Global EV Outlook 2020

Electric vehicles are a key technology to reduce air pollution in densely populated areas and a promising option to contribute to energy diversification and greenhouse gas emissions reduction objectives. Electric vehicle benefits include zero tailpipe emissions, better efficiency than internal combustion engine vehicles and large potential for greenhouse gas emissions reductions when coupled with a low-carbon electricity sector. These objectives are major drivers behind countries’ policy support in the development and deployment of electric powertrains for transport. To date, 17 countries have announced 100% zero-emission vehicle targets or the phase-out of internal combustion engine vehicles through 2050. France, in December 2019, was the first country to put this intention into law, with a 2040 timeframe.

Policy actions for electric vehicles depend on the status of the electric vehicle market or technology. Setting vehicle and charger standards are prerequisites for wide electric vehicle adoption. In the early stages of deployment, public procurement schemes (e.g. for buses and municipal vehicles) have the double benefit of demonstrating the technology to the public and providing the opportunity for public authorities to lead by example. Importantly, they also allow the industry to produce and deliver bulk orders to foster economies of scale. Emerging economies can scale up their policy efforts for both new vehicles and second-hand imports.

Tax rates that reflect tailpipe CO2 emissions can be conducive to increased electric vehicle uptake. Fiscal incentives at the vehicle purchase, as well as complementary measures (e.g. road toll rebates and low-emission zones) are pivotal to attract consumers and businesses to choose the electric option. Local governments are key in proposing and implementing measures to enhance the value proposition of electric vehicles. The use of local low- and zero-emission zones can steer car purchase decisions far beyond just those zones and may influence the relative resale value of internal combustion engines and electric powertrains.

The vast majority of car markets offer some form of subsidy or tax reduction for the purchase of an individual or company electric car as well as support schemes for deploying charging infrastructure. Provisions in building codes to encourage charging facilities and the “EV-readiness” of buildings are becoming more common. So too are mandates to build charging infrastructure along road corridors and fuel stations.

There is common understanding that government support for electric vehicle purchases can only be transitional, as sale volumes increase. In the near term, a point will be reached when technology learning and economies of scale will have driven down the purchase cost of electric vehicles and mass-market adoption is triggered. For the first time a decrease in government spending for electric car purchase incentives was observed in 2019, while both consumer spending and total expenditure on electric cars continued to increase. At the national level, both China and the United States witnessed substantial purchase subsidies reductions or partial phase out in 2019, but there are cases where these reductions were met by increases in local government support. In China the central government was planning in 2019 to culminate a phase-out that dates to 2016, though, in the face of bleak electric car sales in the second half of 2019, the subsidy scheme was extended through 2022. Yet some other countries extended or implemented new purchase incentives schemes in 2019 or early 2020, for example, Germany and Italy.

Shifts to a variety of regulatory and fiscal measures are likely to gradually become a main driver of electric vehicle deployment, setting clear goals and a long-term vision for the industry. Many of the regulatory policies impel vehicle makers to sell a greater number or share of electric or otherwise more efficient vehicles. For example, today 60% of global car sales are covered by China’s New Energy Vehicle mandate, the European Union CO2 emissions standard (which is applicable to all EU member states) or a zero-emission vehicle mandate (in selected US states and Canadian provinces). The European Union approved a new fuel economy standard for cars and vans for 2021 30 and a CO2 emissions standard for heavy-duty vehicles (2020 30), with specific requirements or bonuses for electric vehicles. In the European Union, 2020 is the target year for compliance with the CO2 emissions standards for light- duty vehicles of 95 grammes of CO2 per kilometre, which has contributed to the successful uptake of electric light-duty vehicles in Europe in recent years. In 2019, China announced a tightening of its New Energy Vehicle mandate scheme with both setting new credit targets for 2021-23 and a more stringent calculation method for the credits beyond 2021. These actions are in step with its planned gradual transition from direct to more indirect forms of subsidies and incentives (including increasing support for charging infrastructure and other support services). In the United States, regulatory developments were different from other markets; the Safer Affordable Fuel-Efficient (SAFE) vehicles final rule, put in place in March 2020, replaced the 2012 rule, lowering the annual improvement in fuel economy standards from 4.7% in the 2012 rulemaking to 1.5% in SAFE for model years 2021 through 2026.

