Working at a mobility focused fund, the one question we get more than any other, usually revolves around the future of electric vehicles. In recent months, more and more of these questions get framed around a single narrative regarding crashing EV sales globally at the centre, followed by a query if this signals an end to all the excitement around electric vehicles?
I have noticed media outlets often amplify narratives of an "EV slowdown" through sensationalised headlines, making slight dips in growth rates sound like a catastrophic collapse to drive readership/viewership. Headlines misleadingly emphasise words like "crash" or "slump," confusing readers and making a slower growth % feel like an absolute decline. This clickbaity approach by many journalists often ignores context, such as broader economic factors or change in incentive structures or temporary challenges in industry.
Looking at the headlines above, any lay person could be easily influenced and such reporting skews public perception, making average consumers believe the entire EV transition is faltering and hence, hampering prospective customers from purchasing an EV. Studies have historically shown media bias and selective storytelling significantly shape skepticism, even as I see the number of EV models on sale expanding, EV infrastructure falling into place and affordability of electric vehicles steadily improving.
As an example, at this year's Bharat Mobility Global Expo 2025 in Delhi (same as the erstwhile Auto Expo), a majority of cars on display were electric vehicles and this number was maybe closer to 10-20% even as of last year. Major auto OEMs like Maruti Suzuki, Mahindra, Tata and Hyundai all showcased new mainstream EV models including the e-Vitara, Safari EV, BE 6E and Creta Electric. Others like BYD launched the Sealion 7 and Vietnamese OEM, VinFast also showcased its range of electric cars (VF 3 and VF 8). All in all, over 25 electric cars were launched and showcased at this year's Auto Expo in India.
In India, across 2Ws, 3Ws and 4Ws, electric vehicles have expanded volumes and new vehicle sales penetration has increased consistently over the previous 5 years. India is mainly a 2W and 3W market and light electric vehicle (E2W and E3W) sales volumes have increased by 15.5x between CY20 to CY24 from ~123k to 1.9mn units last year. In fact, over the past 1 year, E2W and E3W volumes have grown by 30.1% and 18.4% respectively. Hence, whenever some version of the "end of EVs in near" comes up in my conversations, my first reaction is to dismiss this outright given the Indian context.
Globally, things are more nuanced, as economics for larger form factors are still not as attractive as for vehicles needing smaller batteries. When everyone speaks of electric vehicles in the global context, they are most often speaking of electric cars. Three major regions, China, USA and Europe account for ~65% of the 88mn odd cars sold worldwide and we need to focus on these geographies to see where global EV markets are heading.
Lets start off by looking at the world’s largest car market, China, where ~25% of all cars globally were sold, equating to 22.6mn+ cars in 2024 (for context India sold just over 4mn cars during the same period). Out of these vehicles, electric, hybrid and fuel cell vehicles or as the Chinese call them New Energy Vehicle, “NEV” account for 48.9%, thereby further cementing China’s position as the largest non ICE market in the world in 2024 with over 11mn non ICE cars sold.
Access to Chinese data is a bit harder and hence finding exact numbers for domestic sales of pure electric vehicles is difficult. We do however have a breakdown between different NEVs (cars and commercial vehicles) provided by the China Association of Automobile Manufacturers (CAAM), which includes exports as well.
This data shows that sales of pure electric vehicles during CY24 increased by 15.5% and the growth during the last month of Dec’24 was even higher at 17.9%. In fact, December 2024 recorded the highest ever NEV sales by China at 1.596mn vehicles.
One unique observation on the Chinese market is that passenger cars are becoming electric faster than commercial vehicles (“CVs”). This is very unlike what is happening in the Indian context, where the market is being driven more by economics (lower operating cost of EVs mean that whoever drives the vehicle more, can derive more benefit from it) and not biased as much by external forces. In China, 48.9% of all cars sold last year were NEV versus only 17.9% of new CVs. This robust growth in NEVs in China is attributed to a combination of heavy central and state government incentives & subsidies, fierce competition among domestic manufacturers and a shift in consumer preferences towards EVs.
Moving onto the second largest car market in the world, USA, which had 15.9mn cars sold in 2024. Here as well, the EV market has shown consistent growth over the past few years and 2024 was no different, with volumes growing by 7.3% to reach 1.3mn units during the year. This was lower than the growth experienced the previous year, when volumes grew by 49.8% over 2022. But 2024 ended on a very positive note, with Q4 CY2024 showing a 15.2% Y-o-Y growth to reach 365,8241 units, which set a new record for the highest volume of EVs sold in any quarter in the US market. Furthermore, the month of December, achieved record monthly sales as well (132,392 units), which meant that EVs achieved a market share of 8.8% among all new car sales in the US market.
