The electric vehicle market reached a major milestone in 2019 when combined annual sales passed the 2 million mark for the first time. Experts predicted that electric vehicles would continue to build off of this success in 2020. But the unprecedented COVID-19 pandemic disrupted the entire automotive industry, including the electric vehicle sector.
Despite last year’s challenges, the electric vehicle market still has a bright future ahead. How quickly will the electric market grow? What will drive the growth in this market? What should automotive consumers expect when shopping for an electric vehicle in the future? Here is what experts believe will happen in the electric vehicle market by 2030:
Electric Vehicle Growth By Market
Experts predict that the electric vehicle market will experience a compound annual growth rate of 29% over the next decade. This means annual electric vehicle sales will increase from 2.5 million units in 2020 to over 31 million units by 2030, which would account for 32% of all new automotive sales.
The electric vehicle market is expected to grow faster in certain markets. According to industry experts, electric vehicles could secure nearly half of the domestic market share in China by 2030. However, electric vehicles are only expected to secure about 27% of the automotive domestic market share in the U.S.
The electric vehicle market will grow faster in Northern and Western European countries compared to Southern and Eastern European countries. This is because the former countries have more resources to invest in infrastructure and offer to consumers and businesses as financial rewards for purchasing new electric vehicles.
By 2030, experts believe that China will hold just under half of the global electric vehicle market share, followed by Europe, which will secure 27% of the global market share, and the U.S., which will hold 14%.
Change in Consumer Attitude
Experts believe that one of the main driving factors fueling the growth of the electric vehicle market in the years ahead will be a change in consumer attitudes.
The Deloitte Global Auto Consumer Study measured consumers’ attitudes toward electric vehicles in 2018 and 2020. This study revealed that consumers have a number of concerns about purchasing an electric vehicle, including the cost, limited driving range, the time required to fully charge, and lack of public chargers. However, the study also revealed that most of these concerns are slowly starting to fade away.
For example, 26% of U.S. consumers cited cost as their number one concern related to electric vehicles in 2018. But in 2020, this number dropped to only 18%. Concerns related to the cost of electric vehicles diminished in other countries, including France, where it dropped from 32% in 2018 to 22% in 2020.
Consumer concerns related to a limited driving range also diminished in a number of countries, including France, Germany, UK, and China, where it dropped from 25% in 2018 to 22% in 2020.
This doesn’t mean that consumers are completely on board with the idea of purchasing an electric vehicle. Other concerns, such as lack of public charging equipment, grew over this two-year period in France, Germany, UK, China, and the U.S. However, the data shows that it is possible to change consumers’ minds in as little as two years.
Automotive manufacturers may want to consider investing in marketing campaigns aimed to educate consumers on electric vehicles. These campaigns could address these concerns and help consumers see electric vehicles in a completely different light.
Experts predict that seeing more electric vehicles on the roads could help consumers get past their initial concerns. Over the next decade, many consumers will travel in electric vehicles owned by their family members or friends, ride in electric buses used for public transportation, and see electric vans or trucks used for commercial purposes. Seeing and experiencing electric vehicles on a regular basis could help consumers view them more favorably.
As these concerns continue to fade in the years ahead, more consumers may start to see the benefits of owning an electric vehicle. This shift in consumer sentiment could lead to significant growth in the electric vehicle market.
Another factor that could impact the electric vehicle market is government intervention. Several different policies and regulations established by government agencies could impact the future of the electric vehicle market, including:
- Fuel Economy and Emission Goals
- State-Level Bans
- New Financial Incentives
- COVID-19 Recovery Plans
Fuel Economy and Emission Goals
Many countries have recently set fuel economy and emission goals in an effort to reduce greenhouse gases and minimize the impact of climate change.
For example, the European Union (EU) set a goal to reduce its greenhouse gas emissions by at least 55% by 2030. To reach this goal, the EU established average emission targets for all new cars, trucks, and vans manufactured in 2020 or later.
Manufacturers that produce vehicles that exceed this emissions target could face steep fines. In fact, a recent analysis revealed that automotive manufacturers could face over $3.7 billion in fines in 2021 due to this new regulation.
Experts predict that automotive manufacturers will begin to invest heavily in increasing the fuel efficiency of vehicles in order to avoid these annual fines. A significant portion of this investment could go toward the production of electric vehicles. Thus, this government regulation could have a direct impact on the electric vehicle market.
Several states in the U.S. have introduced legislation that would ban the sale of vehicles with combustion engines.
For example, Washington’s Clean Cars 2030 Act would prohibit the sale of any passenger vehicle with a combustion engine manufactured in 2030 or later. If it passes, this legislation could leave Washington residents with no other choice but to buy electric vehicles beginning in 2030.
Washington isn’t the only state that is taking action to promote electric vehicles. Last year, California Governor Gavin Newsom signed legislation that will phase out the sale of gasoline-powered vehicles in the state by 2035.
This type of legislation could boost the electric vehicle market over the next several decades.
New Financial Incentives
Some governments now offer automotive consumers financial incentives for choosing electric vehicles over gas-powered vehicles.
