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How Fast Could the Market for Electric Vehicles Grow?

Adam Whitmore's picture

A specialist on energy economics and climate change policy, drawing on over 25 years’ experience of the energy sector. He is currently Head of Policy at a leading climate policy think tank. He...

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  • May 24, 2016

Various policy driven scenarios show electric vehicles gaining market share over the next few decades but with the turnover of the vehicle stock taking longer.

I recently argued that BP’s projections showing almost no take-up of plug-in vehicles[1] by 2035 was unrealistic in view of several convergent trends. There is increasing pressure to reduce CO2 emissions, there is large and growing concern about urban air quality, and electric vehicles are likely to prove attractive to consumers in many respects. In line with these drivers, sales are growing very quickly and many new models are coming on line, while battery technology is improving rapidly, with costs falling sharply and energy density rising.

However while these factors suggest that electric vehicles will gain substantial market share it does not say how much how soon[2]. So how fast might the market for plug-in vehicles grow if policy drivers are strong and matched by favourable economics? Here I consider how quickly electric vehicles could gain market share on that sort of optimistic view.

Market share gains for new technologies

The transition to electric vehicles is in its early stages, so extrapolating historical trends offers only limited guidance. Similarly, highly detailed modelling may not offer robust insights, because too many assumptions are required. Instead it seems appropriate to look at some broad indicators.

A good starting point is to look at adoption other new technologies. The chart below shows the rates of penetration of new technologies in the USA over the 20th and early 21st centuries. It shows variants on a characteristic s-curve shape, with most technologies reaching eventual penetrations of 80-100%. The typical time to reach about 80% penetration following the first 1% or so of deployment (about where plug-in vehicles are now) is around 20-30 years, although some modern highly scalable technologies have become nearly ubiquitous faster than this, and other technologies have taken as long as fifty years or so to reach high penetration.

For example, cars themselves experienced rapid growth between around 1910 and 1930, reaching 60% of households, before experiencing hiatus and decline during the Great Depression and Second
World War, before growing steadily again through the to the second half of the 20th Century.

However these timings are for the USA, and, even in increasingly homogenous, world global adoption may take a little longer.

Chart: Transitions of major technologies

new technology chart

The chart mainly shows technologies that fulfil a new function, rather than those that replace existing technologies, as plug-in vehicles do. However replacement technologies can also gain market share quickly. Digital cameras replacing film almost completely over a period of around 15-20 years, and DVDs replaced VHS in less than 10 years. In these cases the new technology brought clear advantages. For plug in vehicles a combination of some advantages plus regulatory drivers could play a similar role.

Modelling the transition

EVs are rather different from many of these cases in that there is a large existing capital stock which is expensive to replace – a new car is much more costly than a new camera. This limits the rate of change of the stock. I have therefore applied the sorts of timescales shown above to a rough and ready model representing the potential rate of gain market share of new vehicles, rather than changes to the stock. The model uses a standard s-curve (logistic function). Changes in the stock are then calculated considering stock turnover.

I have developed three scenarios representing respectively strong policy drivers, more moderate policy drivers, and a delayed transition representing either weaker policy or greater practical or economic obstacles. The strong policy case fits better with the historic data, but this may not be a reliable marker as the history is so short and there are a number of particular circumstances at work.

I have assumed plug-in vehicles will eventually account for 80%-90% of the market for light vehicles, with markets for internal combustion vehicles likely to remain where consumers seek low capital costs or they need long range with poor infrastructure. There will doubtless also be small niches for car enthusiasts seeking experience of the internal combustion engine, just as there are for taking photographs on film. However these are likely to play only a small role.

The rate at which the stock of vehicles is replaced depends on how long vehicles last. I have assumed this to be 15 years, although there is obviously a distribution around this. If this were to lengthen further it would slow the change in the stock, or could be shortened by incentives to scrap older vehicles. The life of new electric vehicles is unproven (although battery guarantees of typically around 8 years are available), but in any case I have assumed buyers replace their battery packs, or replace their EVs with other EVs rather than returning to internal combustion engines.

Growth of the vehicle fleet leads to a faster proportional changeover of the stock, assuming plug in vehicles gain the same share of the larger market, because current sales are a greater proportion of the historic stock. I’ve here assumed a 2.5% p.a. global growth rate for car sales[3].

