Electric car sales continue to increase, led by China
Electric car sales1 saw another record year in 2022, despite supply chain disruptions, macro-economic and geopolitical uncertainty, and high commodity and energy prices. The growth in electric car sales took place in the context of globally contracting car markets: total car sales in 2022 dipped by 3% relative to 2021. Electric car sales – including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) – exceeded 10 million last year, up 55% relative to 2021.2 This figure – 10 million EV sales worldwide – exceeds the total number of cars sold across the entire European Union (about 9.5 million vehicles) and is nearly half of the total number of cars sold in China in 2022. In the course of just five years, from 2017 to 2022, EV sales jumped from around 1 million to more than 10 million. It previously took five years from 2012 to 2017 for EV sales to grow from 100 000 to 1 million, underscoring the exponential nature of EV sales growth. The share of electric cars in total car sales jumped from 9% in 2021 to 14% in 2022, more than 10 times their share in 2017.
Over 26 million electric cars were on the road in 2022, up 60% relative to 2021 and more than 5 times the stock in 2018
Increasing sales pushed the total number of electric cars on the world’s roads to 26 million, up 60% relative to 2021, with BEVs accounting for over 70% of total annual growth, as in previous years. As a result, about 70% of the global stock of electric cars in 2022 were BEVs. The increase in sales from 2021 to 2022 was just as high as from 2020 to 2021 in absolute terms – up 3.5 million – but relative growth was lower (sales doubled from 2020 to 2021). The exceptional boom in 2021 may be explained by EV markets catching up in the wake of the coronavirus (Covid-19) pandemic. Seen in comparison to recent years, the annual growth rate for electric car sales in 2022 was similar to the average rate over 2015-2018, and the annual growth rate for the global stock of electric cars in 2022 was similar to that of 2021 and over the 2015-2018 period, showing a robust recovery of EV market expansion to pre-pandemic pace.
Half of the world’s electric cars are in China
The increase in electric car sales varied across regions and powertrains, but remains dominated by the People’s Republic of China (hereafter “China”). In 2022, BEV sales in China increased by 60% relative to 2021 to reach 4.4 million, and PHEV sales nearly tripled to 1.5 million. The faster growth in PHEV sales relative to BEVs warrants further examination in the coming years, as PHEV sales still remain lower overall and could be catching up on the post-Covid-19 boom only now; BEV sales in China tripled from 2020 to 2021 after moderate growth over 2018-2020. Electric car sales increased even while total car sales dipped by 3% in 2022 relative to 2021.
China accounted for nearly 60% of all new electric car registrations globally. For the first time in 2022, China accounted for more than 50% of all the electric cars on the world’s roads, a total of 13.8 million. This strong growth results from more than a decade of sustained policy support for early adopters, including an extension of purchase incentives initially planned for phase-out in 2020 to the end of 2022 due to Covid-19, in addition to non-financial support such as rapid roll-out of charging infrastructure and stringent registration policies for non-electric cars.
In 2022, the share of electric cars in total domestic car sales reached 29% in China, up from 16% in 2021 and under 6% between 2018 and 2020. China has therefore achieved its 2025 national target of a 20% sales share for so-called new energy vehicles (NEVs)3 well in advance. All indicators point to further growth: although the national NEV sales target is yet to be updated by China’s Ministry of Industry and Information Technology (MIIT), which is responsible for the automotive industry, the objective of greater road transport electrification is re-affirmed in multiple strategy documents. China aims to reach a 50% sales share by 2030 in so-called “key air pollution control regions”, and 40% across the country by 2030 to support the national action plan for carbon peaking. If recent market trends continue, China’s 2030 targets may also be reached ahead of time. Provincial governments are also supporting adoption of NEVs, with 18 provinces to date having set NEV targets.
Support at the regional level in China has also helped to advance some of the world’s largest EV makers. Shenzhen-based BYD has supplied most of the city’s electric buses and taxis, and its leading position is also reflected in Shenzhen’s ambition of reaching a 60% NEV sales share by 2025. Guangzhou, which has a 50% NEV sales share by 2025 target, facilitated the expansion of Xpeng Motors to become one of the national EV frontrunners.
