Ten million electric cars were on the world''s roads in 2020. It was a pivotal year for the electrification of mass market transportation. Sales of electric cars were 4.6% of total car sales around the world. The availability of electric vehicle models expanded. New initiatives for critical battery technology were launched. And, this progress advanced in the midst of the Covid-19 pandemic and its related economic downturn and lockdowns.
Over the last decade a variety of support policies for electric vehicles (EVs) were instituted in key markets which helped stimulate a major expansion of electric car models.
But the challenge remains enormous. Reaching a trajectory consistent with the IEA Sustainable Development Scenario will require putting 230million EVs on the world''s roads by 2030.
Significant fiscal incentives spurred the initial uptake of electric light-duty vehicles (LDVs) and underpinned the scale up in EV manufacturing and battery industries. The measures – primarily purchase subsidies, and/or vehicle purchase and registration tax rebates –were designed to reduce the price gap with conventional vehicles. Such measures were implemented as early as the 1990s in Norway,1 in the UnitedStates in 2008 and in China in 2014.
Gradual tightening of fuel economy and tailpipe CO2 standards has augmented the role of EVs to meet the standards. Today, over 85% of car sales worldwide are subject to such standards. CO2 emissions standards in the European Union played a significant role in promoting electric car sales, which in 2020 had the largest annual increase to reach 2.1 million. Some jurisdictions are employing mandatory targets for EV sales, for example for decades in California2 and in China since 2017.
Convenient and affordable publicly accessible chargers will be increasingly important as EVs scale up. To help address this, governments have provided support for EV charging infrastructure through measures such as direct investment to install publicly accessible chargers or incentives for EV owners to install charging points at home. In some places building codes may require new construction or substantial remodels to include charging points, for example in apartment blocks and retail establishments.
Efforts by cities to offer enhanced value for EVs has encouraged sales even outside of urban areas. Such measures include strategic deployment of charging infrastructure, and putting in place preferential/prohibited circulation or access schemes such as low- and zero-emission zones or differentiated circulation fees. Such measures have had a major impact on EV sales in Oslo and a number of cities in China.
Broader and more ambitious policy portfolios to accelerate the transition
Making the 2020s the decade of transition to EVs requires moreambition and action among both market leaders and followers. In markets that demonstrated significant progress in the 2010s, a primary direction in 2021 and beyond should be to continue to implement and tighten, as well as to broaden, regulatory instruments. Examples include the European Union CO2 emissions regulation for cars and vans, China''s New Energy Vehicles (NEV) mandate or California''s Zero-Emission Vehicle (ZEV) mandate.
Near-term efforts must focus on continuing to make EVs competitive and gradually phasing out purchase subsidies as sales expand. This can be done via differentiated taxation of vehicles and fuels, based on their environmental performance, and by reinforcing regulatory measures that will enable the clean vehicle industry to thrive.
In the long term, realising the full potential for EVs to contribute to cut vehicle emissions requires integration of EVs in power systems, decarbonisation of electricity generation, deployment of recharging infrastructure and manufacturing of sustainable batteries.
Countries that currently deploy limited numbers of electric cars can profit from the lessons learned and advances already made in automotive and battery technology to support the production and uptake of EVs. Product innovation and the expertise developed in the charging services industry will also be beneficial for emerging economies. But they will also need to significantly tighten fuel economy and emissions standards. Emerging economies with large markets for second-hand imported cars can use policy levers to take advantage of electric car models at attractive prices, though they will need to place particular emphasis on implications for electricity grids.#anchor3## 4
To date, more than 20 countries have announced the full phase-out of internal combustion engine (ICE) car sales over the next 10‑30years, including emerging economies such as Cabo Verde, Costa Rica and Sri Lanka. Moreover, more than 120countries (accounting for around 85% of the global road vehicle fleet, excluding two/three-wheelers) have announced economy-wide net-zero emissions pledges that aim to reach net zero in the coming few decades.
Policy attention and actions need to broaden to other transport modes, in particular commercial vehicles – light-commercial vehicles, medium- and heavy-duty trucks, and buses – as they have an increasing and disproportionate impact on energy use, air pollution and CO2 emissions. Medium- and heavy‑duty vehicles represent 5% of all four-wheeled road vehicles in circulation but almost 30% of CO2 emissions. Progress in batteries has led to rapid commercialisation in the past few years of more and more models in ever heavier weight segments and with increasing ranges.
Given their enormous number and populartity, electrifying two/three-wheelers in emerging economies is central to decarbonising transport in the near term. China is taking a leadwith a ban of ICE versions of two/three-wheelers in a number ofcities.
Electric car sales broke all records in 2020. They were up over 40% from 2019. This is particurlary notable as sales of all types of cars contracted 16% in 2020 reflecting pandemic-related conditions.
Existing EV strategies bolstered the electric car market in the first-half of 2020
Electric car sales were underpinned with existing policy support and augmented with Covid-related stimulus measures. Prior to the pandemic, many countries were already developing and strengthening e-mobility strategies with key policy measures such as fiscal incentives and making vehicle CO2 emission standards more strigent. Purchase incentives increased in early 2020, notably in Germany, France and Italy. As a result,electric car sales in Europe were 55% higher during the first-half of 2020 relative to the same period in 2019.
In the rest of the world, electric car sales were hurt by the economic crisis, with sales falling from 2019 levels though not as steeply as conventional cars.
Stimulus measures boosted electric cars sales in the second-half of 2020
Additional Covid-19-related stimulus measures from mid-2020 further boosted electric car sales. Sales between July and December surpassed the 2019 levels in each month in all large markets, despite second waves of the pandemic.5
These stimulus measures differed in important ways from those enacted during the 2008‑09 financial crisis. First, there was a specific focus on boosting the uptake of electric and hybrid vehicles. Second, a number of countries adopted a more integrated approach for the transport sector by supporting charging infrastructure, public transport and non‑motorised mobility. EV stimulus measures primarily took the form of increased purchase incentives (or delaying the phase-out of subsidies) and EV-specific cash-for-clunker approaches. Noteably, Germany did not provide any subsidies to conventional cars in its support package to the automotive sector.
The approaches were more integrated to the broader context of commitments to clean energy transitions and EV deployment than those that were made prior to the Covid-19 crisis. In a number of countries they were confirmed in 2020 via new commitments to achieve net-zero emissions by mid-century.
In addition, ongoing declines in battery costs, wider availability of electric carmodels, uptake of EVs by fleet operators andenthusiasm of electric car buyers provided fertile ground for the EV market in 2020. These factors, supplemented by local policy measures, likely played an influential role in the uptick in electric car sales shares in the United States despite few incentives at the federal level.
Maintaining momentum in 2021 and beyond is vital
Many of the automotive-related stimulus measures implemented in 2020 were planned to be phased out by the end of the year. In some cases, the maximum quotas were reached in just a few weeks, e.g. France''s enhanced cash-for-clunker scheme. The targeted stimulus measures provided impetus to the EV market, but do not guarantee persistent sales growth over time.
Acknowledging the success of the short-term measures, in the second-half of 2020 some countries extended their EV support packages by several months or even years, although in some cases with stricter access tosubsidies,e.g. tightened vehicle price caps, higher income conditions, gradual reduction of subsidies and tax reductions.
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