What will EV trend be in 2025 width

Global EV Market Trends and Predictions for 2025

The electric vehicle market is undergoing a transformative phase, marked by rapid technological advancements, particularly in battery technology, and a global shift towards sustainable transportation. This article explores the current trends, growth drivers, and future projections of the EV market, with a focus on Germany's evolving role in this sector.

1. Technological Advancements and Battery Prices

Advancements in EV Technology & Predictions

The electric vehicle market has seen substantial technological advancements, particularly in battery technology, which is central to the performance and affordability of EVs. Modern EV batteries are not only more energy-efficient but also offer longer lifespans and shorter charging times compared to earlier models. Innovations in battery chemistry, such as the development of solid-state batteries, are poised to further enhance energy density and safety, representing a potential game-changer in the industry.

• 40% Reduction in EV Battery Prices by 2025: This forecast is crucial as it indicates a downward trend in the cost of key EV components. A major portion of an EV's cost is its battery; this price drop is expected to significantly reduce the overall cost of EVs, enhancing their competitiveness with traditional internal combustion engine vehicles.
• Manufacturing and Scale: As global EV production increases, improvements in manufacturing processes and economies of scale are reducing costs.
• Technological Advancements: New battery technologies are emerging, leading to more cost-effective materials and designs.
• Raw Material Availability: Expansion in mining activities for lithium, nickel, and cobalt is increasing the supply, thus decreasing the costs of these crucial raw materials.

Impact on the EV Market

• Firstly, it enhances the economic viability of EVs, potentially accelerating consumer adoption. With lower costs, EVs could reach price parity with traditional vehicles sooner than anticipated, making them an attractive option for a broader range of consumers.
• Secondly, lower battery costs could spur innovation in the sector, encouraging manufacturers to invest in new technologies and designs, further boosting the performance and appeal of EVs. This could lead to a more diverse range of EV models, catering to various consumer preferences and needs.
• Finally, the reduction in battery costs is likely to influence global EV adoption trends, particularly in cost-sensitive markets. It could play a pivotal role in driving EV adoption in emerging economies, where cost is a significant barrier to EV uptake.

2. Market Growth and Consumer Adoption

Driving Forces Behind Market Growth

• As awareness of environmental issues like climate change and air pollution intensifies, there is increasing demand for cleaner transportation options. EVs, with their zero tailpipe emissions, are seen as a key solution to these environmental challenges.
• Technological advancements in EVs, particularly in battery efficiency and charging infrastructure, have also propelled market growth. Modern EVs offer longer ranges, reduced charging times, and overall better performance, making them more appealing to a broader consumer base.
• Government policies and incentives play a crucial role as well. Many countries have implemented policies that promote EV adoption through subsidies, tax incentives, and investments in charging infrastructure.

Consumer Adoption Trends

Consumer adoption of EVs is on an upward trajectory. Initially, EVs were perceived as a niche market, catering primarily to environmentally conscious consumers. However, this perception is changing rapidly. As EV technology improves and prices become more competitive, a broader spectrum of consumers is considering EVs as a viable alternative to traditional vehicles.

One notable trend is the increasing interest in EVs in urban areas, where concerns about air quality are more pronounced. City dwellers are also more likely to benefit from the existing EV charging infrastructure. However, adoption is not limited to urban settings. In many regions, including rural areas, the growing network of charging stations is making EVs more practical for a wider range of users.

3. The German EV Market

Germany, a powerhouse in the automotive industry, is undergoing a significant shift towards electric mobility. This transition is part of a broader national effort to combat climate change and reduce carbon emissions. The German government has set ambitious targets for EV adoption, aiming to have 7 to 10 million electric vehicles on the road by 2030.

