Despite a difficult 2020, amid the Covid-19 pandemic, the electric vehicle market continues to grow, enabled by sharp declines in battery cost and sustained policy from governments motivated to improve air quality, reduce greenhouse gas emissions, improve energy security, and develop new economic opportunities.
While still a relatively small share of auto sales for now, electric vehicle (EV) demand is forecast to rise substantially over the coming decades, with most meaningful increases in demand beginning around the mid-2020s as technology, consumer taste, and government regulation gradually converge to hasten the adoption of greener technology.
We think it is important to emphasize that while EVs will become a substantial part of auto sales over the 10-15 years, which will impact OEMs and production-centric economies, EVs’ share of the overall fleet (total number of vehicles on the road) will move much more slowly, barring regulation that bans autos powered by internal combustion engines.
Yet, while at present the cost to manufacture an EV is still higher than an internal combustion engine, we also expect that continued market expansion will lower costs through economies-of-scale and more competition leading to innovations in design and manufacturing for EVs.
Gareth Colesmith, head of global rates and macro research, fixed income, Insight Investment.