Electric vehicle sales are poised to more than triple by 2025, and yet governments and manufacturers need to lean even harder into eliminating emissions from road transportation by the middle of this century, according to BloombergNEF.
The research firm lays out the stakes and calls for action in its seventh annual Long-Term Electric Vehicle Outlook, released Wednesday. BNEF’s analysts deem EVs “a remarkable success story,” predicting plug-in passenger vehicle sales will soar to 20.6 million in 2025, much higher than its 14 million forecast just a year ago, mainly due to faster uptake in China.
Yet for all the progress, replacing the 1.2 billion passenger vehicles on the road that run on internal combustion engines takes time. Just over two-thirds of the global fleet will be zero-emission by 2050, if no new policies or regulations are enacted. Heavier commercial vehicles are on track to trail far behind, with only 29 per cent of the fleet decarbonizing on that timeline.
“Despite the rapid rise in EV adoption, road transport is still not on track for carbon neutrality by 2050,” analysts led by Colin McKerracher, BNEF’s head of advanced transport, write in the report. “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 window to stay on track for net zero is closing quickly.”
The 201-page report covers the gamut of opportunities electric vehicles present, the impact they may have and the risks they face. It also highlights how governments can make the challenging transition easier by combatting car dependency. If the amount of miles traveled by passenger vehicles and size of the fleet is just 11 per cent lower than what BNEF is modeling for 2050, it would spare the world 2.25 gigatons of cumulative CO2 emissions and reduce the strain on battery supply chains.
Under BNEF’s net-zero scenario, $1.4 trillion of investment will be needed to build out charging infrastructure by 2040. It will be a challenge scaling up networks quickly enough to keep pace with EV uptake, especially in the US, where average annual public charging installs need to increase sixfold in the next four years.
On the battery front, BNEF sees little slack in supplies of lithium, cobalt, manganese and nickel — the key EV battery ingredients — this decade. Battery production lines, which China will continue to dominate, must sustain unprecedented growth to keep pace with demand.
The point when pack prices will drop below $100 per kilowatt hour — a widely cited benchmark around which battery costs are competitive with combustion engines — is now less certain because of significant cost pressures.
“If raw material prices remain elevated or climb further, this could delay the timeline by a couple of years, out from 2024 in most markets,” the analysts write. That said, they don’t expect the rising cost of batteries to derail near-term EV adoption. “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.”
© 2022 Bloomberg L.P.