The US EV market is dominated by Tesla with ~49% market share and the top 2 selling electric cars in the US are Tesla's Model Y SUV and Model 3 sedan. The next largest OEMs are Ford and Chevrolet with only 7.5% and 5.2% market share respectively.
On closer observation of the data, we notice that the dominance of Tesla is what held the electric car market back in the US in 2024, as Tesla sold less cars in 2024 than in 2023. And when the OEM with almost 50% market share contracts, the entire market is bound to slow down. Hence, its noteworthy that the market actually grew by 7%+ in the year gone by, mainly driven by Honda, GM, Hyundai and others stepping up.
The final car market we will analyse is the European market (EU + EFTA + UK), which is the 3rd largest car region in the world retailing 12.96mn cars in 2024. Even though total volumes increased by 0.9% in 2024, the European car market has contracted by ~2.9mn units since pre-Covid-19, when it had touched volumes of 15.79mn.
In Europe as well, the share of petrol and diesel vehicles has been falling for a while and has come down from almost 75% in 2020 to only 44% in 2024. This region registered 1.99mn electric cars in the CY 2024, which meant the penetration of EVs stood at 15.4%. This was actually slightly lower than 2023, when 2.01mn electric cars were registered across the region (15.7% market share).
Unlike the China and US market, the European market consists of over 30 diverse countries including 27 countries in the EU, 4 in the EFTA (Iceland, Liechtenstein, Norway, Switzerland) and the United Kingdom, due to which the EU-28 became the EU-27! Europe is not a monolithic market, but a collection of diverse countries with varying economic structures and performance. Differences in wealth distribution, economic stability, and government incentives across countries significantly impact consumer behavior and market dynamics. Hence, we need to dive a bit deeper into different regions to understand what is happening in the market.
Looking at the map of Europe, we notice a wide variation in performance of new electric cars sales in 2024. Markets like Belgium, United Kingdom, Hungary, Greece have grown by over 20% in 2024 vs 2023. Others like Germany, Finland and Ireland have shrunk by over 20% in the same period.
We will focus our attention on the top 5 car markets in the region, as they make up almost 70% of the total new car registrations in the region. 3 out of the top 5 markets showed slowing registration of electric cars, but 2 out of those (France and Italy) are markets where car sales in general also contracted (albeit by only 1-3%) and hence, EVs as a % of total new car registrations remained at 2023 levels.
The one country that stands out sorely is Germany, which saw electric car registrations fall by 27% during the year (dropping it below the UK in terms of largest electric car market in 2024) and it happens to be the largest car market in Europe by some distance as well. New car registrations in general also fell by 1% in Germany, but electric cars were more severely impacted. This dramatic fall has been mainly attributed to the very sudden end of the electric car subsidy program by the German Government in Dec’23, in order to deal with the budget crisis the country was facing.
Additionally, legacy ICE focused OEMs in Germany, like in other countries, have sunk investments in their ICE products and would like to benefit from the same to the fullest extent possible. Hence, they are probably looking to do the least effort possible towards the EV transition - basically whatever minimum is required from a regulation, customer and ecosystem perspective. This explains why despite the dramatic decrease in price of key EV components, prices of electric cars in Europe have not fallen accordingly (and hence demand has not increased).
But 2025 should change this, as the tightening of CO2 emission regulations for cars during the year (from 95g CO2/km to 93.6g CO2/km) will force OEMs to sell more electric cars to balance their fleet wide emissions. Signs of this are already visible with players like VW announcing recently that they will show an entry level (~$20,000) EV to potential customers by March 2025, the ID.one. 2025 will definitely see a significant increase in EV penetration in the European market.
Moving forward, in order to meet the EU's increasingly stringent CO2 emission reduction targets, Europe will have to dramatically boost its electric car market share in the coming years, whether auto OEMs like it or not. The EU fleet wide target for new cars is set to drop to 49.5g CO2/km by 2030 and within a decade reach a final target of 0 g CO2/km, effectively banning the sale of new petrol/diesel cars in Europe. Hence, regulatory compulsion due to heavy penalties for automakers who fail to comply, will ensure accelerated EV penetration.
So is the ICE to EV transition losing steam? I firmly do not believe so. Sure, you may see some scary headlines about "slowing sales" and the "end of EVs", but as we dig a little deeper, we clearly see that we're still heading towards an electric future, even if the road isn't perfectly straight. There were always going to be ups and downs, twists and turns, but with better technology, lower prices, supportive policies and more customers trying EVs, the transition is not stopping anytime soon. This is a journey, not a sprint, and we're definitely on our way to a future filled with EVs!