Growth remained steady in Europe despite disruptions
Whether China’s electric car sales share will remain significantly above the 20% target in 2023 remains uncertain, as sales may have been especially high in anticipation of incentives being phased out at the end of 2022. Sales in January 2023 plunged, and while this is in part due to the timing of the Chinese New Year, they were nearly 10% lower than sales in January 2022. However, electric car sales caught up in February and March 2023, standing nearly 60% above sales in February 2022 and more than 25% above sales in March 2022, thereby bringing sales in the first quarter of 2023 more than 20% higher than in the first quarter of 2022.
In Europe,4 electric car sales increased by more than 15% in 2022 relative to 2021 to reach 2.7 million. Sales grew more quickly in previous years: annual growth stood at more than 65% in 2021 and averaged 40% over 2017-2019. In 2022, BEV sales rose by 30% relative to 2021 (compared to 65% growth in 2021 relative to 2020) while PHEV sales dipped by around 3%. Europe accounted for 10% of global growth in new electric car sales. Despite slower growth in 2022, electric car sales are still increasing in Europe in the context of continued contraction in car markets: total car sales in Europe dipped by 3% in 2022 relative to 2021.
The slowdown seen in Europe relative to previous years was, in part, a reflection of the exceptional growth in electric car sales that took place in 2020 and 2021 in the European Union, as manufacturers quickly adjusted corporate strategy to comply with the CO2 emission standards passed in 2019. These standards covered the 2020-2024 period, with EU-wide emission targets becoming stricter only from 2025 and 2030 onwards.
High energy prices in 2022 had a mixed impact on the competitiveness of EVs relative to internal combustion engine (ICE) cars. Gasoline and diesel prices for ICE cars spiked, but residential electricity tariffs (with relevance for charging) also increased in some cases. Higher electricity and gas prices also increased manufacturing costs for both ICE and EV cars, with some carmakers arguing that high energy prices could restrict future investment for new battery manufacturing capacity.
Europe remained the world’s second largest market for electric cars after China in 2022, accounting for 25% of all electric car sales and 30% of the global stock. The sales share of electric cars reached 21%, up from 18% in 2021, 10% in 2020 and under 3% prior to 2019. European countries continued to rank highly for the sales share of electric cars, led by Norway at 88%, Sweden at 54%, the Netherlands at 35%, Germany at 31%, the United Kingdom at 23% and France at 21% in 2022. In volume terms, Germany is the biggest market in Europe with sales of 830 000 in 2022, followed by the United Kingdom with 370 000 and France with 330 000. Sales also exceeded 80 000 in Spain. The share of electric cars in total car sales has increased tenfold in Germany since before the Covid-19 pandemic, which can in part be explained by increasing support post-pandemic, such as purchase incentives through the Umweltbonus, and a frontloading of sales in 2022 in expectation of subsidies being further reduced from 2023 onwards. However, in Italy, electric car sales decreased from 140 000 in 2021 to 115 000 in 2022, and they also decreased or stagnated in Austria, Denmark and Finland.
The United States confirms return to growth
Sales are expected to continue increasing in Europe, especially following recent policy developments under the ‘Fit for 55’ package. New rules set stricter CO2 emission standards for 2030-2034 and target a 100% reduction in CO2 emissions for new cars and vans from 2035 relative to 2021 levels. In the nearer term, an incentive mechanism operating between 2025 and 2029 will reward manufacturers that achieve a 25% car sales share of zero- and low-emission cars (17% for vans). In the first two months of 2023, battery electric car sales were already up by over 30% year-on-year, while overall car sales increased by just over 10% year-on-year.
