end of petrol cars from 2030 to 2035 — but in most of the world, the deadline appears to be holding against political attacks fomented by the oil companies.
Jammed
Source: Associated Press / Alamy
Electric cars, even if they are much cleaner than petrol cars, are hardly a perfect answer to the world’s transportation woes. Smart transportation policy entails giving people alternatives to driving, including public transport, cycling and walking — that is to say, getting people out of cars. On this score, we are sad to report that 2024 featured a major setback.
Singapore, London, Stockholm and Milan have proven that one of the best ways to manage traffic is a ‘congestion charge’ — a fee for driving a car into the densest parts of the city. They put the money raised into public transport, so that people have workable alternatives to driving. After decades of political struggle, New York City was poised to follow their lead, introducing the idea of congestion charging to the world’s most car-dependent country, the United States.
The plan, carefully negotiated over a decade of political struggle, was to impose a congestion charge of $15 for cars driving into lower Manhattan, the most overcrowded part of the city.