The last few weeks have brought great excitement for electric vehicle (EV) enthusiasts with the announcement of the Tesla Model 3 and the subsequent filling of its order book with over 250,000 vehicles. With costs coming down and vehicle range improving, there appears to be real consumer interest in EVs, including battery electric, plug-in hybrid and hydrogen fuel cell types. The International Energy Agency has been following the development of EVs for some time now and an excellent info-graphic is available with a variety of useful deployment statistics for the period up to and including 2014.
But how quickly would EVs have to deploy to align with the ambition of the Paris Agreement, i.e. having the passenger vehicle sector reach nearly zero direct emissions early in the second half of this century? Such an outcome would be required to be on track to well below 2°C, with a shot at 1.5°C.
In the last 2-3 years EV growth rates have been in the range 50-100% per annum, but this is quite typical of a new technology with a very small base. As the base increases, year on year percentage growth slows down quickly, even as absolute production continues to increase.
The first goal for EV deployment is to reach an installed base of 20 million vehicles by 2020, or about 2% of the global fleet. This is the target set by the Electric Vehicle Initiative of the Clean Energy Ministerial, a global energy/environment Minister forum to promote policies and share best practices to accelerate the global transition to clean energy. The initiative seeks to facilitate the global deployment of EVs, including plug-in hybrid electric vehicles and fuel cell vehicles.
By the end of 2015 the global EV stock was heading towards 1.5 million , which gives just 5 years to produce another 18-19 million cars. That will require year on year growth rates of around 50% per annum into the 2020s, resulting in additional new production of some 1-2 million vehicles per annum, i.e. to reach total annual production of 6-7 million vehicles per annum in 2020 itself. According to the IEA info-graphic, production in 2014 was around 300,000 per annum.
If growth at such rates could continue, with additional new production surpassing 4 million per annum throughout the balance of the 2020s and into the 2030s, then by 2035 the global EV stock could be at 500 million vehicles, or nearly a third of the total expected fleet. By this time absolute annual EV growth may be slowing, influenced by an outlook that sees EV production approaching that of global passenger vehicle production. This is assuming that there is no consumer resistance to EVs, even amongst those who love the roar of a finely tuned high powered internal combustion engine (ICE).
But even if production of EVs completely eclipses that of ICE vehicles, there remains the generational timespan to turn over the entire fleet. Even in Europe, the age distribution of vehicles is very broad, so we shouldn’t expect ICE vehicles to disappear overnight. The average age has also been rising, up from 8.4 to 9.7 years in Europe over the last decade. There is also a wide distribution, for example in the Netherlands in 2012, 41% of the passenger vehicle fleet was over 10 years old, but for the same year in Poland it was 71%.
Putting all the above together in a single chart, a very rapid and accelerated switch from ICE to EV could look something like the picture below. For the sake of the calculation, I have assumed the global fleet topping out around 1.7 billion vehicles in the 2060s, a number which is highly uncertain. For instance, just as EVs are beginning to make progress in the market, autonomous vehicles are possibly offering a completely different model for car ownership, which could see far fewer cars in the global fleet. The prospect of a much smaller market could start to send ripples through the entire investment chain, slowing the uptake of EVs considerably. Equally, if personal motoring progresses rapidly in developing countries, the fleet could be much larger in the second half of the century, which may also argue for an older fleet with ICE vehicles remaining on the road for much longer.
Simply because of fleet growth and existing production which currently totals 65-70 million vehicles per annum, maximum ICE stock isn’t reached until well into the 2020s, topping out at about 1.2 billion vehicles vs. 900 million today. ICE numbers return to current levels in the mid-2030s, but then decline to very low levels by the 2060s.
There are many other unknowns to factor in, such as the supply chain for the EV. Current battery technology calls for lithium, but prices over the last 18 months have risen. Some Chinese Lithium Hydroxide prices have risen over 100% in the last year but some market observers have noted the volatility and uncertainty surrounding this.
With the Tesla 3 appearing on the streets in 2017, but many other models from various manufacturers also being shown, the years ahead will only get more interesting for the passenger vehicle market.