Germany's recent decision to phase out its "Environmental Bonus" for electric vehicles marks a significant shift in European EV policy. This change, driven by budget constraints in the Climate and Transformation Fund (KTF) and a ruling by the Federal Constitutional Court, signifies the end of a major phase of state support for electric vehicles in the country. The reasons for the termination of the Environmental Bonus include:

• Budget Deficit in KTF: The discontinuation was primarily due to a significant budget deficit in the Climate and Transformation Fund, which is crucial for Germany's climate and energy initiatives.
• Federal Constitutional Court Ruling: This ruling necessitated immediate budget adjustments, impacting several subsidy programs, including those for electric vehicles.
• Strategic Budget Reallocation: To address the financial deficit and comply with the court's ruling, the government redistributed its 2024 budget, affecting various programs, including the Environmental Bonus.
• Immediate Policy Implementation: The policy to end the subsidies was implemented immediately, with the Federal Office of Economics and Export Control (BAFA) not accepting new applications after December 18, 2023.
• Maintaining Existing Commitments: While new applications were halted, the government confirmed that existing commitments and previously submitted applications would continue to be processed.

Consumer Adoption in Germany

Despite the recent incentive changes, German consumers are increasingly embracing EVs, driven by environmental awareness, government incentives, and a growing selection of EV models. While the initial adoption was slower compared to some other European countries, recent years have seen a surge in EV sales. This uptick is attributed to a combination of factors, including the expanding range of EV models offered by German manufacturers, improvements in battery technology, and a more robust charging infrastructure.

4. EV Market Projections for 2025

By 2025, the global electric vehicle market is poised for considerable growth. Analysts, including those from Goldman Sachs, anticipate a significant increase in EV market penetration. This expected growth is driven by advancements in EV technology, favorable government policies, and rising consumer adoption. EVs are projected to make up a substantial share of the global automotive market, bolstered by improvements in battery technology which enhance vehicle performance and cost-effectiveness.

Key Points

• Market Penetration: A notable increase in the proportion of EVs in total vehicle sales is expected.
• Driving Factors: Advances in battery technology, supportive government policies, and growing consumer interest.
• Market Scenarios:

Conservative Estimates: Steady, gradual increase in EV adoption.

Hyper-Adoption Scenarios: Rapid growth in EV adoption, possibly driven by technological breakthroughs, aggressive environmental policies, or shifts in consumer preferences.

• Influential Factors: Improvements in EV infrastructure, especially charging networks, and new government regulations and incentives.
• Challenges and Barriers: Availability and cost of battery raw materials, Pace of infrastructure development, Technological disruptions, Post-2025 economic and policy landscape.

Conclusion

By 2025, the EV market is expected to witness significant growth globally, driven by advancements in technology, supportive government policies, and increasing consumer adoption. Germany's EV market, in particular, is set to play a pivotal role, despite recent changes in government incentives, underscoring the country's commitment to reducing carbon emissions and leading the charge in electric mobility.

FAQs

What are the key technological advancements in the EV market?

Significant improvements in battery efficiency, longer lifespans, shorter charging times, and the development of solid-state batteries enhancing energy density and safety.

How much will EV battery prices reduce by 2025?

Research suggests a 40% reduction in EV battery prices by 2025, making EVs more economically viable and competitive.

What factors are driving the growth of the EV market?

Increased awareness of environmental issues, advancements in battery technology and charging infrastructure, and government policies promoting EV adoption.

How is Germany's EV market adapting to recent policy changes?

Despite phasing out the "Environmental Bonus," consumer adoption in Germany continues to grow, supported by environmental awareness and an expanding range of EV models.

What are the potential challenges and barriers for the EV market post-2025?

Challenges include the availability and cost of battery raw materials, the pace of infrastructure development, potential technological disruptions, and the economic and policy environment.

China

In China, where the sales share of electric cars has been high for several years, the sales-weighted average price of electric cars (before purchase subsidy) is already lower than that of ICE cars. This is true not only when looking at total sales, but also at the small cars segment, and is close for SUVs. After accounting for the EV exemption from the 10% vehicle purchase tax, electric SUVs were already on par with conventional ones in 2022, on average.

