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. 

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.

Unfortunately, the governor of New York, Kathy Hochul, panicked at the last minute and pulled the plug on this carefully negotiated plan, blowing a $16.5 billion hole in New York’s transport plans.⁵ Apparently, she was worried about the political consequences of angering suburban drivers in an election year.⁶

The governor ought to have known the history of these plans: people profess to hate them until they go into effect, but then they see how well it works to thin traffic, and public opinion turns around.⁷ We fear the idea of congestion charging in America may now be dead for another generation due to the governor’s actions. We can only hope that some bold American city, perhaps on the West Coast, picks up the mantle and demonstrates to the rest of the country that congestion pricing is an intelligent urban policy. This is exactly what happened in other countries: after the success of congestion tolling in London and Stockholm, smaller cities in Sweden and the UK picked up the idea and put successful schemes into place. 

If the transition to electric cars is fully under way, the conversion of heavier vehicles is lagging. For ships, planes and heavy lorries or trucks, plans to cut emissions are still in their infancy, though 2023 and early 2024 did see incremental progress.

While Airbus, the European aircraft manufacturer, is experimenting with a plane designed to run on clean hydrogen, most experts believe the path forward will be to use conventional jet engines powered by ‘sustainable aviation fuel,’ essentially identical to jet fuel made from oil. But the feedstock to make this fuel would likely be plants, with early efforts focusing on converting waste oils to jet fuel. The supply of waste oils is limited, though, so the industry has been looking at Brazilian sugar cane and American maize as potential feedstocks. So far costs are quite high, but governments are supporting the effort to get a sustainable fuel industry off the ground. More importantly, the airlines are finally beginning to support it, and to procure small quantities of fuel from the earliest factories. As with electric cars, sustainable aviation fuel will not be a perfect answer to the problem of greenhouse emissions from planes, but there are hopes that the best schemes will be able to cut emissions by more than 50 percent.

In an intriguing development in public policy, some European countries have already banned short-haul flights if a high-speed train competes on the same route, essentially forcing people to take the train, with its far lower greenhouse emissions. It is on these short routes that electric aeroplanes might ultimately prove workable; if Europe were to allow them onto routes where fuel-burning planes are banned, that might be a way to jump-start the market for these planes. The airlines are fighting the bans, belying their claims to be working toward sustainability.

The options are somewhat broader when it comes to shipping. Ships, too, could run on fuel made from plants, but they may have cheaper possibilities. Short-haul ships, like ferries, can be electrified, and in fact some battery-powered ferries have already gone into service. Shipping goods across the ocean is likely to require burning fuel; the best choice might be ammonia, which can be made from clean hydrogen with minimal emissions of greenhouse gases. The fuel itself will need to be transported, as oil is today: 2023 saw the first big orders of tankers designed to carry large quantities of ammonia across the sea. The shipping giant Maersk is pushing particularly on ammonia as the potential shipping fuel of the future.

For a long time, it was unclear whether electrification would be a workable strategy for the primary mode of goods-hauling on land: long-distance trucking. But batteries are improving so rapidly that this is starting to look like the best way forward, and 2023 saw production announcements and orders for electrified Class 8 tractors, the largest lorries on the roads. The market is still small and tentative, and complete electrification of these vehicles might easily take until the 2040s, but we do seem to be at the beginning of a trend. Already, the spread of electric city buses, school buses and urban delivery lorries has proven that the size of the vehicle is no intrinsic barrier to electrification. Across large urban areas, China has already replaced fuel-burning buses with electric ones.

The trick with long-distance haulage will be figuring out how to charge the vehicles. Trying to charge such large vehicles rapidly at depots could place enormous strains on the power grid, and it is unclear if this will be the cheapest option. Other possibilities include embedding charging coils in roads, so the lorries could charge as they travel, or using robotic systems to switch out the batteries in the vehicles for fresh ones. Such a system would entail large upfront investments, but once those are in place, the battery changes could be done in 45 seconds; it may prove to be the simplest method. Experiments are under way with all these approaches.