The results of this analysis are shown in the chart. Annual sales of EVs reach 20-60% of the market by 2030, expected to be over 100 million vehicles p.a. by then. They by then account for around 7-22% of the vehicle stock, or around 100-330 million vehicles. By 2050 electric vehicles account for a majority of light vehicles on the roads in all the scenarios.

Global market share of plug in light vehicles

EV growth chart

So do these projections make sense, and what might stop them?

Cost competitiveness. Analysis by a variety of commentators show EVs becoming economically competitive in the early to mid-2020s, varying between geographies depending on factors such as driving patterns and petrol prices. This timing corresponds with the period when vehicles begin to gain market share much more rapidly in the above model, especially in the first two cases, which appears consistent.

China. A large proportion of vehicle sales in the coming years will be in developing countries, especially China. Concerns around urban air quality, development of the indigenous automotive industry, infrastructure development, and oil imports look likely to tend to favour EVs in China. Driving patterns based around lots of shorter distance urban driving are also compatible with EVs. For these reasons government policy in China strongly favours EVs. Again this seems consistent.

Growth rate. The compound annual growth rate for annual sales over the period to 2030 ranges from 25% to 33%, both well below current growth rates of around 60% p.a.

Scale-up. The need to produce tens of millions of additional EVs by 2030 is a formidable challenge. However the international car industry increased production by about 35 million units p.a. over the two decades between the 1990s and 2015, and added 20 million units p.a. in the last decade alone[4]. Replacing models with electric equivalents at this scale does not seem like an insuperable barrier, at least in the lower two scenarios. However the challenges of achieving this for the stronger policy scenario are formidable, and policy drivers would need to be correspondingly strong to overcome these barriers.

Battery production would also need to be scaled up by orders of magnitude. There don’t appear to be any fundamental barriers to supply of the vast quantities of lithium that would be needed, but it may take time to develop the infrastructure.

The need to ramp up production of both new models and batteries may act to slow growth, at least for a while and especially in the strong policy case, but do not seem likely to act as a fundamental longer term constraint.

Grid constraints. EVs are likely to require reinforcement of grids, but again this does not look like a major barrier given the timescales involved.

Other projections

These projections show much faster growth than analysis by BNEF, which suggests 35% market share by 2045[5]. However the reasons that BNEF sees growth being so restricted are unclear, and there appear to be few examples where the penetration of a new technology has been so slow. It seems a more likely estimate for a share of the stock by that date, though even then looks to be towards the low end of the range.

Goldman Sachs estimates 22% of the market being EVs by 2025[6]. This includes conventional hybrids, with the share of plug-in vehicles being only about a third of this, closer to the moderate case. However it would not seem to require a fundamental change to the market’s development for a greater share of hybrids to be plug-in, so Goldman’s analysis seems at least potentially consistent with the strong regulation case shown here.

Other scenarios show something close to the moderate case shown here. The IEA 450 scenario and Statoil’s reform scenario both show EV sales reaching around 30% of the market by 2030[7].

Outturn will doubtless differ from these projections. But they do highlight the extent to which policy might succeed in stimulating a major transition in car markets in the next two or three decades.

[1] All estimates here refer to pure electric vehicles and plug in hybrids, which get much or all of their energy from externally generated electricity. Depending on driving patterns, a PHEV may typically get 70% of its energy from external electricity. I exclude conventional hybrids, which are essentially a variant of internal combustion engines with increased efficiency, in that still get all their energy from petrol.

[2] Some have made the case that on pure resource cost grounds internal combustion engine vehicles will continue to predominate. See This is potentially true in the absence of any policy drivers due to emissions or other factors, but this seems unrealistic.

[3] For comparison, BP assume a doubling of the vehicle fleet by 2035, about a 3.5% p.a. growth rate (see there 2035 outlook).




[7] See Lost in transition, Carbon tracker p. 102 for plots of these projections

Original Post

Mark Heslep's picture
Mark Heslep on May 24, 2016

increasing pressure to reduce CO2 emissions, there is large and growing concern about urban air quality ..

True, though it does not necessarily follow that EVs will turn out to be the method actually used to make progress towards these goals in the decades ahead. MIT’s recent “On the Road Toward 2050” extensive survey of alternative engine types warrants inclusion in a literature review. They find that much more efficient cumbustion and hybrid drive trains will likely be more achievable than mass adoption of EVs by 2050, with EV market share still in the single digits.

