Targets may be formulated in terms of total sales volumes, as sales shares, or as an ambition to transition all sales of the company or of a certain brand to all-electric. As shown in Prospects for electric vehicle deployment, these targets often exceed not only regulatory requirements (as reflected in the Stated Policies Scenario), but also government ambitions (as reflected in the Announced Pledges Scenario).

However, manufacturers’ targets are non-binding and still often focus only on leading EV markets. Indeed, it is probably no coincidence that the most ambitious targets are for the European market, where the newly amended CO₂ emission standards would mean that all new cars and vans will be zero-emission by 2035. Major new OEM announcements have been made at the global level and regionally in 2022-2023. Several Chinese OEMs recently announced EV targets; in contrast with OEMs based in the rest of the world, Chinese car manufacturers’ targets are generally shorter-term and tend to be well within reach of current NEV market shares.

In addition, automakers continue to invest increasing sums in electrification and digital technologies. Just seven automakers, which were collectively responsible for nearly half of LDV sales in 2022, have capital expenditures of more than USD 55 billion on emerging automotive technologies since 2019, including for manufacturing facilities.

In addition to goals to electrify vehicle production and sales, major automotive groups have set corporate decarbonisation targets.

Eight major automotive groups that collectively accounted for more than 40% of LDV sales in 2022 – BMW Group, Ford, General Motors, Mercedes-Benz, Renault Group, Toyota, Volvo Cars, and VW Group – have joined the Science-Based Targets initiative, which defines a common framework and path to reduce emissions in line with the Paris Agreement. The automotive groups have set targets for LDVs to reduce Scope 1 and 2 GHG emissions (i.e. coming from sources controlled or owned by an organisation, and indirect emissions associated with the purchase of electricity, steam, heat, or cooling) by 50%-80%, relative to recent benchmarks, as well as certain Scope 3 emissions by 30%-50%, all in the 2030-2035 timeframe. Within Scope 3, the most commonly set targets include only category 11 emissions, which covers those incurred in the fuel supply chain and use of fuel to power vehicles produced by the car company.

Automakers are also announcing their own corporate net zero pathways. BMW Group, Ford, Geely, General Motors, Honda, Hyundai, Mazda, Mercedes-Benz, Nissan, Renault Group, Stellantis, Toyota, Volvo Cars, and VW Group have set targets for carbon neutrality from 2038 through 2050. Collectively, these companies accounted for around 60% of global light-duty vehicle (LDV) sales in 2022. These corporate ambitions differ in terms of scope, reporting, and the degree to which they are incorporated into corporate governance, strategy, and financial decisions.

Global spending on electric cars was up 50% in 2022 relative to 2021, reaching about USD 425 billion. Most of this was directly spent by consumers when buying a vehicle, while governments spent around USD 40 billion through direct purchase incentives. These include subsidies and tax deductions such as VAT exemption, and bonuses related to weight, CO₂ emissions or range. The increase in global spending on electric cars means that carmakers – including incumbents – are generating more revenues from EV sales, and particularly from SUVs and large car models, thereby progressively helping to reduce reliance on ICE sales to finance EV manufacturing, R&D and new model development. While there is still a long way to go, this is an important step for EV growth and the transition to fully electrified road transport.

Over the 2017-2022 period, the share of government spending in total spending decreased from over 20% to just under 10%. On a per-vehicle basis, government spending decreased from around USD 9 000 per electric car in 2017 to USD 4 000 in 2022, as sales increased more quickly than government spending. In 2023 and beyond, governments in major EV markets are gradually phasing out subsidies for electric cars, suggesting government spending will decrease in those markets. However, incentives in markets where adoption has been lower to date, including in EMDEs such as India, Indonesia and Thailand, could push overall government spending up.

In both China and Europe, government spending has increased significantly since 2017, especially in the wake of the Covid-19 pandemic. In China, government spending dipped in 2019-2020 but caught up quickly afterwards: it doubled between 2020 and 2021, and increased by nearly 70% in 2022 relative to 2021, exceeding USD 22 billion. In Europe, government spending boomed in 2020 and continued increasing through 2021 (up 50% year-on-year) and 2022 (up 20%), totalling more than USD 15 billion in 2022. In China, purchase incentives, which are based on driving range, have been decreasing. Although the average range of electric cars sold in China has been increasing, and accordingly more models have become eligible for subsidies, per-unit government support has been steadily decreasing, standing at around USD 4 000 in 2022. The majority of public support for electric cars comes from the vehicle purchase tax exemption rather than the subsidy. In Europe, per-unit support by governments has remained steady at around USD 6 000 over the 2017-2022 period, but could drop in 2023 and future years as subsidies decrease in major markets such as Germany, the United Kingdom and France.

