Report: The electric car revolution will happen faster than expected

July 7, 2017

Much of today's auto world is obsessed with a very important question: when will electric cars really take off?

A new report from Bloomberg New Energy Finance has an answer: sooner than anyone thinks.

BNEF closely tracks electrification trends among today's automakers. In 2016, the firm predicted that electric and plug-in hybrid vehicles would make up about 35 percent of the world's auto market by the year 2040. This year, BNEF upped that figure considerably.

In fact, by 2040, analysts now say that 54 percent of all cars sold on the planet will be electric.

How is that possible, given that electric vehicles currently account for less than three percent of vehicles sold around the globe?

It all comes down to the price of lithium-ion batteries, which are now 73 percent cheaper per kWh than they were in 2010. Based on current trends, the batteries used in 2030 are likely to be 70 percent cheaper than those in use today.

But there's more to it than that. By 2040, not only will electric vehicles cost the same or less to buy than cars with internal combustion engines (ICE), but with fewer moving parts and the fact that they don't require fossil fuels, they'll also be cheaper to maintain. That double-whammy of cost-savings will drive demand for EVs, and that, in turn, will help drive supply.

When will we reach the tipping point? BNEF's Colin McKerracher expects it to happen in about a decade: "We see a momentous inflection point for the global auto industry in the second half of the 2020s. Consumers will find that upfront selling prices for EVs are comparable or lower than those for average ICE vehicles in almost all big markets by 2029."

Not surprisingly, the countries where demand for electric cars is strong now are expected to lead the EV revolution. From a statement issued by BNEF:

"BNEF sees [electric vehicles] accounting for nearly 67% of new car sales in Europe by 2040, and for 58% in of sales in the U.S. and 51% in China by the same date. Countries that have made early progress in EV uptake are expected to be among the leaders in 2040, including Norway, France, and the U.K. Emerging economies such as India are forecast not to see significant EV sales until the late 2020s."

The timing of this report is likely music to the ears of automakers like Volvo, which just this week announced plans to electrify all new cars, starting in 2019. It's also welcome news to France, which is considering a ban on sales of gas and diesel vehicles by the year 2040. 

You can read a brief executive summary of the BNEF report here.

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