Other countries with increasing policy activity to support electric vehicles are Canada, Chile, Costa Rica, India and New Zealand. For example, Chile seeks to establish energy efficiency standards for new vehicles sold by car manufacturers or importers, including multipliers for electric and hybrid vehicles in the calculation of the sales average car efficiency.

In addition to new regulations, in order to transition from internal combustion engines to electrified vehicles in the transport sector governments need a long-term vision and a diversified and adaptive portfolio of policy measures, including new fiscal schemes. For instance, governments will need to anticipate and adapt taxation approaches early to replace lost fuel tax revenues, such as taxation based on vehicle activity (e.g. distance- or congestion-based pricing). 

Many uncertainties characterise the Covid-19 crisis, from the capacity of governments and companies to double-down on transport electrification efforts to what behavioural changes could potentially be expected from the current crisis, including from low oil prices and confinement measures. As cities gradually emerge from lockdowns, some of them are placing temporary restrictions on the frequency and occupancy of public transport, raising the risk of a spike in car traffic. Many cities, particularly in Europe, are therefore rapidly putting together policies to rethink the use of urban space and to promote walking and cycling. As part of economic recovery efforts, a focus on promoting clean transport is being called for at national and local levels.

Auto manufacturing, a critical sector of economic activity in many of the world’s largest economies, employs millions of people across the entire supply chain. It has been severely affected during the Covid-19 crisis; practically all major car manufacturers halted production lines for some period. Governments need to carefully consider appropriate policy responses. It is reasonable to expect that stimulus packages will seek to bolster the economy in countries with important vehicle manufacturing capacity by including measures to support the automotive industry, not least given their relevance for the labour market. While such measures will inevitably help boost electric vehicle sales as well, targeted measures to support electric vehicle sales in particular will be required to ensure that the electrification of road transport remains on track towards the postulated goals. 

In China, policy makers were quick to identify the auto market as a primary target for economic stimulus. Among other measures, the central government encouraged cities to relax car permit quotas, at least temporarily, complemented by strengthening targeted New Energy Vehicle measures. In the European Union, at the time of writing, existing policies and regulations were being maintained and countries like France and Germany announced increased support measures towards electric vehicles for the remainder of 2020.

Experience of automotive industry stimulus measures has been mixed. Cash-for- clunkers programmes can be an effective approach if they are designed to support the uptake of more efficient (e.g. hybrid) and electric cars. In past stimulus packages, however, such considerations were not always adequately addressed and sales of sport utility vehicles and diesel cars were boosted, which pushed up global oil demand and air pollution. Support for the auto industry can also be tied to ambitious fuel economy regulations, which in the past triggered innovation and helped jump- start key parts of today’s electric car industry. Other targeted and direct support measures, such as for charging infrastructure, or via favourable loans with low interest rates and/or public co-funding, towards corporate fleets for bulk procurement of electric cars, buses and trucks, could support continued growth in electric vehicle sales. In countries where fossil fuel subsidies prevail, the low oil price environment is an important opportunity to phase out price supports, which are detrimental for pursuing energy efficiency efforts in general and for creating a context that supports road vehicle electrification in particular.

The ongoing trend of increasing battery capacity is projected to continue. By 2030, battery electric vehicles are assumed to reach an average driving range of 350-400 km corresponding to battery sizes of 70-80 kWh. In addition to battery size, another important variable in projecting total battery capacity is the proportion of battery electric vehicles and plug-in hybrid electric vehicles in overall electric vehicle sales.

In the Stated Policies Scenario, global electric vehicle battery capacity increases from around 170 GWh per year today to 1.5 TWh per year in 2030. In the Sustainable Development Scenario, demand of 3TWh is projected. Despite ambitious electrification in the Sustainable Development Scenario, modes other than cars account for only 11% of overall battery demand in 2030, highlighting the centrality of electric cars in the battery market over the next decade.

