Battery facts and figures
By: Our Analysis Centre.
Of these, China is the largest market, with annual sales of 25 million cars, while the other three are fairly similar, at between 15 and 20 million a year. Global passenger car sales have fallen by around 10 per cent in recent years.
There are currently 7 million electrified cars on the road, 70 per cent of which are fully electric and the remainder plug-in hybrids. The share of electric cars has risen steadily in recent years, but remains relatively small. In 2020, an estimated 2.5 million, or 3 per cent, of new cars were electric.
Electric buses and mopeds are also sold in many markets, particularly in China. However, the number of electric buses remains fairly limited, and electric moped batteries are relatively small. Batteries for passenger cars are therefore expected to continue accounting for 90 per cent of the total market for vehicle batteries.
Growing share – dependent on price and support
Analysts agree that the share of electric vehicles will increase significantly over the coming decades, but there is still considerable uncertainty about how soon and how quickly this growth will occur. One key uncertainty is how the cost of electric vehicles will develop. At present, electric vehicles are largely unable to compete with fossil-fuel vehicles. They could become competitive if costs continue to fall rapidly, particularly if battery costs keep declining. Batteries currently account for around half the cost of an average electric vehicle. If and when a large proportion of motorists believe that an electric vehicle meets their needs and can compete on equal terms with a fossil-fuel vehicle, the share of electric vehicles will rise sharply. McKinsey estimates that the cost of battery cells will fall by 30 per cent over the next ten years, to around NOK 700 per kilowatt-hour (kWh).
Until then, support schemes and regulations – the other key source of uncertainty – will have a major impact on the pace of electric vehicle adoption. When China and the US reduced their electric vehicle subsidies in 2019, sales fell significantly in both countries. China has since increased its subsidies again. European countries, including Germany and the Netherlands, increased their subsidies last year, and electric vehicle sales in Europe rose by 25 per cent from 2018 to 2019, while overall car sales declined. In the third quarter of 2020, electric vehicles accounted for almost 10 per cent of all new cars sold in the EU. In Norway, which offers extensive electric vehicle subsidies, there is discussion of banning fossil-fuelled cars in certain areas to accelerate the adoption of electric vehicles.
The average electric car today has a 50–60 kWh battery. With sales of 2.5 million cars, the total capacity of the batteries produced is around 150 gigawatt-hours (GWh), or 150 million kWh per year.
Last summer, the International Energy Agency (IEA) estimated that, with moderate climate policies and support schemes, this market would grow to 1,500 GWh per year. Average battery capacity will increase to 70–80 kWh, while annual car sales will rise to 20 million. With more ambitious climate policies, the total market could double over the next decade. China is expected to account for 40 per cent of the market over the coming decades, while Europe will account for around half that share. The US Energy Information Administration (EIA) expects the number of passenger cars in OECD countries to increase slightly over the next 30 years, while the number of electric vehicles will rise sharply at the expense of diesel and petrol cars, from 3.5 million in 2018 to 169 million in 2050. Outside the OECD, the number of cars is expected to increase across almost all fuel types, including substantial growth in electric and hybrid vehicles. The number of electric vehicles outside the OECD is expected to rise from 2.2 million to 269 million by 2050.
Policy has a major impact
In the 2020 edition of its Global Energy Outlook, oil company BP examines how different policies will affect the transport sector's future fuel mix. It illustrates how policy decisions over the coming years will have a major impact on market growth, including the market for electric vehicle batteries. BP outlines three scenarios: one in which measures are implemented to rapidly reduce CO2 emissions from energy use by 70 per cent by 2050; one that meets the 1.5°C target, with CO2 emissions from energy use falling by 95 per cent by 2050; and one that follows recent climate policy trends, with CO2 emissions from energy use falling by just 10 per cent by 2050. BP expects energy use in the transport sector to increase in all three scenarios, so the level of ambition in climate policy will have far-reaching consequences for the electric vehicle market.
The potential is significant and difficult to estimate
Growth on this scale will have consequences for energy markets. Total global electricity production today is around 25,000 terawatt-hours (TWh), or 25 million GWh, of which almost 150 TWh is produced in Norway. With ambitious climate policies leading to 40 million electric vehicles being sold in 2030, the IEA estimates that the total number of electric vehicles will then consume 1,000 TWh. On the other hand, oil consumption will fall by up to 4 million barrels per day, equivalent to 4 per cent of current production. This could help reduce global greenhouse gas emissions by between 200 and 500 million tonnes per year, or approximately 0.5–1.2 per cent of current emissions.
By 2050, NHO forecasts a global market for electric vehicle batteries of 5,000 GWh, while a research paper by Xu et al. (2020) estimates that the market could reach 12,000 GWh under a stringent climate policy supported by generous incentive schemes. Given that current sales are only a fraction of this, the actual uncertainty is likely to be considerably greater than even this range suggests. The EIA estimates that the global electric vehicle fleet will reach 450 million by 2050.
NHO hopes that Norway's total battery production capacity will reach 100 GWh by 2040. This would represent 2–5 per cent of global battery production capacity, broadly equivalent to Norway's share of global oil production in recent decades.
According to NHO, Norwegian companies have comparative advantages in some parts of the battery value chain, including the processing of raw materials such as nickel, cobalt and manganese, battery assembly and recycling. NHO believes that subsidising battery cell production could strengthen these advantages. It estimates that sales of battery cells from Norway could therefore reach NOK 100 billion in 2030 and twice that amount in 2050. It is worth emphasising that these estimates are highly uncertain. This market barely exists today and will most likely be shaped by regulations and political decisions, as well as unforeseen technological breakthroughs in the years and decades ahead.
Sources:
ACEA: Fuel types of new cars. November 2020.
BP: Energy Outlook 2020.
EIA: International Energy Outlook 2019 with projections to 2050.
IEA: Global EV Outlook 2020, June 2020.
McKinsey: Electric Vehicle Index: Europe cushions a global plunge in EV sales. 2020.
NHO: Norwegian opportunities in green, electric value chains. 2020.
Chengjian Xu et al.: Future material demand for automotive lithium-based batteries. Nature Communications Materials. 2020.