Meanwhile, federal government spending in the United States has remained much lower than that in other major markets in the past few years, especially as major carmakers – mostly Tesla and General Motors – reached the cap on further subsidies. However, it increased from below USD 1 billion in 2020 to almost USD 2.5 billion in 2022 as more electric cars that are eligible to subsidies were sold than in previous years. While aggregate public support increased significantly, the IRA changed eligibility requirements for sales taking place between mid-August and end-2022. The IRA aims to promote EV manufacturing in North America, and as such the list of vehicles qualifying for subsidies shrank in the second half of 2022. Furthermore, while carmaker caps have been removed in 2023, they remained in place throughout 2022. As a result, public spending on a per-unit basis dropped from more than USD 3 000 in 2021 to USD 2 500 in 2022. The trend could be reversed in 2023 and beyond as the list of qualifying vehicles grows.

While financial markets and investors have maintained confidence in the future of transport being electric, 2022 was a difficult year for EV companies. The stocks of EV-related companies had seen extraordinary growth in the past few years, including through the Covid-19 pandemic, consistently outperforming traditional carmakers since 2019. However, growth stalled in 2022 and financial markets were rationalised in the context of increased market maturity and tougher competition (especially in China with a downward price war for electric cars), and as a result of increased risks, geopolitical shocks, supply chain disruptions and higher inflation rates. The gap between pure-play EV companies and incumbent carmakers has narrowed accordingly.

In 2022 the market capitalisation of EV companies shrank dramatically, falling from an all-time high at the end of 2021. This drop is almost entirely due to Tesla: the company’s market capitalisation decreased from its peak at the end of 2021 to early 2023 by about USD 870 billion, which is more than the combined valuation of the selected top 10 incumbent carmakers early 2023. The company also heavily reduced vehicle prices repeatedly in 2023 to boost sales, with discounts of up to USD 34 000. However, Tesla remains the highest valued EV firm and the eighth most highly valued company in the world, with strong investor confidence. It ranks far ahead of competitors such as BYD, Li Auto and NIO, and other companies such as Rivian, Lucid Motors and XPeng, which struggled in 2022, as well as smaller players such as VinFast and truckmaker Lordstown Motors. As an example of a company that had difficulties in 2022, Rivian halted plans to produce electric vans with Mercedes-Benz in Europe, weakening confidence.

Increasing competition in EV markets is also influencing investor confidence and financial performance. Incumbent carmakers are diversifying their fleets in order to comply with strengthened policies, such as CO₂ standards, or to reach new consumers, yet are struggling to catch up with EV companies. New market entrants – especially from China – that aim to capture a share of booming EV markets are also increasing pressure on incumbent carmakers. Carmakers that do not have sufficiently attractive electric car offerings are likely to face issues in the growing EV market in the near future.

In 2022, the world’s largest carmakers in terms of ICE car sales (Volkswagen, General Motors, Toyota, Stellantis, Honda, Renault-Nissan-Mitsubishi, Ford, Hyundai-Kia, Geely, Mercedes-Benz and BMW) accounted for 40% of global electric car sales. In 2015, the same companies accounted for 55%. Over the same period, the combined market share of just two companies, Tesla and BYD, increased from 20% to over 30%. In 2015, Chinese carmakers accounted for 35% of global EV sales, and this share increased to 45% in 2022, led by BYD (18%), Geely (6%), and a number of other firms including SAIC, Chery, Changan, Dongfeng, Hozon, CHJ, Great Wall, NIO, Xiaopeng and Leap. Geely, for example, saw revenue increase by nearly 50% in 2022 relative to 2021, and net income by 10%, with expectations of a 15% growth in electric car sales in 2023. Incumbent Chinese carmakers are also adapting their strategies, such as Great Wall Motor, which in March 2023 announced a new strategy focusing on EVs, after sales dropped in 2022 by nearly 20% relative to 2021.