The demand for the materials used in electric vehicle batteries will depend on changing battery chemistries, nickel cobalt aluminium oxide (NCA), nickel manganese cobalt oxide (NMC) and lithium iron phosphate (LFP) cathodes for lithium-ion (Li-ion) batteries being the most widely used today.

The estimated material demand for the batteries of the electric vehicles sold in 2019 was about 19 kt for cobalt, 17 kt for lithium, 22 kt for manganese and 65 kt for nickel. For battery needs in the Stated Policies Scenario, cobalt demand expands to about 180 kt/year in 2030, lithium to around 185 kt/year, manganese to 177 kt/year and class I nickel to 925 kt/year. In the Sustainable Development Scenario, higher electric vehicle uptake leads to 2030 material demand values more than twice as high as the Stated Policies Scenario. 

The cost of batteries for electric vehicles is falling markedly. Industry reports show that sales-weighted battery pack prices in 2019 were an average of USD 156 per kilowatt-hour, down from more than USD 1 100/kWh in 2010. The average battery pack size across electric light-duty vehicles sold (including battery electric vehicles and plug-in hybrid electric vehicles) continues an upwards trend; it is now 44 kWh, up from 37 kWh in 2018, and battery electric cars in most countries are in the 50-70 kWh range. This increase is driven by two trends: battery electric vehicle models with longer ranges are becoming available and are increasingly in demand, and the share of battery electric vehicles relative to plug-in hybrid electric vehicles is rising.

The most common cathode chemistry used in electric vehicle Li-ion batteries is NMC. The energy density of cells with NMC cathodes increases with increasing nickel content. On these grounds, there are reasons to believe that density is also continuing on an upward trend. While Li-ion technology has made tremendous progress over the past decade in terms of energy density, costs and cycle life, room for improvement remains. Research is being conducted to improve all three key components of Li-ion battery cells: cathodes, anodes and electrolytes. In addition, recent developments in battery design and thermal management aim primarily to cut the costs of the pack and module components. 

The next generation of Li-ion battery technology, set to enter the market in the coming five to ten years, is likely to have low nickel content and use either NCA (with less than 10% nickel) or NMC 811 cathodes. Near-term developments should enable cell-level energy densities of up to 325 Wh/kg and pack-level energy densities could reach 275 Wh/kg. These values approach the upper performance bounds of Li-ion technology.

However, some electric vehicles might not necessarily be designed for the highest possible energy density. This might be the case for urban buses or delivery vehicles where volumetric constraints are less stringent, or for low-end electric vehicles where affordability is more important than long driving ranges. For these applications, the LFP cathode could be well suited.

For the next decade, the Li-ion battery is likely to dominate the electric vehicle market. For the period after 2030, a number of potential technologies might be able to push the boundaries beyond the performance limits imposed by Li-ion battery technology. These include the lithium-metal solid state battery, lithium-sulphur, sodium-ion or even lithium-air, which could represent an improvement from Li-ion on indicators such as cost, density, cycle life, and benefits from more widely available materials than Li-ion technologies. However, not a single technology reaps all these benefits at the same time. In addition, even once performance is proven in the lab, deployment and scale-up of these new technologies will take time and compete with the well-established Li-ion technology, which by now benefits from considerable experience in its large-scale manufacture and solid understanding of its long-term durability characteristics, and of substantial investments already made. 

Considering the life-cycle greenhouse gas emissions of available powertrains, analysis suggests that:

• Today the use phase is the largest contributor to life-cycle greenhouse gas emissions of all powertrains.
• With a greenhouse gas intensity of electricity generation equal to the current global average, battery electric vehicles, hybrid electric vehicles and fuel cell electric vehicles have similar lifetime greenhouse emissions, and lower than those of an average internal combustion engine vehicle.
• Increasing the range of a battery electric vehicle reduces its relative benefits compared to internal combustion engine vehicles or fuel cell electric vehicles.
• As the electricity supply decarbonises and serves both battery manufacturing facilities and charging, the benefits of lower life-cycle greenhouse gas emissions of electric cars amplify relative to other powertrains. 