In France, for example, consumers who purchase electric vehicles receive a financial incentive of up to $8,000. Automotive consumers in the U.S., on the other hand, could qualify for a tax credit of up to $7,500 for purchasing a new electric vehicle.
The German government also incentivizes the purchase of electric vehicles by offering consumers a lower value-added tax (VAT) on all low-emission vehicles.
Many consumers may be motivated to purchase electric vehicles instead of gas-powered vehicles just so they can take advantage of these financial incentives.
COVID-19 Recovery Plans
Many governments are passing recovery plans that are designed to help consumers and the economy as a whole bounce back from the devastating effects of the COVID-19 pandemic. The details of these plans could impact the future of the electric vehicle market.
For example, Germany recently passed a $146 billion COVID-19 recovery plan. About $2.8 billion of this budget is being invested in electric vehicle infrastructure.
China is another country that is incorporating an investment into electric vehicles into its COVID-19 recovery plan. In China, about $378 million of the COVID-19 recovery plan budget is going toward electric vehicle infrastructure.
Funding the development of electric vehicle infrastructure could lead to the widespread adoption of electric vehicles in the near future.
New Electric Vehicle Models
There are currently only a handful of players in the electric vehicle market. Tesla, which has a market share of approximately 16%, is considered the market leader. But a number of new competitors could emerge over the next decade that could shake up the electric vehicle market.
In 2019, automotive manufacturers launched a total of 143 new electric vehicles. But industry analysts predict that over 450 new electric vehicle models will launch by the end of 2022.
Many automotive manufacturers have already announced that they plan to commit significant resources to the production of electric vehicles over the next few years. Some of the strategic electric vehicle goals set by automotive manufacturers include:
- Mazda will release its first electric vehicle by the end of 2021. The company plans on making only electric or hybrid vehicles by the early 2030s.
- Toyota has set an electric vehicle sales goal of 30,000 units for 2021.
- Fiat Chrysler plans on releasing at least 30 new electric vehicles by the end of 2022.
- BMW will release at least 25 new electric vehicles by 2023.
- Ford will invest $11.5 billion in electric vehicles and add 40 electric vehicles to its global portfolio by the end of 2022.
- General Motors has set an electric vehicle sales goal of 1 million units by 2025.
- Volvo would like electric vehicles to account for 50% of all global sales by 2025.
- Hyundai will invest $87 billion in electric vehicles and introduce 44 new electric vehicle models by 2025.
- Honda would like electric vehicles to account for two-thirds of its global sales by the year 2030.
Experts believe that automotive manufacturers are truly committed to meeting these ambitious targets. If so, this means that there will be a major shift toward the production of electric vehicles in the automotive industry over the next 10 years.
It could also mean that automotive consumers will have far more electric vehicle options to choose from. This could lead to an increase in sales since there may be an electric vehicle to meet the needs of every type of automotive consumer.
Since the marketplace will become increasingly competitive, automotive manufacturers may need to launch aggressive marketing campaigns to win over electric consumers. Some of these marketing campaigns may focus on converting existing gas-powered vehicle customers to electric vehicle customers. But others may focus on converting new customers to electric vehicle customers instead.
It’s important to note that the goals listed above were set by established players in the automotive industry. But a number of new companies that solely produce electric vehicles may enter the automotive industry over the next decade. Not all of these companies will succeed, but the ones that do could potentially disrupt the electric vehicle market.
Corporations have always played a big role in the automotive industry. For instance, businesses currently account for about 63% of all new automotive sales in Western European countries. But experts predict that corporations will start to use their purchasing power to drive growth in the electric vehicle market in the years ahead.
Many companies are trying to differentiate themselves from their competitors by taking a stance on social causes, including climate change. Experts believe that many corporations will begin supporting the shift to electric vehicles in an effort to show the public that they are serious about mitigating the effects of climate change.
But this isn’t the only reason why companies may start to show more support for electric vehicles over the next decade. It costs about $0.10 per mile to fuel a gas-powered vehicle, but it only costs about $0.03 per mile to fuel an electric vehicle. Switching to electric vehicles can help companies that utilize commercial fleets save thousands of dollars on fuel expenses every year.
Companies that run commercial fleets can also save money on maintenance costs by switching to electric vehicles. Electric vehicles are designed with fewer parts than gas-powered vehicles. Plus, they don’t require fluid replacement services. For these reasons, electric vehicles are easier and less expensive to maintain than gas-powered vehicles.
Companies could also receive financial incentives for supporting the switch to electric vehicles. For example, the city of Pasadena offers companies up to $50,000 for installing electric vehicle chargers in public areas.
Some businesses could also qualify for financial incentives provided by the government simply by switching to electric vehicles. Businesses in the UK, for instance, may be able to save up to £3,000 on the purchase of a small electric van and up to £6,000 on the purchase of a large electric van.
If the corporate world switches to electric vehicles in the next decade, not only will this directly lead to an increase in global electric vehicle sales, but it may also inspire consumers to follow their lead.
It’s too early to measure the accuracy of these predictions. But if experts are right, manufacturers, dealers, and other parties in the automotive industry must start to prepare for the rise in popularity of electric vehicles.