As battery demand continues to increase, battery makers are seeing strong financial stock performance, outperforming that of EV makers in 2022, in spite of supply chain disruptions and critical mineral price volatility. Their market capitalisation has also been steadily increasing since 2020, suggesting strong investor confidence in future returns and growth. In 2022, CATL, which accounts for nearly 40% of the world’s market for EV cells, far ahead of LG Energy and BYD, saw net income nearly double relative to 2021 as EV sales increased. Financial analysts suggest that the market for lithium-ion batteries could boom from USD 90 billion in 2022 to USD 250 billion in 2030.

However, growth in market capitalisation was slower and financial performance not as high in 2022 as it was over 2020-2021. The gross profit margin of major battery makers has been steadily decreasing from more than 30% in 2015 to about 20% in 2022. This is due not only to increasing competition in the market, but also to higher raw material and commodity prices (e.g. for lithium, cobalt and nickel), which tend to boost the profits of firms involved in extraction while putting pressure on the firms purchasing the materials for refining and to manufacture products such as batteries.

As carmakers compete to secure battery supplies, they are increasing investments for in-house battery production for increased vertical integration. For example, Tesla is increasing its focus on battery manufacturing, and introducing innovative concepts expected to cut costs. Toyota, GM, Hyundai and Ford are investing USD 2.5 billion, USD 6.6 billion, USD 5.5 billion and USD 11.4 billion respectively in EV and battery manufacturing sites in the United States alone. To secure supply of critical minerals needed for batteries, carmakers are also partnering with mining companies or even directly investing in mining operations. Ford partnered with Vale and Huayou to build a processing plant in Indonesia with capacity to process 120 kt of nickel per year; Stellantis invested EUR 50 million (USD 55 million) in the German lithium producer Vulcan, and Tesla signed agreements with mining companies such as Albemarle, for lithium, and Prony Resources, for nickel.

The past two years have been very profitable for the mining industry. The revenues of the top 40 mining companies increased by 30% between 2020 and 2021, and their net profit by 130%. In the context of the energy transition, critical mineral demand is of particular interest for the mining sector. In 2021, the combined value of critical minerals used for clean technologies was around USD 75 billion. Assuming prices stay constant, by 2050, the needs of the energy transition could increase this value fivefold in the Net Zero by 2050 Scenario. This prospect makes the critical mineral sector especially attractive for investors. Indeed, the market capitalisation of lithium, copper and nickel mining companies grew by 350%, 90% and 85% respectively between 2016 and 2022, compared with 20% for coal producers and 75% for the top 100 mining companies over the same period. This reflects increasing appetite for critical metal mining and confidence in future returns. There are also new entrants in this sector, just as in other steps of the EV supply chain. In March 2023, Lithium Royalty Corp., a Canadian company established in 2018, raised USD 109 million in the biggest initial public offering (IPO) in the country since May 2022.

Competition is pushing some mining companies to also seek vertical integration: downstream in mineral processing for miners, and upstream in mining for refiners. Albemarle and Covalent Lithium, for example, are building processing sites in Australia to turn the spodumene they extract into lithium hydroxide. In total, lithium processing projects have received USD 5 billion in Western Australia alone over the past three years. As a result of mining companies expanding operations downstream, refiners are under pressure, with profit margins shrinking, especially in China where there is historic reliance on Australian spodumene. As a result, some refiners are moving upstream as a means to secure raw materials, but lead times to develop new mines can be long.

Looking to the future, vertical integration on both sides of EV supply chains – from miners downstream and from carmakers upstream – could help decrease manufacturing costs and prices for consumers accordingly, but could also lead to greater market concentration.

In the past decade, venture capital (VC) funding for clean energy start-ups has boomed, particularly in electromobility. Financial investors such as banks and VC or private equity funds see in EV start-ups a potential for future returns with high exit values. Many companies, including major incumbent carmakers, also provide funding to start-ups through corporate VC to develop new technology or to acquire concepts developed by new entrants, as a means to maintain a competitive edge and secure their own positioning in car markets. While in the past century most major carmakers typically developed ICE technology in-house, through R&D and manufacturing innovation, investing in start-ups is now a notable trend, illustrating a new way of innovating, and the need to catch up with quickly evolving markets and regulatory environments.

