While many describe a widespread adoption of electric vehicles (EVs) as inevitable, a closer look at the global market reveals more nuanced trends driven by a complex interplay of economic pressures, policy changes, and consumer preferences. In this article, I will highlight the unique characteristics of three key markets - Europe, the United States, and China - to explain this uneven growth across different geographies.
The initial roar of EVs is simmering down as the growth, while persistent, is not hitting the high notes once projected. In 2023, new electric car registrations reached nearly 3.2 million in 2023, increasing by almost 20% relative to 2022.
The concerns are most palpable in markets like Germany, which, until recently, led the charge with generous subsidies. The rollback of these incentives has made the switch to pricier EVs less appealing for the average buyer. Germany saw its EV sales share fall from 30% in 2022 to 25% in 2023 due to these changes. However, countries like France, the UK, and the Netherlands continue to see strong sales, with Norway leading at nearly 95% EV sales share. Figure 1 by the EEA shows the varying degree of EV enthusiasm across EU nations; including a distinction between battery electric vehicles and plug-in electric cars.
The biggest update is, of course, the implementation of anti-subsidy tariffs of up to 38% on imports of Chinese electric vehicles. This tariff hike is added to the pre-existing 10% levy on cars imported into the EU, which means that EVs made in China face total tariffs of up to 48%. In response, Chinese car manufacturers are pressuring Beijing to impose retaliatory tariffs of 25% on the imports of petrol-driven European cars. It remains to be seen how this trade war will unfold.
Across the Atlantic, the U.S. is scripting a different story, with the Inflation Reduction Act (IRA), the nation’s biggest commitment to the green transition change so far, leading to a renaissance in local manufacturing. Additionally, President Biden announced a 100% tariff on the imports of Chinese EVs.
The IRA, partly designed to lessen their dependence on China, dictates that only EVs with locally sourced components qualify for subsidies. According to BENCHMARK MINERAL INTELLIGENCE LIMITED, this sent a shockwave through the battery landscape, with its ripples being felt far beyond the American borders. Since 2021, companies pledged over USD 100 billion to manufacturing investments designed for developing the United States’ battery supply chain. This goes hand-in-hand with a keen interest in magnet wire manufacturing.
Even though this protectionist yet pragmatic policy could very well be a game-changer for EV market in the U.S., it is also not without controversy. In their article for Financier Worldwide Magazine, analysts Andrew Shaw and Linda Willard give an excellent overview of the republican criticism, including concerns over grid reliability and distorting the market by artificially promoting renewables.
Aside from these geopolitical updates, there seems to be an uptake in vandalism targeted towards EV charging points. Netizens across the US report being unable to use public chargers due to the cables being cut, or drivers parking their internal combustion car to block the access to the charger. This practice is also known as ‘ICEing’.
China’s march towards dominating the EV market seems unstoppable. Earlier this year, Chengy Lin reported in Harvard Business Review that in 2022, China’s new EV sales accounted for almost 60% of global EV purchases. Most of them being domestic brands that benefited from multiple policy efforts aimed at, for example, battery capacity.
Biggest newcomer of the year is Xiaomi’s Speed Ultra 7 (SU7) sedan. In China, the starting price of this first EV by the popular Chinese smartphone brand is about USD 4,000 cheaper than Tesla’s Model 3. A pricing that positions it aggressively against Porsche and Tesla, the premium brands it wants to compete with.
Other factors that help explain the Chinese rise to EV fame include their position as the global leader in the production of the required rare earth metals, and focus on solving operational challenges to make EV adoption as convenient as possible. An example? Large-scale battery swapping that could potentially also lead to an industry-wide standardization of EV battery technology. Nio is the innovator here, but many companies on the Chinese market are investigating this. For smaller electric trucks, there are also several suppliers.
Battery swapping can prove particularly useful when you have to cover long distances, when there are few opportunities to charge your vehicle, or when spending a lot of time charging your EV is not an option. Because you are, for example, driving a long-haul truck, live in a high-rise building with a limited number of charging points, or you work as a delivery driver and cannot afford to lose time.
These are all valuable reasons and motivations for, among other Chinese brands, Nio to keep investing in battery-swapping technology. And the efforts are paying off, even in one of the most challenging EV segments: heavy trucks. According to BNEF analyst Siyi Mi, almost 50% of all heavy battery electric trucks sold in China in 2023 had swappable batteries. Among them, XCMG, Farizon and Sany heavy trucks topped the lists of sales. Worth the mention: despite the swappable battery concept, Nio is still moving into 800V, showing that the value is not only there for fast charging.
Interestingly, China was relatively late to the export game. As demonstrated by the figure below, it wasn’t until 2017 that the export of EVs started taking off. (Source: International Council on Clean Transportation.)
And taking off it did, indeed. Official data on the EU-China trade relations indicate that, in the first 7 months of 2023, the import of Chinese EVs rose by an explosive 361 % from 2021. Brands such as BYD and GEELY charm the European consumer with their tried and tested strategy of undercutting rivals by up to 25%. It remains, of course, to be seen whether and how the new tariffs will impact this success.
In summary, the global EV narrative is as much about the journey as it is about the destination.
