In this day and age, just about everyone who’s paying attention — even stalwarts of the auto and oil industries — acknowledges that vehicle electrification is the future. But how far in the future are we talking about? Forecasts are all over the map. Automakers and governments have begun setting target dates (or, more often, “aspirational goals”) for the end of the Oil Age. Fossil fuel fans tend to disparage these as unrealistic, and environmental advocates ridicule them as hopelessly timid.
What about independent analysts? Management consultants, information providers, think tanks — whatever you call them, these outfits study technologies and markets in great detail, and prepare thick reports containing predictions backed up by reams of data, for which they charge corporate and governmental customers large sums. These outfits are staffed by experts, and they all have access to the same data, so their forecasts about the electrification of the auto industry should be fairly similar, right?
Well, not really. Looking at the numerical forecasts from different analysts, we find that their predictions differ significantly. Of course, it’s hard to make apples-to-apples comparisons, for several reasons. For one thing, the various outlets don’t publish their forecasts on a coordinated schedule — they all continually update their predictions as conditions change, and a forecast made this month is bound to be different from one made back in December, especially considering the economic upheavals caused by the pandemic. Also, different organizations tend to focus on different types of trends — some go into detail about technological developments, while others emphasize political or economic factors. Finally, they’re not all looking at the same timeframe — most reports focus on the present and the near future, but some dare to make projections a couple of decades out.
One metric that we do often see is the date by which EVs will start to outsell legacy gas burners, so let’s look at the forecasts from some of the most-cited analysts as to when that event is likely to take place. IHS Markit, which weighed in on the issue in January 2021, predicts that, in 2025, global sales of plug-in vehicles will top 12.2 million. Bloomberg New Energy Finance, in a 2020 report, predicted that global EV sales will be 8.5 million in 2025, and that over half of all passenger vehicles sold will be electric by 2040. A more recent BNEF report, from May 2021, found that it is perfectly feasible (not that it will necessarily happen) for 100% of vehicle sales in the EU to be EVs by 2035. The Boston Consulting Group predicted in April 2021 that electrified vehicles will account for more than half of light vehicles sold globally by 2026.
Why is there such a wide range of opinions among the analysts? For one thing, there are a lot of wild cards in the deck. It seems certain that EV technology will continue to improve rapidly, and that prices will continue to fall. However, other factors — such as the behavior of automakers, governments, and consumers — are unpredictable. Automakers are fickle, and several — including Nissan, BMW, and Toyota — have reversed their policies on electrification over the years. At the moment, VW and GM seem to be all in on electrification, but there’s no guarantee that they’ll follow through. One or more of the EV startups could become players, which would be a welcome development — Tesla can’t get the job done alone — but they face a long, rough road, and not all will make it to the end. Progress on the vehicle autonomy front would give a huge boost to EV demand. Once self-driving robotaxis become a reality, owning a gas car will quickly become like owning a horse, as Elon Musk has quipped — but he can’t predict when that’s going to happen. Government policies and the development of charging infrastructure are just a couple of the other X factors that make precise predictions impossible.
There are a couple of things that all the analysts cited here agree on. One is that Europe is currently leading the electrification race, outpacing China, and that the US is lagging far behind. McKinsey’s 2020 Electric Vehicle Index reported that, in the first quarter of 2020, EV sales declined by 33 percent in the US, while they increased by 25 percent in Europe. The report looked at EV penetration rates in 16 countries — nine of the top ten were in Europe, and the US ranked dead last. EV sales have grown significantly over the past year, but the US is still not catching up to its global competitors. IHS Markit predicts that, in 2021, China will account for 44% of the EV market, Europe about 28%, and North America a paltry 16%.
Another common thread among the various reports is that, so far, Tesla has been the world’s undisputed EV leader. McKinsey reported that the California carmaker increased its share of the global EV market from 12% in 2018 to 16% in 2019, mostly thanks to the global launch of Model 3. This may not last, however. In Europe, local rivals have already knocked Tesla out of the top spot — IHS Markit tells us that in 2020, Volkswagen Group led the European EV market with a 24% market share, followed by Renault (16%), and Tesla in third place (8.6%). And a lot more competition is on the way — BNEF predicts that by 2022, there will be over 500 different electrified models available globally.
There’s another finding that most analysts agree on, and it isn’t good news: the current pace of electrification is much too slow to stave off catastrophic climate change. A new report from the International Energy Agency finds that “climate pledges by governments to date — even if fully achieved — would fall well short of what is required to bring global energy-related carbon dioxide emissions to net zero by 2050 and give the world an even chance of limiting the global temperature rise to 1.5° C.” According to the IEA report, if we don’t want to end up underwater, sales of new fossil fuel-burning passenger cars must end, to be replaced by EVs powered by renewable energy, by 2035.