February 2023
We expect global EV sales to reach 13.6m in 2023, rising 26% from an estimated 10.8m in 2022. By 2025, we expect sales to reach 19.8m, reaching a market share of 22%. There are now almost 30m EVs on the road, up from just 10m at the end of 2020. The market share of electric cars has also tripled since 2020, reaching 13% last year.

In Norway, EVs now represent four out of every five new cars sold. That’s up from just one in five as recently as 2016. In Germany, more than 55% of new cars registered in December were battery-electric or plug-in hybrid. Germany sold 833k EVs in 2022, jumping 22% from 681k in 2021. 

In China, the biggest EV market in the world, the rise is even more dramatic. EVs have grown from 6% in 2020 to 25.6% in 2022. In December of last year, EVs jumped to 32% of auto sales. We expect China to sell 11m EVs in 2023, reaching a market share of 31%.   



China sold 6.9m EVs last year, nearly twice as many electric vehicles as in 2021. The country’s largest single EV manufacturer, BYD, has surpassed Tesla for global market share. BYD sold 1.8m EVs in 2022, outpacing Tesla’s 1.3m. On an all-electric basis, however, Tesla still sold around 350k more.

Further, Tesla remains far more profitable than BYD. BYD’s net income jumped 458% on-year to US$2.5bn in 2022—a profit margin of roughly 4%. Tesla produced net income of about US$12.6bn last year, for a margin of roughly 15%.

The US is expected to sell 1.2m EVs in 2023, up from 0.92m last year, before jumping to 2m in 2025. We expect EVs to represent 21% of new US car sales in 2025, up from just 2% five years earlier.

We expect Europe (EU + UK + EFTA) to sell 2.8m EVs in 2023. The region sold 2.6m EVs in 2022, rising 18% from 2.2m in 2021. Europe’s EV market share rose to 24% last year, up from 18% in 2021.

The growth in global EV sales is also dramatically faster than most were projecting just a few years ago. In 2020, the International Energy Agency (IEA) did not expect the global share of EV sales to top 10% before 2030. But we’ve already crossed that threshold eight years early. We expect the market share of EVs to approach 40% by the end of the decade. The IEA is less bullish but has still roughly doubled its 2030 projection in just two years.


Policies Drive Growth

The most critical factor supporting EV adoption is regulation. The US passed the Inflation Reduction Act in August 2022, which sets out US$369bn in climate spending. The bill has already prompted US$34bn in investments to develop the country’s EV supply chain.

Even before that, the Environmental Protection Agency (EPA) finalised greenhouse gas emissions standards for vehicles for 2023-2026. That equated to an annual increase in stringency of 10% in 2023, 5% in 2024, 6.6% in 2025 and >10% in 2026. 

Separately, the US Securities and Exchange Commission is preparing a federal rule for emissions-related disclosures for public companies, which is expected to be rolled out by late March.

The EU is currently finalising new rules on CO2 emissions that would effectively ban sales of ICE vehicles in 2035. That is part of an ambitious plan to cut emissions to at least 55% below 1990 levels by 2030.

The EUR800bn (US$854bn) NextGenerationEU Covid-19 recovery programme requires at least 37% of spending to the green transition. On top of that, about EUR100bn (US$107bn) of the EU’s 2021-27 cohesion spending is expected to be green.

Last year, China issued a proposal for automakers' EV quotas to rise to 28% in 2024 and 38% in 2025 from 18% in 2023.


Capex is Back

The underlying production capacity is perhaps even more eye-popping than the sales boom. The US and Europe are embarking on a massive wave of battery, EV, and semiconductor spending. The world's biggest automakers want to spend close to US$1.2tn through 2030 to develop and produce EVs, battery and raw materials.

Globally, battery manufacturing capacity grew almost 40% last year, and we project it to grow fivefold by just 2025. By that year, lithium mining is expected to be triple what it was in 2021.

In the US, investments in battery manufacturing reached a record $73bn last year—three times as much as the previous record, set in 2021. We expect US battery production capacity to soar to 403GWh by 2025, up from 70GWh in 2021.



The US is seeing a huge wave of battery and EV investments, fuelled by the Inflation Reduction Act, which lays out US$370bn in climate spending. The IRA rules are designed to shift the US battery supply chain away from China, which currently produces 70% of EV batteries. The US has just over 10% of EV production and 7% of battery production capacity. In 2022, China produced 545.9GWh of EV batteries, soaring 149% from the previous year.

Earlier this month, President Biden used his State of the Union address to defend his large-scale federal spending program to pump up domestic manufacturing—and deliver a defiant message to Beijing. “I will make no apologies that we are investing to make America strong. Investing in American innovation, in industries that will define the future, and that China’s government is intent on dominating,” Mr Biden said.

Also, in February, the US Department of Energy announced that it will issue a US$2bn loan to Redwood Materials to help build a US$3.5bn recycling and re-manufacturing complex in Nevada for EV battery cathode materials.

