The rise of EVs: transforming the auto & energy industry

The rise of EVs has significant implications for the energy sector, particularly oil, as the IEA estimates that by 2030, EVs will avoid the need for at least 5 million barrels of oil per day. This is a clear indication that the internal combustion engine, which has dominated the auto industry for over a century, is being challenged by EVs.

The positive trends in EV sales are also having a knock-on effect on battery production and supply chains. The IEA’s report highlights that there are enough announced battery manufacturing projects to meet the demand for EVs up to 2030 in its Net Zero Emissions by 2050 Scenario. However, manufacturing remains highly concentrated, with China dominating the battery and component trade and increasing its share of global EV exports to over 35% in 2022.

Other economies are also taking steps to improve their competitiveness in the EV market. For example, the EU’s Net Zero Industry Act aims to meet nearly 90% of annual battery demand through domestic battery manufacturers, while the US Inflation Reduction Act places emphasis on strengthening domestic supply chains for EVs, batteries, and minerals. Major EV and battery makers have announced investments totaling at least USD 52 billion in EV supply chains in North America between August 2022 and March 2023, following the passage of the Inflation Reduction Act.

While the concentration of EV sales and manufacturing in only a few big markets is a concern, there are promising signs in other regions. Electric car sales more than tripled in India and Indonesia last year, and they more than doubled in Thailand. The share of EVs in total sales rose to 3% in Thailand and to 1.5% in India and Indonesia, and effective policies and private sector investment are likely to increase these shares in the future.

In developing economies, the most dynamic area of electric mobility is two- or three-wheel vehicles, which outnumber cars. For example, over half of India’s three-wheeler registrations in 2022 were electric, demonstrating their growing popularity. In many developing economies, two- or three-wheelers offer an affordable way to access mobility, making their electrification crucial to supporting sustainable development.

In conclusion, the rise of EVs is transforming the auto industry and has significant implications for the energy sector. The strong growth in EV sales, particularly in China, Europe, and the US, is driving investments in battery production and supply chains. While there are concerns about the concentration of EV sales and manufacturing in a few big markets, there are also promising signs in other regions, and the electrification of two- or three-wheel vehicles in developing

Source: global EV outlook 2023 | IEA