See Chap 11 below for the summary

Jarmo Mikkonen's picture
Jarmo Mikkonen on May 24, 2016

In my native Finland, the government has decided the fastest route to cut transport emissions are biofuels blended into regular gas and diesel.

The reasons:
1. You can use biofuels on existing stock of vehicles with their ICE engines. No need to replace all the vehicles.
2. Finland can produce a lot of biofuel alongside existing forestry industry processes and from waste products. Finland is the 5th largest paper exporter in the world. Bigger than Canada….
3. Finland is a big country on European scale with a small population and distances are long. EVs have a problem with long distances.

This approach is reasonable if the goal is cut emissions fast. If the goal is to increase the market share of EVs, then this approach is not useful.

Engineer- Poet's picture
Engineer- Poet on May 24, 2016

What are the limits of the biofuel approach, though?  (Not that tall oil has a great many competing uses, IIUC.)  If there’s an effective emissions floor for biofuels and you need to go below it, you at least need a both/and approach.

Jarmo Mikkonen's picture
Jarmo Mikkonen on May 25, 2016

Finnish government aim is to raise the share of renewable fuels in transportation to 40% of the total by 2030. It is now about 10% and target for 2020 is 20%.

Finland has the biomass resources and the goal is to use materials that are byproducts and waste products of forestry industry material flow.

Electricity generation will be 80% carbon-free by 2020 so electric cars make sense here. But no way the government will subsidize them like the Norwegians have done.

I think this approach rational as transportation will in any case be the last domain that fossil fuels will dominate.

Engineer- Poet's picture
Engineer- Poet on May 25, 2016

So the 2030 transport energy decarbonization ceiling set by Finnish policy is approximately 40%.  Is that enough?

Bob Meinetz's picture
Bob Meinetz on May 26, 2016

Jarmo, the idea that Finnish biomass comes from “waste products” is a joke – unless you consider old-growth trees a waste product.

Finland burned 330,000 tons of wood pellets in 2015 from domestic sources and Russian imports, and exported 40,000 tons of pulverized trees for burning elsewhere in the EU. There is nothing “renewable” nor “sustainable” about chopping down forests twenty times faster than they can grow back.

Jarmo Mikkonen's picture
Jarmo Mikkonen on May 26, 2016


You apparently know very little about forestry. Let me enlighten you.

In Finland, the policy is to avoid cutting forests or grown trees for fuel. They are cut down for lumber and pulp. The parts that the industry cannot use: branches, partly rotten logs, twisted sections, tops of trees – are used for biomass.

Commercial forests are also thinned when they are 25-40 years old. The thicker parts of thinned trees go to pulp industry and thinner parts to biomass. The best and thickest trees are left to grow.

Biomass also includes pulp industry black liquor, sawdust, bark etc.
Finnish forest volume is growing far faster than commercial use, I have linked a page of national forest inventory down below. Please check the facts.

Jarmo Mikkonen's picture
Jarmo Mikkonen on May 26, 2016

Target, I’m not clear what you mean by ceiling.

Mind you, two sectors which are probably not included in the target are shipping and air transport.

Enough? Enough for what?

Engineer- Poet's picture
Engineer- Poet on May 26, 2016

Ceiling = how much decarbonization the policy can achieve.

Enough = reducing carbon emissions to sustainable levels.

Failing to adopt a plan which can get there is planning to fail.

Bob Meinetz's picture
Bob Meinetz on May 26, 2016

Jarmo, where are the 70,000 tons of pellets Finland imports from Russia accounted for? Are those made from partly rotten logs, flower clippings, and bark scratched from trees by squirrels too?

Your link shows Finnish forest volume is growing by 7%/year. My link shows Finnish wood pellet imports are growing by ~100%/year. Please check the facts.

Mark Heslep's picture
Mark Heslep on May 26, 2016

” This approach is reasonable if the goal is cut emissions fast.”

Speed is one of most notable problems with wood based biofuels; wood can not cut emissions fast. The usual justification is a fast local source of fuel, i.e. security of supply versus imports, and not fast emissions cuts.

Consider, if a million tons of carbon is harvested in the form of wood and converted to transport fuel, the carbon goes into the atmosphere almost immediately. Yet at best, wood regrowth occurs over 25 years in areas like the US southeast, and elsewhere over perhaps 50 years. In fact CO2 emissions will necessarily continue to increase during the ramp up period of a biofuels program and not reach equilibarium until decades later. And this assumes a net zero carbon balance for biofuels, which they are not.