Electric car prices have dropped significantly since 2018. We estimate that around 55% of the electric cars sold in China in 2022 were cheaper than their average ICE equivalent, up from under 10% in 2018. Given the further price declines between 2022 and 2023, we estimate that this share increased to around 65% in 2023. These encouraging trends suggest that price parity between electric and ICE cars could also be reached in other countries in certain segments by 2030, if the sales share of electric cars continues to grow, and if supporting infrastructure such as for charging is sustained.

As reported in detail in GEVO-2023, China remains a global exception in terms of available inexpensive electric models. Local carmakers already market nearly 50 small, affordable electric car models, many of which are priced under CNY100000 (USD15000). This is in the same range as best-selling small ICE cars in 2023, which cost from CNY70000 to CNY100000. In 2022, the best-selling electric car was SAICs small Wuling Hongguang Mini EV, which accounted for 10% of all BEV sales. It was priced around CNY40000, weighing under 700kg for a 170-km range. In 2023, however, it was overtaken by Tesla models, among other larger models, as new consumers seek longer ranges and higher-end options and digital equipment.

United States

In the United States, the sales-weighted average price of electric cars decreased over the 2018-2022 period, primarily driven by a considerable drop in the price of Tesla cars, which account for a significant share of sales. The sales-weighted average retail price of electric SUVs fell slightly more quickly than the average SUV battery costs over the same period. The average price of small and medium models also decreased, albeit to a smaller extent.

Across all segments, electric models remained more expensive than conventional equivalents in 2022. However, the gap has since begun to close, as market size increases and competition leads carmakers to cut prices. For example, in 2023-2024, Teslas Model 3 could be found in the USD39000 to USD42000 range, which is comparable to the average price for new ICE cars, and a new Model Y priced under USD50000 was launched. Rivian is expecting to launch its R2 SUV in 2026 at USD45000, which is much less than previous vehicles. Average price parity between electric and conventional SUVs could be reached by 2030, but it may only be reached later for small and medium cars, given their lower availability and popularity.

Smaller, cheaper electric models have further to go to reach price parity in the United States. We estimate that in 2022, only about 5% of the electric cars sold in the United States were cheaper than their average ICE equivalent. In 2023, the cheapest electric cars were priced around USD30000 (e.g.Chevrolet Bolt, Nissan Leaf, Mini Cooper SE). To compare, best-selling small ICE options cost under USD20000 (e.g.Kia Rio, Mitsubishi Mirage), and many best-selling medium ICE options between USD20000 and USD25000 (e.g.Honda Civic, Toyota Corolla, Kia Forte, Hyundai Avante, Nissan Sentra).

Around 25 new all-electric car models are expected in 2024, but only 5 of them are expected below USD50000, and none under the USD30000 mark. Considering all the electric models expected to be available in 2024, about 75% are priced above USD50000, and fewer than 10 under USD40000, even after taking into account the USD7500 tax credit under the IRA for eligible cars as of February 2024. This means that despite the tax credit, few electric car models directly compete with small mass-market ICE models.

In December 2023, GM stopped production of its best-selling electric car, the Bolt, announcing it would introduce a new version in 2025. The Nissan Leaf (40kWh) therefore remains the cheapest available electric car in 2024, at just under USD30000, but is not yet eligible for IRA tax credits. Ford announced in 2024 that it would move away from large and expensive electric cars as a way to convince more consumers to switch to electric, at the same time as increasing output of ICE models to help finance a transition to electric mobility. In 2024, Tesla announced it would start producing a next-generation, compact and affordable electric car in June 2025, but the company had already announced in 2020 that it would deliver a USD25000 model within 3 years. Some micro urban electric cars are already available between USD5000 and USD20000 (e.g.Arcimoto FUV, Nimbus One), but they are rare. In theory, such models could cover many use cases, since 80% of car journeys in the UnitedStates are under 10 miles.

Europe

Pricing trends differ across European countries, and typically vary by segment.

In Norway, after taking into account the EV sales tax exemption, electric cars are already cheaper than ICE equivalents across all segments. In 2022, we estimate that the electric premium stood around -15%, and even -30% for medium-sized cars. Five years earlier, in 2018, the overall electric premium was less advantageous, at around -5%. The progressive reintroduction of sales taxes on electric cars may change these estimates for 2023 onwards.

