Bloomberg New Energy Finance has a new prediction about electric cars — they will account for more than half of all new car sales globally by 2040 and account for a third of all light duty vehicles on the road. The latest report was put together by an advanced team of BNEF analysts and takes several factors into account. Its predictions are significantly more optimistic than the last BNEF report just one year ago, which projected sales of electric cars would reach 35% of the market by 2040.
First and foremost, the experts expect the price of batteries, electric motors, and other components for electric cars to continue falling as volumes increase. By contrast, tougher emissions rules may actually result in higher prices for internal combustion engines as they struggle to remain relevant in a changing world. Another factor is that electric cars have lower lifetime operating costs than conventional cars.
Yet another matter is the number of mainstream manufacturers who are rushing new electric cars to market. Just this week, Volvo announced that all its new cars will have a battery and electric motor by 2019. Mercedes, Audi, and Volkswagen are hot on the electric cars trail as well.
Chevrolet will have the new Chevy Bolt on sale in all 50 states within a few weeks and has a backlog of orders in Norway and South Korea. Don’t discount the Chinese auto companies. They sell few cars in the US at present (and may sell none if President Tweet has his way) but they have every intention of exporting to global markets in coming years. If the BNEF prediction is correct, the world will use 8 billion fewer barrels of oil in 2040 for the transportation sector while global demand for electricity will grow by 5% from today’s level.
Colin McKerracher, is the leader of the advanced transport analysis team at BNEF. He says, “We see a momentous inflection point for the global auto industry in the second half of the 2020s. Consumers will find that upfront selling prices for EVs are comparable or lower than those for average ICE vehicles in almost all big markets by 2029.” Renewables are now less expensive than coal, oil, natural gas, or nuclear power in many parts of the world and getting cheaper almost by the hour.
The BNEF forecast predicts EV sales worldwide will grow steadily in the next few years, from 700,000 in 2016 to 3 million by 2021. At that point, they will account for nearly 5% of light duty vehicle sales in Europe, up from a little over 1% now, and around 4% in both the US and China. While that is good news, the analysts expect big changes will begin near the end of the next decade when the purchase price of electric cars falls below that of conventional cars.
Countries that have made early progress in the sale of electric cars, such as Norway, France, the Netherlands, and the UK, are expected to be among the leaders in 2040. Emerging economies such as India are not expected to see significant EV sales until late in the next decade, despite that country’s pledge that all new cars sold there will be electric by 2030.
Jon Moore, chief executive of BNEF, said that the growth in EV market share “will come about during a time when the power system is also undergoing a revolution, towards cleaner, more distributed generation. This means that not only do EVs surge, but their emissions profile improves over time.”
BNEF’s forecast is based on analyzing the relative economics of electric cars and conventional cars. It assumes that current incentives will continue until their scheduled expiration date but does not assume the introduction of any new incentives. BNEF analyzed the automobile market not just by country but also by market segment, including everything from small sedans to SUVs and large family cars.