Mark Heslep's picture
Mark Heslep on May 26, 2016

Finnish forest volume is growing far faster than commercial use “

If so, then the net emission of carbon by Finland is not *reduced* by zeroing out the growth, or reversing it.

Jarmo Mikkonen's picture
Jarmo Mikkonen on May 27, 2016


Please look at the numbers, not percentages. Your link says Finnish pellet production was 330 000 tons in 2015. Fine. My Metla link says the annual increase of forest volume is 104 000 000 cubic meters…despite all the cutting done each year.

Cubic meter of wood is roughly 500-600 kg. Annual increase of forest volume is thus around 50-60 million tons. It is over 150 times more than the pellet production in Finland in 2015.

When the increase of the forest volume each year is over 150 times greater than total pellet production, I see no problems with sustainability. Do you?

Jarmo Mikkonen's picture
Jarmo Mikkonen on May 27, 2016

The delay is there, that is a fact. But consider the alternative, electric car. In China it is mostly a coal-powered car because over 70% of electricity is produced by coal, same as in India. Also in the US, 67% of electricity is generated by fossil fuels. In Germany, 56% of which 44% by coal.

It will also take decades before a) electric car numbers grow enough to dent emissions and b) before fossil fuels are no longer used to generate electricity.

Jarmo Mikkonen's picture
Jarmo Mikkonen on May 27, 2016

I doubt biofuels can achieve more than 50-60% share in the next 20 years. By that time electric cars will have greater impact, also Finnish electricity generation will be close to 100% emission-free. Also the next generation of ICE cars will hopefully consume a lot less fuel and create less emissions. There are several factors at play.

I think the Finnish approach is realistic. Whether it is enough is a matter of opinion.

Mark Harrigan's picture
Mark Harrigan on May 28, 2016

An excellent piece of analysis thanks – but I think there are two major issues (and one minor one) that I do not see mentioned and that could be significant barriers/impediments to EV deployment rates

1) The availability and price of Cobalt – this is used in far greater quantities than Lithium in most Lithium Ion battery chemistries and is also not so amenable to supply expansion

2) The availability of neodymium for the electric motors – perhaps an even bigger issue, especially if demand for Wind (which uses a lot of Neodymium) keeps growing.

Neither of these two may prove insurmountable – the history of commodities shows that we find ways to bring new supply on line – but more often than not with some delay and at higher prices – both of which may slow EV uptake

3) – the minor one – Just how quickly can rapid charging stations be rolled out and at what cost? Currently the numbers are tiny and I’m not sure many pundits appreciate the scale issue here (I appreciate you talk about existing stock but the infrastructure may matter as much or more). Analysis of this factor is also relevant

Based on the 362,000 pre-orders alone, the best-selling sedan of 2017 is an electric vehicle, the Tesla Model 3. In 2015 the best selling sedan was the Camry with just over 360,000 sold.

Jeffery Surratt's picture
Jeffery Surratt on May 29, 2016

At this stage knowing how fast PHEV will be adopted by the public is anyone’s guess.
That is all any of it is a WAG. I will be buying a used volt in 2017, because it is the only car I can buy for less than $20,000 and save $10,000 in fuel costs over a 10 year ownership period. Gasoline prices are headed back up and as they do, more people will be buying used PHEV to save money. I have not purchased a new car since 1981. The used car market is where many buyers will choose their first EV, less cost and if they do not like it and have to trade it in, they will not lose as much. As solar costs come down, many will turn to small solar systems for just charging their EVs.

Graeme Tychsen's picture
Graeme Tychsen on Jun 8, 2016

By 2020, the number of private passenger road vehicles will double from somewhere over 1bln today to something towards 3bln. Until now there has been little or no discipline in energy / power use, but the demand is astronomical in many billions, rising, now seeking, understandably following, the example of those with a still rising “high’ standard of living that globally was not planned. The vastness of the demands and looming shortages for many materials points to efficiency, par excellence, on all fronts.Just on the growth of such vehicle use, means EV 35 per cent market share by 2045 is far too little far too late. As for biofuels in comments, it seems to continue a cumbersome system, a clear trait of the crude oil production system now.

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