Germanys electric premium ranks among the lowest in the EuropeanUnion. Although the sales-weighted average electric premium increased slightly between 2018 and 2022, it stood at 15% in 2022. It is particularly low for medium-sized cars (10-15%) and SUVs (20%), but remains higher than 50% for small models. In the case of medium cars, the sales-weighted average electric premium was as low as EUR5000 in 2022. We estimate that in 2022, over 40% of the medium electric cars sold in Germany were cheaper than their average ICE equivalent. Looking at total sales, over 25% of the electric cars sold in 2022 were cheaper than their average ICE equivalent. In 2023, the cheapest models among the best-selling medium electric cars were priced between EUR22000 and EUR35000 (e.g.MG MG4, Dacia Spring, Renault Megane), far cheaper than the three front-runners priced above EUR45000 (VW ID.3, Cupra Born, and Tesla Model 3). To compare, best-selling ICE cars in the medium segment were also priced between EUR30000 and EUR45000 (e.g.VW Golf, VW Passat Santana, Skoda Octavia Laura, Audi A3, Audi A4). At the end of 2023, Germany phased out its subsidy for electric car purchases, but competition and falling model prices could compensate for this.

In France, the sales-weighted average electric premium stagnated between 2018 and 2022. The average price of ICE cars also increased over the same period, though more moderately than that of electric models. Despite a drop in the price of electric SUVs, which stood at a 30% premium over ICE equivalents in 2022, the former do not account for a high enough share of total electric car sales to drive down the overall average. The electric premium for small and medium cars remains around 40-50%.

These trends mirror those of some of the best-selling models. For example, when adjusting prices for inflation, the small Renault Zoe was sold at the same price on average in 2022-2023 as in 2018-2019, or EUR30000 (USD32000). It could be found for sale at as low as EUR25000 in 2015-2016. The earlier models, in 2015, had a battery size of around 20kWh, which increased to around 40kWh in 20182019 and 50kWh in newer models in 2022-2023. Yet European battery prices fell more quickly than the battery size increased over the same period, indicating that battery size alone does not explain car price dynamics.

In 2023, the cheapest electric cars in France were priced between EUR22000 and EUR30000 (e.g.Dacia Spring, Renault Twingo E-Tech, Smart EQ Fortwo), while best-selling small ICE models were available between EUR10000 and EUR20000 (e.g.Renault Clio, Peugeot 208, Citron C3, Dacia Sandero, Opel Corsa, Skoda Fabia). Since mid-2024, subsidies of up to EUR4000 can be granted for electric cars priced under EUR47000, with an additional subsidy of up to EUR3000 for lower-income households.

In the United Kingdom, the sales-weighted average electric premium shrank between 2018 and 2022, thanks to a drop in prices for electric SUVs, as in the United States. Nonetheless, electric SUVs still stood at a 45% premium over ICE equivalents in 2022, which is similar to the premium for small models but far higher than for medium cars (20%).

In 2023, the cheapest electric cars in the United Kingdom were priced from GBP27000 to GBP30000 (USD33000 to 37000) (e.g.MG MG4, Fiat 500, Nissan Leaf, Renault Zoe), with the exception of the Smart EQ Fortwo, priced at GBP21000. To compare, best-selling small ICE options could be found from GBP10000 to 17000 (e.g.Peugeot 208, Fiat 500, Dacia Sandero) and medium options below GBP25000 (e.g.Ford Puma). Since July 2022, there has been no subsidy for the purchase of electric passenger cars.

Elsewhere in Europe, electric cars remain typically much more expensive than ICE equivalents. In Poland, for example, just a few electric car models could be found at prices competitive with ICE cars in 2023, under the PLN150000 (Polish zloty) (EUR35000) mark. Over 70% of electric car sales in 2023 were for SUVs, or large or more luxurious models, compared to less than 60% for ICE cars.

