Internal combustion engine sales now in ‘permanent decline’ worldwide, but aggressive policy action still needed to hit climate goals warns, BloombergNEF
Plug-in electrified vehicles are on track to make up over the fifth of the new passenger vehicle market in 2025, with global sales expected to rise from 6.6 million in 2021 to 20.7 million by mid-decade, according to fresh analysis from BloombergNEF.
The influential analyst’s Electric Vehicle Outlook 2022 sets out short and long-term predictions for the decarbonisation of road transport over the decade worldwide, predicting that plug-in vehicle sales will rise from 10 per cent of all passenger vehicle sales last year to 23 per cent in 2025.
Fully-electric vehicles (EVs) are set to dominate the growing plug-in market, with the report projecting they will comprise three-quarters of the plug-in segment by 2025 and up to 39 per cent of all vehicle sales in the markets of China and Europe by the same year.
It notes that internal combustion engine vehicle sales are now in a “permanent decline” after peaking in 2017, but warns that the policymakers and financiers must move must faster to incentivise various forms of zero emission transport if the road transport sector is to align with global climate goals.
The Outlook notes that the EV market is shifting from being primarily driven by policy and regulation to one driven by organic consumer demand, noting that supply is a larger constraint on EV adoption than demand in most countries.
But it warns of a “widening gap” between wealthy and emerging on EV adoption, predicting that China and Europe will account for as much as cent of EV sales by 2025.
It stresses that the road transport sector is not on track to deliver carbon neutrality by 2050, despite gains in the EV market, and calls on policymakers and business leaders to consider a broad range of public transport decarbonisation solutions, beyond EVs.
“Simply changing out of the drivetrain of vehicles may not be the most efficient way to deliver net zero, and a full range of solutions – including more public transit, and active transport options – will be needed,” the introduction to the report notes. “Aggressive action from policymakers will be required, especially on heavier vehicles where both batteries and hydrogen fuel cells are vying for a place in the market. The window to stay on track for net zero is closing quickly.”
Meanwhile, the analyst’s long-term outlook notes that no countries are currently on track to phase out combustion vehicle sales by 2038, despite this milestone being necessary to meet to deliver a “net zero global fleet” by mid-century.
“The window for achieving net zero emissions in the road transport sector by 2050 is still open, but urgent action is needed and there is no room for complacency,” the report states. “Some vehicle segments and geographies are almost on track for net zero under the Economic Transition Scenario [which assumes no new policies and regulations are enacted that impact the market]. Others are not.”
Zero emission vehicles need to represent 61 per cent of global new passenger vehicle sales by 2030, 93 per cent by 2035, and 100 per cent by 2038 in order to achieve net zero emissions in the road transport sector by mid-century, according to BloombergNEF .
Under current policies and regulations, the fleet of passenger electric vehicles is on track to hit 469 million by 2035, but this figure needs to jump to 612 million to align with climate goals, it said.
Much of this gap will have to be met in an emerging situation, which will need financial support to accelerate the roll out of electric mobility of all types, the analyst said.
“Developed countries and multilateral institutions should include electric vehicle investments, incentives and charging infrastructure deployments in their international climate finance plans, making capital available to emerging with credible plans to develop this sector,” it states. “Concessional finance has been a key enabler for the development of renewable power generation in an emerging emerging, and could play a similar role in the EV sector.”
That conventional petrol and diesel vehicle sales are now in permanent decline would have been unthinkable even a few short years ago, yet now even with a zero emission road transport revolution in sight, complexity of shifting away from fossil fuel cars worldwide altogether remains a major challenge.