In 2022, VC investments in early-stage start-ups (i.e. seed and series A, referring to the first rounds of financing and the earlier stages of start-up development) developing battery technologies increased by 15% relative to 2021 to nearly USD 850 million. VC investments in start-ups producing vehicles and charging technologies increased by 50% to USD 1.2 billion. The increase was particularly high in the charging segment, which saw an all-time high among early-stage funding at USD 730 million. There was also a notable increase in funding for battery recycling and reuse, which stood at USD 200 million, an eightfold increase relative to 2021.

Meanwhile, early-stage electric car manufacturers are raising less and less money as EV markets mature. Start-ups developing new electric cars were the first beneficiaries of booming EV VC in around 2015, but less and less capital is provided to new entrants as competition increases and major incumbents accelerate electrification. The 2015-2020 period also saw major VC activity in China, but this has now declined as the market consolidates around frontrunners – many of which were start-ups less than a decade ago.

Early-stage investors are instead looking for new investment opportunities in the value chain, either upstream (such as batteries or critical minerals) or downstream (such as charging or recycling). Companies developing lithium-ion batteries still dominate, accounting for 60% of early-stage VC investments in the battery segment over 2018-2022, but new chemistries are on the rise, both lithium- and non-lithium-based. Critical minerals VC is also booming as metal demand surges, standing at around USD 650 million in 2022 from close to zero in 2018-2019, before the Covid-19 pandemic.

One notable development in 2022 was the drop in growth-stage investments (i.e. series B and growth equity, which refers to the later rounds of financing as start-ups increase activity). These fell by 25% relative to 2021 both for batteries, to USD 6.1 billion, and for vehicles and charging, to USD 7.4 billion, due to lower investments in battery and truck manufacturers. Putting things into perspective, 2021 was an exceptional year for batteries, as investments caught up following the Covid-19 pandemic; and 2022 was still twice as high as ever before. As such, the downward trend in 2022 might not be of immediate concern. For trucks, the 2019-2021 period was a fruitful one in growth equity VC markets, but investor appetite may be drying up following concerns over the performance of leading companies.

Over the 2018-2022 period, China accounted for 70% of VC investments in electric car start-ups, while the United States led in investments in charging, trucks and battery components. Funding for battery making start-ups was evenly distributed across China, Europe and the United States. India had a strong lead in two-wheelers, the only EMDE beyond China with a significant presence in global EV VC.

Given that China is the largest electric car market, it comes as no surprise that it is also the largest producer of EVs: China imports under 1% of the electric cars sold in the country. The focus of China’s EV policy on domestic sales has also attracted international car manufacturers to set up production in China. Around 25% of all the electric cars manufactured in China in 2022 were made by foreign carmakers, and since EV production costs in China are relatively low, those carmakers, as well as domestic ones, also export part of their Chinese output. China is therefore a leading exporter of electric cars, representing over 35% of electric car exports, as well as of batteries. In 2022, the share of global battery manufacturing capacity located in China was around 75%.

Europe is China’s largest trade partner for both electric cars and their batteries. Indeed, over the past year the share of electric cars sold in the European market coming from China increased from about 11% in 2021 to about 16% in 2022. However, almost 20% of the electric cars shipped from China for sale in Europe were manufactured by European OEMs with plants in China; another 40% were American cars produced in China.

Over the past five years, the share of global electric car exports coming from China has increased more than eightfold, with China becoming the largest exporter in 2021 and the gap further widening in 2022. The share of electric car exports from the United States peaked in 2019 and has since fallen below the levels exported from China, Korea and Europe. While the number of electric cars traded globally has continued to increase over time, the share of exports out of total electric car sales has decreased over the past four years.

The transition to electric mobility is shifting and will continue to shift trade balances. Historically, Europe has been a net exporter of ICE cars (by value), while China has been a net importer. However, with the transition to electric cars, the size of the ICE car market is expected to shrink over time, while the EV market grows. China, Japan and Korea are all net exporters of electric cars, electric motors and Li-ion batteries, and are well positioned to benefit from a growing electric car market. Nonetheless, these battery-exporting countries are also strongly dependent on the import of critical minerals, such as lithium, cobalt and nickel.