In 2023, there were several announcements by European OEMs for smaller models priced under EUR25000 in the near-term (e.g.Renault R5, Citron e-C3, Fiat e-Panda, VW ID.2all). There is also some appetite for urban microcars (i.e.L6-L7 category), learning from the success of Chinas Wuling. Miniature models bring important benefits if they displace conventional models, helping reduce battery and critical mineral demand. Their prices are often below USD5000 (e.g.Microlino, Fiat Topolino, Citron Ami, Silence S04, Bir B2211).

In Europe and the United States, electric car prices are expected to come down as a result of falling battery prices, more efficient manufacturing, and competition. Independent analyses suggest that price parity between some electric and ICE car models in certain segments could be reached over the 2025-2028 period, for example for small electric cars in Europe in 2025 or soon after. However, many market variables could delay price parity, such as volatile commodity prices, supply chain bottlenecks, and the ability of carmakers to yield sufficient margins from cheaper electric models. The typical rule in which economies of scale bring down costs is being complicated by numerous other market forces. These include a dynamic regulatory context, geopolitical competition, domestic content incentives, and a continually evolving technology landscape, with competing battery chemistries that each have their own economies of scale and regional specificities.

Japan

Japan is a rare example of an advanced economy where small models both for electric and ICE vehicles appeal to a large consumer base, motivated by densely populated cities with limited parking space, and policy support. In 2023, about 60% of total ICE sales were for small models, and over half of total electric sales. Two electric cars from the smallest Kei category, the Nissan Sakura and Mitsubishi eK-X, accounted for nearly 50% of national electric car sales alone, and both are priced between JPY2.3million (Japanese yen) and JPY3million (USD18000 to USD23000). However, this is still more expensive than best-selling small ICE cars (e.g.Honda N Box, Daihatsu Hijet, Daihatsu Tanto, Suzuki Spacia, Daihatsu Move), priced between USD13000 and USD18000. In 2024, Nissan announced that it would aim to reach cost parity (of production, not retail price) between electric and ICE cars by 2030.

Emerging market and developing economies

In EMDEs, the absence of small and cheaper electric car models is a significant hindrance to wider market uptake. Many of the available car models are SUVs or large models, targeting consumers of high-end goods, and far too expensive for mass-market consumers, who often do not own a personal car in the first place (see later sections on second-hand car markets and 2/3Ws).

In India, while Tatas small Tiago/Tigor models, which are priced between USD10000 and USD15000, accounted for about 20% of total electric car sales in 2023, the average best-selling small ICE car is priced around USD7000. Large models and SUVs accounted for over 65% of total electric car sales. While BYD announced in 2023 the goal of accounting for 40% of Indias EV market by 2030, all of its models available in India cost more than INR3million (Indian rupees) (USD37000), including the Seal, launched in 2024 for INR4.1million (USD50000).

Similarly, SUVs and large models accounted for the majority share of electric car sales in Thailand (60%), Indonesia (55%), Malaysia (over 85%) and Viet Nam (over 95%). In Indonesia, for example, Hyundais Ionic 5 was the most popular electric car in 2023, priced at around USD50000. Looking at launch announcements, most new models expected over the 2024-2028 period in EMDEs are SUVs or large models. However, more than 50 small and medium models could also be introduced, and the recent or forthcoming entry of Chinese carmakers suggests that cheaper models could hit the market in the coming years.

In 2022-2023, Chinese carmakers accounted for 40-75% of the electric car sales in Indonesia, Thailand and Brazil, with sales jumping as cheaper Chinese models were introduced. In Thailand, for example, Hozon launched its Neta V model in 2022 priced at THB550000 (Thai baht) (USD15600), which became a best-seller in 2023 given its relative affordability compared with the cheapest ICE equivalents at around USD9000. Similarly, in Indonesia, the market entry of Wulings Air EV in 2022-2023 was met with great success. In Colombia, the best-selling electric car in 2023 was the Chinese mini-car, Zhidou 2DS, which could be found at around USD15000, a competitive option relative to the countrys cheapest ICE car, the Kia Picanto, at USD13000.