Last July, the DoE said it would loan US$2.5bn to Ultium Cells, a JV between General Motors and LG Energy Solution, to help finance construction of new battery cell manufacturing facilities. Ultium Cells plans to have 160GWh of battery production capacity later this decade. GM is aiming to make 1m EVs a year in North America by 2025—a roughly 40-fold increase from now.

Automakers are teaming up with Korean battery makers to build out US lithium-ion battery capacity, fuelled by the IRA. Ultium Cells, a JV between General Motors and LG Energy Solution, plan to have 160GWh of battery production capacity across three plants later this decade. The companies are also planning a fourth plant.

GM’s key competitor Ford plans to build 129GWh of US battery capacity across three plants by >2025 with Korean partner SK On. The US automaker will invest US$50bn through 2026 on EVs and batteries.

SK will also team up with Hyundai to build a US$1.9bn, 20GWh battery plant in Georgia, with an aim to start operations in 2026. SK will receive tax benefits of US$35/kWh. Separately, Stellantis and Samsung plan to build a US$2.5bn, 33GWh EV battery plant in Indiana, set to open in 2025.


European Companies Looks to the US, China Eyes Both  

A new age of protectionism looks to be unfolding as Europe enters a subsidy race with the US. Since the US IRA became law in August, several European OEMs have announced investments in the US.

This month, BMW said it would invest EUR800m for EV production in Mexico, which is included (along with Canada) in US subsidies for EV final assembly. The announcement came days after Brussels unveiled a rival incentive plan, adding fuel to the fire of the EU’s criticism that the US subsidies are luring European companies across the Atlantic.

In October, German automaker BMW said it will invest US$1bn in its South Carolina factory to start building EVs and an additional US$700m to build a battery plant nearby.

Even as Europe and the US try to reduce dependence on the Chinese battery supply chain—the country is not giving up that easily. CATL’s first battery plant outside China kicked off production in December.

The EUR1.8bn (US$1.9bn) factory in Germany will have an initial capacity of 8GWh, before ramping up to 14GWh. Mercedes has already signed up to be the factory’s first and largest buyer. The Chinese battery giant also plans to build a 100GWh battery plant in Hungary. Estimated to cost EUR7.3bn (US$7.6bn), it would be Europe’s largest gigafactory.

CATL is reportedly teaming up with Ford for a US$3.5bn battery plant in Detroit, Michigan. Ford is expected to own and operate the plant, with CATL listed as a technology partner, so that the batteries will still qualify for the IRA’s tax credits. It’s unclear if that will be the case. The Treasury Department’s proposed guidance for EV battery sourcing requirements won’t be finalised until March.

Virginia was initially considered as a home for the plant, but Governor Glenn Youngkin removed the state from consideration last month. The governor described Ford’s relationship with CATL as a “trojan horse” that would undermine the IRA. Michigan Governor Gretchen Whitmer replied that Virginia’s decision was “political”.

Chinese automakers will continue to expand their presence in the Europe this year. The trend, which began in the second half of 2022, has been driven by BYD, Great Wall Motor and NIO. The country also exported US$3.2bn worth of EVs in November 2022, more than double the exports of the previous November.


Subsidy Cuts

China’s subsidies for battery electric vehicles (BEVs) were reduced by 30% from 2022 and eliminated from 2023. In 2019, the subsidy was worth RMB12,600 (roughly US$1,845) per unit. Despite this, the country’s EV market is maturing, limiting the impact compared to the reduction in 2019. However, demand will be weaker in the first half of 2023. 

China, which has subsidised EV sales since 2009, dominates every step of the battery supply chain, except mining. This dominance has allowed Chinese OEMs to push down EV costs faster than the West. That might enable an organic growth in the future regardless of subsidies.

Many EV subsidies in Europe have been cut this year, after incentives were bumped up during the pandemic. That will test the maturity of the market. Still, the average subsidy in the EU is roughly US$6,500, not that far off the US$7,500 offered by the US IRA.

At the start of 2023, Germany’s subsidies for plug-in hybrids expired and reduced for BEVs from EUR6k (US$6.4k) to EUR4.5k (US$4.8k). Eligible BEVs need to cost below EUR40k. That will likely flatten sales growth this year. Germany sold 833k EVs in 2022, rising 22% from 2021. The country’s EV market share rose to 31%, from 26% in 2021. We expect Germany to sell 957k EVs this year.

France has also reduced EV subsidies this year to EUR5k (US$5.3k) from a previous EUR6k (US$6.4k). They now need to cost less than EUR47k (US$50k), down from a previous threshold of EUR60k (US$64k). Sweden axed its EV subsidies from November 2022 as the government says EV price parity has been achieved. The subsidy was previously worth US$4.8k for BEVs and US$1k for PHEVs.