In the global average example in the figure, in a current battery electric vehicle with a large battery (80 kWh) manufactured in China (representative of high greenhouse gas intensity of battery manufacturing), the battery can be responsible for up to a third of the vehicle’s life-cycle emissions. The main areas of action to reduce battery manufacturing emissions and life-cycle impacts are:

• Increase the energy density of batteries.
• Scale up manufacturing facilities and increase throughput.
• Increase energy efficiency and use low-carbon energy sources in mining and refining processes for raw materials, especially for aluminium, and in synthesis of active materials such as nickel, cobalt and graphite.
• Increase energy efficiency and use low-carbon energy sources in cell manufacturing and pack assembly.
• Ensure appropriate end-of-life battery management. 

Based on the two scenarios, it is estimated that 100-120 GWh of electric vehicle batteries will be retired by 2030, a volume roughly equivalent to current annual battery production. Without effective measures to address such volumes, this can become a significant environmental liability. Spent batteries can be channelled to second-use or recycling with the aid of policies that help to steer these markets towards sustainable end-of-life practices. 

Battery reuse in second-life, stationary storage applications for services to electricity network operators, electric utilities, and commercial or residential customers can extend the lifetime of batteries that are no longer suited for automotive applications. Extending the useful life of automotive batteries can contribute to displacing the environmental impacts, emissions and costs of manufacturing new batteries for the provision of the same services. However, there is little experience to date from this nascent market. Challenges in implementing second-life applications for automotive batteries reside primarily in competition with the decreasing cost of new battery manufacturing and a potentially long and technical refurbishing process that requires efficient technical information transfer between the stakeholders along the value chain. An industry is starting to emerge, made up of stakeholders from original equipment manufacturers, utilities and specialised start-ups.

As volumes of spent electric vehicle batteries increase, the development of an effective recycling industry will be key to the sustainability of Li-ion batteries. By recovering critical materials, a robust recycling system would reduce demand for raw materials, greenhouse gas emissions and negative local impacts from mining and refining. Furthermore, domestic recycling enables countries to reduce their reliance on imports of critical materials. So far, economic viability and market incentives for recycling have been limited because of generally low raw material prices and small volumes of spent electric vehicle batteries to date. However, as the growing market for electric vehicles puts further pressure on primary resources, raw material prices could increase and/or prices may become more volatile. Thus, materials recovered through recycling would become more competitive. The economic and strategic value of essential inputs, such as lithium and cobalt, may incentivise recycling in the long term and steer recycling policies.

It is estimated that current recycling facilities using mainstream recycling technologies such as pyrometallurgy and hydrometallurgy, may add a limited greenhouse gas footprint to an electric vehicle battery (about 10%), compared to a battery manufactured from primary raw materials. Research points towards a net benefit when considering non-greenhouse gas indicators such as ecotoxicity. The scale-up of Li-ion battery recycling facilities, driven by electric vehicle deployment, as well other energy efficiency measures and renewable energy input into recycling processes will be necessary to significantly reduce greenhouse gas emissions from battery recycling. New, innovative recycling processes using less energy, and adequate sorting and separation of battery pieces that need recycling or that can directly be repurposed or repackaged into new batteries are also under research. 

Recent policy developments highlight an increased focus on the projected large- scale deployment of batteries for automotive applications and their life-cycle impacts. Battery collection and recycling policies have usually focused on other industries and battery technologies than the Li-ion batteries used in electric vehicles, such as consumer electronics or lead-acid batteries. Hence, they are not designed for electric vehicle battery end-of-life. In 2019, China mandated producer responsibility, holding them responsible for the recycling, as well as the reverse logistics involved in taking back the Li-ion batteries. The European Union is currently reviewing its Battery Directive to adapt to transport electrification through identifying improvements and assessing the relevance, effectiveness, efficiency, coherence, and added value of the policy; it has set up a Battery Alliance to discuss further measures with key stakeholders. In the United States, the California Assembly Bill 2832 requires the formation of a Lithium-Ion Car Battery Recycling Advisory Group to advise the legislature on electric vehicle Li-ion battery recycling policy. These developments, along with private sector innovation, are expected to push forward battery end-of-life solutions.