The 20 largest OEMs accounted for 90% of all LDVs sold globally in 2021. Based on a weighted average of their announced EV sales targets, 21% of their overall sales in 2025 will be electrified, 56% by 2030, 78% by 2035 and 84% by 2040.
- If sales targets are achieved, leading OEMs would sell 46 million EVs in 2030 and 80 million in 2040 – assuming an average of 2% annual growth in overall global LDV production/sales from present to 2040. In contrast, the S&P Global Commodity Insights reference forecast shows 26 million EVs sold in the year 2030 and 57 million in 2040.
- Complex challenges that OEMs need to address to achieve these goals include the reduction of EV production costs and expanded charging networks for the vehicles to encourage growth in consumer demand.
- According to S&P Global Commodity Insights, demand for key battery metals is set to rise to an annual amount of 2 million mt in 2030, 3.3 million mt in 2035, and 4.5 million mt in 2040 in comparison to the 500,000 mt of demand in 2021. If OEM supply targets are actualized this demand would increase by an additional 70% in 2030 and 40% in 2040.
In 2021, internal combustion engine vehicles dominated overall light-duty vehicle sales, accounting for approximately 91% of the global market share.
However, as a whole, the LDV market experienced a sharp downturn in sales over the past two years due to the pandemic’s negative impacts on economic growth/wealth and travel behavior coupled with global supply chain shortages.
In fact, while ICE sales rose by 2.8% year on year in 2021, they still fell 15% short of pre-pandemic 2019 annual sales. In contrast, annual electric vehicle sales have surpassed pre-pandemic levels, tripling 2019 sales figures and doubling 2020 sales to achieve a record 6.29 million unit sales in 2021.
S&P Global Commodity Insights expects that total LDV sales will return to pre-pandemic levels by 2023 as supply chain tightness unwinds and broader mobility metrics continue to normalise. However, S&P Global’s forecast shows global peak ICE sales have already occurred, taking place in 2016, and will decline again over the longer term as electric vehicle sales expand.
This divergent trend is expected to continue due to a number of factors including policy/regulation pressures, expansion of EV charging infrastructure, and a decrease in EVs’ initial and lifespan costs. In addition to these factors, a driving force behind the market evolution will be automotive original equipment manufacturers’ focused efforts and increased investments in the growth of the EV market.
Leading global OEMs, including Volkswagen, BYD, Toyota, Ford, and others’ cumulative investments total over half a trillion dollars in every facet of the EV supply chain, including battery and electric vehicle research and production through 2030 alone.
In 2021, the 20 largest OEMs in the automotive sector accounted for 90% of all LDV sales worldwide. On top of financial investments, each of these 20 OEMs has set targets for increased integration of EVs into their annual vehicle sales. By 2030, five OEMs are targeting a complete shift to only EVs, growing to nine OEMs in 2035, and 12 by 2040.
All but one of the remaining top 20 OEMs have targeted at least 25% of sales to be electrified by 2040. Assuming these targets are met, the weighted average of EV sales from these top 20 OEMs will account for 21% of their overall sales in 2025, 56% by 2030, 78% by 2035 and 84% by 2040. This would result in over 46 million EVs sold in 2030 and 80 million in 2040.
Goals that, if achieved, would bolster the OEMs in many of their efforts to attain elusive carbon neutrality targets. S&P Global’s 2-degree outlook for the EV sector does align consumer demand with the OEMs’ supply targets by 2040.
This is important to note and provides an opportunity for governments to increase support through policy and funding to help achieve higher EV adoption. To reach the 2-degree scenario, government involvement is critical in removing barriers such as the availability of charging infrastructure and shrinking the gap in cost between EVs and ICE vehicles through subsidies for consumers.
The 2-degree outlook forecasts the multi-sectoral shifts in energy demand that would need to occur for global emissions to reduce to a level that would constrain temperature levels across the world from rising past 2 degrees Celsius (consensus global climate protection target).
Based on these shifts in energy demand the above figure outlines the demand for EVs that is required from the LDV sector to achieve this target.
The rise in consumer demand for EVs to equal these OEM supply targets will face several hurdles and challenges of its own. This includes the needed expansion of public EV charging points across the world to quell potential purchasers’ fear of being left stranded on a journey without a place to recharge their vehicle (range anxiety).
While the number of public EV charging points has increased exponentially over the past few years, their growth rate is not high enough to facilitate the uptake of these OEMs’ EV supply targets without dissuading a segment of consumer demand needed to meet said targets.
Additionally, production costs for EVs have decreased dramatically for OEMs as technology advancements coupled with larger economies of scale have come online. However, S&P Global does not forecast EV production costs to decline at a rate fast enough to reach a level that will entice enough consumer demand to meet the OEM supply targets.
In addition, S&P Global’s “most likely” EV demand forecast does not anticipate that these supply/sales targets will be fully achieved due to a number of other contributing factors. This includes the incongruous EV production lead time and targeted time horizons for OEMs attempting to produce EVs in line with their ambitions.
An increase in production capacities would require numerous areas of the EV supply chain to be enhanced and created for many OEMs. This includes the construction of battery manufacturing facilities for the battery packs used in the vehicle, a process that can take years on its own. Additionally, the impact of cross OEM competition must be taken into account as these companies work to increase their EV market share.
The purchase of an EV by a consumer is a zero-sum game that, while resulting in a consumer purchase for one OEM, will be a missed opportunity for another. This brings about the potentially most significant limiting factor in these OEMs’ quests to electrify their vehicle sales, consumer demand.
Perhaps the most notable challenge for OEMs is the cost of EV powertrains. The most significant cost component of an EV is the battery pack. While battery pack prices have declined drastically in the past decade, recent surges in demands for EVs coupled with only moderate growth in mining operations have resulted in key battery metals spot prices skyrocketing in recent months.
sulfate rose 42%, 46%, 3%, and 10%, respectively, month over month in February. While the average price per mt of these metals in 2021 rose year on year by 122%, 193%, 38%, and 63% respectively.
According to S&P Global’s “most likely” forecast, the demand for key battery metals from EVs will grow fivefold in the year 2030 and ninefold for 2040 in comparison to demand in 2021. Assuming today’s most popular battery cathode chemistry, nickel manganese cobalt, holds constant into the future, the metals in highest demand will be nickel, cobalt, manganese, and lithium. If OEM supply targets are met, the demand for these metals would increase by an additional 70% in 2030 and 40% in 2040.