In the United States, electric car sales increased 55% in 2022 relative to 2021, led by BEVs. Sales of BEVs increased by 70%, reaching nearly 800 000 and confirming a second consecutive year of strong growth after the 2019-2020 dip. Sales of PHEVs also grew, albeit by only 15%. The increase in electric car sales was particularly high in the United States, considering that total car sales dropped by 8% in 2022 relative to 2021, a much sharper decrease than the global average (minus 3%). Overall, the United States accounted for 10% of the global growth in sales. The total stock of electric cars reached 3 million, up 40% relative to 2021 and accounting for 10% of the global total. The share of electric cars in total car sales reached nearly 8%, up from just above 5% in 2021 and around 2% between 2018 and 2020.
A number of factors are helping to increase sales in the United States. A greater number of available models, beyond those offered by Tesla, the historic leader, helped to close the supply gap. Given that major companies like Tesla and General Motors had already reached their subsidy cap under US support in previous years,5 new models from other companies being available means that more consumers can benefit from purchase incentives, which can be as high as USD 7 500. Awareness is increasing as government and companies lean towards electrification: in 2022, a quarter of Americans expect that their next car will be electric, according to the American Automobile Association. Although charging infrastructure and driving range have improved over the years, they remain major concerns for US drivers given the typically long travel distances and lower popularity and limited availability of alternatives such as rail. However, in 2021 the Bipartisan Infrastructure Law strengthened support for EV charging, allocating USD 5 billion in total funding over the 2022-2026 period through the National Electric Vehicle Infrastructure Formula Program, as well as USD 2.5 billion in competitive grants over the same period through the Charging and Fueling Infrastructure Discretionary Grant Program.
The acceleration in sales growth could continue in 2023 and beyond thanks to recent new policy support (see Prospects for electric vehicle deployment). The Inflation Reduction Act (IRA) has triggered a rush by global electromobility companies to expand US manufacturing operations. Between August 2022 and March 2023, major EV and battery makers announced cumulative post-IRA investments of USD 52 billion in North American EV supply chains, of which 50% is for battery manufacturing, and about 20% each for battery components and EV manufacturing. Overall, company announcements including tentative commitments for US investments for future battery and EV production add up to around USD 75-108 billion. As an example, Tesla plans to relocate its Berlin-based lithium-ion battery gigafactory to Texas, where it will work in partnership with China’s CATL, and to manufacture next-generation EVs in Mexico. Ford also announced a deal with CATL for a battery plant in Michigan, and plans to increase electric car manufacturing sixfold by the end of 2023 relative to 2022, at 600 000 vehicles per year, scaling up to 2 million by 2026. BMW is seeking to expand EV manufacturing at its plant in South Carolina following the IRA. Volkswagen chose Canada for its first battery plant outside Europe, which will begin operations in 2027, and is also investing USD 2 billion in its plant in South Carolina. While these investments can be expected to lead to high growth in the years to come, the impact may only fully be seen from 2024 onwards as plants come online.
In the immediate term, the IRA has constrained eligibility requirements for purchase incentives, as vehicles need to be produced in North America in order to qualify for a subsidy. However, electric car sales have remained strong since August 2022, and the first months of 2023 have been no exception: In the first quarter of 2023, electric car sales increased 60% compared to the same period in 2022, potentially boosted by the January 2023 removal of the subsidy caps for manufacturers, which means models by market leaders can now benefit from purchase incentives. In the longer-term, the list of models eligible for subsidies is expected to expand.
The 2023 outlook for electric cars is bright
Early indications from first quarter sales of 2023 point to an upbeat market, supported by cost declines as well as strengthened policy support in key markets such as the United States. Globally, our current estimate is therefore for nearly 14 million electric cars to be sold in 2023, building on the more than 2.3 million already sold in the first quarter of the year. This represents a 35% increase in electric car sales in 2023 compared to 2022 and would bring the global electric sales share to around 18%, up from 14% in 2022.
Electric car sales in the first three months of 2023 have shown strong signs of growth compared to the same period in 2022. In the United States, more than 320 000 electric cars were sold in the first quarter of 2023, 60% more than over the same period in 2022. Our current expectation is for this growth to be sustained throughout the year, with electric car sales reaching over 1.5 million in 2023, bringing the electric car sales share in the United States up to around 12% in 2023.
