This is an extract from a recent report “Global EV Outlook 2024” by IEA. In this extract we specifically focus on China.

Trends in electric cars

Global electric car sales neared 14 million in 2023, 95% of which were in China, Europe and the United States. Almost 14 million new electric cars were registered globally in 2023, bringing their total number on the roads to 40 million. Electric car sales in 2023 were 3.5 million higher than in 2022, a 35% year-on-year increase. While sales of electric cars are increasing globally, they remain significantly concentrated in just a few major markets.

In 2023, just under 60% of new electric car registrations were in the People’s Republic of China, just under 25% in Europe, and 10% in the United States – corresponding to nearly 95% of global electric car sales combined. In these countries, electric cars account for a large share of local car markets: more than one in three new car registrations in China was electric in 2023. Nevertheless, China, Europe and the United States also represent around two thirds of total car sales and stocks, meaning that the EV transition in these markets has major repercussions in terms of global trends. 

In China, the number of new electric car registrations reached 8.1 million in 2023, increasing by 35% relative to 2022. Increasing electric car sales were the main reason for growth in the overall car market, which contracted by 8% for conventional (internal combustion engine) cars but grew by 5% in total, indicating that electric car sales are continuing to perform as the market matures. The year 2023 was the first in which China’s New Energy Vehicle (NEV) industry ran without support from national subsidies for EV purchases, which have facilitated expansion of the market for more than a decade. Tax exemption for EV purchases and non-financial support remain in place, after an extension, as the automotive industry is seen as one of the key drivers of economic growth. 

Some province-led support and investment also remains in place and plays an important role in China’s EV landscape. As the market matures, the industry is entering a phase marked by increased price competition and consolidation. In addition, China exported over 4 million cars in 2023, making it the largest auto exporter in the world, among which 1.2 million were EVs. This is markedly more than the previous year – car exports were almost 65% higher than in 2022, and electric car exports were 80% higher. The main export markets for these vehicles were Europe and countries in the Asia Pacific region, such as Thailand and Australia. 

From January to March of this year, nearly 1.9 million electric cars were sold in China, marking an almost 35% increase compared to sales in the first quarter of 2023. In March, NEV sales in China surpassed a share of 40% in overall car sales for the first time, according to retail sales reported by the China Passenger Car Association. As witnessed in 2023, sales of plug-in hybrid electric cars are growing faster than sales of pure battery electric cars. Plug-in hybrid electric car sales in the first quarter increased by around 75% year-on-year in China, compared to just 15% for battery electric car sales, though the former started from a lower base. 

The majority of the additional 3 million electric car sales projected for 2024 relative to 2023 are from China. Despite the phase-out of NEV purchase subsidies last year, sales in China have remained robust, indicating that the market is maturing. With strong competition and relatively low-cost electric cars, sales are to grow by almost 25% in 2024 compared to last year, reaching around 10 million. As a result, electric car sales could represent around 45% of total car sales in China over 2024. Factors such as high interest rates and economic uncertainty could potentially reduce the growth of global electric car sales in 2024. Other challenges may come from the tightening of technical requirements for EVs to qualify for the purchase tax exemption in China. 

Electric car availability and affordability

The number of available electric car models nears 600, two thirds of which are large vehicles and SUVs. In 2023, the number of available models for electric cars increased 15% year-on year to nearly 590, as carmakers scaled up electrification plans, seeking to appeal to a growing consumer base. Meanwhile, the number of fully ICE models (i.e. excluding hybrids) declined for the fourth consecutive year, at an average of 2%. If all announced new electric models actually reach the market, and if the number of available ICE car models continues to decline by 2% annually, there could be as many electric as ICE car models before 2030. 

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. It is estimated 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, it is estimated 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 car makers already market nearly 50 small, affordable electric car models, many of which are priced under CNY 100 000. This is in the same range as best-selling small ICE cars in 2023, which cost from CNY 70 000 to CNY 100 000. In 2022, the best selling electric car was SAIC’s small Wuling Hongguang Mini EV, which accounted for 10% of all BEV sales. It was priced around CNY 40 000, weighing under 700 kg 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. 

China is expected to surpass a 50% electric car sales share in the next few years 

The current momentum in electric car sales has led to anticipation in China that passenger new energy vehicle (NEV) sales could reach a 50% share as soon as 2025, as stated in the recent Automotive Industry Green and Low-Carbon Development Roadmap 1.0 developed under the supervision of China’s Ministry of Industry and Information Technology. If this materialises, it would be a decade ahead of the 50% sales in 2035 target laid out in the Energy-saving and New Energy Vehicle Technology Roadmap 2.0 published just a few years ago. Moreover, it would be well above the official target of 20% new energy car sales by 2025, and would even exceed the recently announced 45% NEV sales share target for 2027. 

After achieving this milestone, the sales share of electric cars and vans continues to grow in the STEPS, exceeding two-thirds of total sales in 2030 and almost reaching 85% in 2035. Given that the current trend is tracking ahead of government targets, the electric LDV sales shares are the same for STEPS and APS through 2035. However, it will be critical for China to roll out public charging infrastructure in a timely manner to enable such growth. Electric LDVs are generally cost-competitive in China even at purchase, and so the phasing out of EV purchase subsidies in 2023 is unlikely to affect further growth. Announced EV battery manufacturing capacity is well above projected sales share, with an eye to potential exports, and so even higher shares are theoretically achievable.

China is also the global leader in terms of electric share of the 2/3W fleet, with over one-third of all 2/3Ws being electric today, and is expected to remain the leader in electric 2/3W sales in both the STEPS and APS. In the STEPS, the sales share of electric 2/3Ws reaches nearly 90% in 2035; in the APS, the share is slightly above that by 2035. China also has one of the highest stock shares of electric buses, with more than one in four buses being electric. By 2035, the sales share of electric buses increases to over 70% in both scenarios, up from 50% in 2023. While sales of electric medium- and heavy-duty trucks are significantly lower than other road modes, China held over 90% of the world’s total global electric truck stock in 2023. Electric truck sales are projected to reach a sales share of almost 50% in 2035 in both scenarios. 

The sales share of EVs across all road transport modes (excluding 2/3Ws) reaches around 80% in 2035 in both scenarios. Across all modes, the current market dynamics, and the policy landscape as considered in the STEPS to 2035, are sufficient to bring EV sales shares into line with China’s ambition of climate neutrality by 2060, as well as with provincial electrification targets. As such, in China there is no gap between existing policy frameworks and future targets, and even more ambition is conceivable.

Access the complete report here