In China, electric car sales were off to a rough start in 2023, with January sales being 8% lower than in January 2022. The latest available data suggests a quick recovery: over the entire first quarter of 2023, electric car sales in China were more than 20% higher than in the first quarter of 2022, with more than 1.3 million electric cars being registered. For the remainder of 2023, we expect the generally favourable cost structure of electric cars to outweigh the effects of the phase-out of the NEV subsidy. As a result, our current expectation is for electric car sales in China to be more than 30% higher than in 2022 and reach around 8 million by the end of 2023, reaching a sales share of over 35% (from 29% in 2022).
Based on recent trends and tightening CO2 targets not going into effect until 2025, the growth of electric car sales in Europe is expected to be the lowest of the three largest markets. In the first quarter of 2023, electric car sales in Europe increased by around 10% compared to the same period in 2022. For the full year, we currently expect electric car sales to increase by over 25%, with one-in-four cars sold in Europe being electric.
Outside of the major EV markets, electric car sales are expected to reach around 900 000 in 2023 – 50% higher than in 2022. Electric car sales in India in the first quarter of 2023 are already double what they were in the same period in 2022. In India and across all regions outside the three major EV markets, electric car sales are expected to represent 2-3% of car sales in 2023, a relatively small yet growing share.
There are, of course, downside risks to the 2023 outlook: a sluggish global economy and the phase-out of subsidies for NEVs in China could reduce 2023 growth in global electric car sales. On the upside, new markets may open up more quickly than anticipated, as persistent high oil prices make the case for EVs stronger in an increasing number of settings. And new policy developments, such as the April 2023 proposal from the US Environmental Protection Agency (EPA) to strengthen GHG emissions standards for cars, may send signals that boost sales even before going into effect.
The number of electric car models rises, especially for large cars and SUVs, at the same time as it decreases for conventional cars
The race to electrification is increasing the number of electric car models available on the market. In 2022, the number of available options reached 500, up from below 450 in 2021 and more than doubling relative to 2018-2019. As in previous years, China has the broadest portfolio with nearly 300 available models, double the number available in 2018-2019, prior to the Covid-19 pandemic. This remains nearly twice as many as in Norway, the Netherlands, Germany, Sweden, France and the United Kingdom, which all have around 150 models available, more than three times as many as before the pandemic. In the United States, there were fewer than 100 models available in 2022, but twice as many as before the pandemic; and 30 or fewer were available in Canada, Japan and Korea.
The 2022 trend reflects the increasing maturity of EV markets and demonstrates that carmakers are responding to increasing consumer demand for electric cars. However, the number of electric car models available remains much lower than that of conventional ICE cars, which has remained above 1 250 since 2010 and peaked at 1 500 in the middle of the past decade. In recent years, the number of ICE models sold has been steadily decreasing, at a compound annual growth rate of minus 2% over the 2016-2022 period, reaching about 1 300 models in 2022. This dip varies across major car markets and is most pronounced in China, where the number of available ICE options was 8% lower in 2022 than in 2016, versus 3-4% lower in the United States and Europe over the same period. This could result from contracting car markets and a progressive shift towards EVs among major carmakers. Looking forward, the total number of ICE models available could remain stable, while the number of new models shrinks, if carmakers focus on electrification and keep selling existing ICE options rather than increasing budgets to develop new models.
In contrast to ICE models, EV model availability has been growing quickly, at a compound annual growth rate of 30% over the 2016-2022 period. Such growth is to be expected in a nascent market with a large number of new entrants bringing innovative products to the market, and as incumbents diversify their portfolios. Growth has been slightly lower in recent years: the annual growth rate stood at around 25% in 2021 and 15% in 2022. In the future, the number of models can be expected to continue to increase quickly, as major carmakers expand their EV portfolios and new entrants strengthen their positions, particularly in emerging markets and developing economies (EMDEs). The historic number of ICE models available on the market suggests that the current number of EV options could double, at least, before stabilising.
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