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Electric cars hit 2 million mark worldwide in 2016

Electric vehicles reached 2 million cars worldwide last year, an increase of 59% year over year, as manufactures put another 750,000 vehicles on the road.

The U.S., which used to lead the electric car market, fell behind China for the second year in a row, according to the International Energy Agency's, or IEA's, latest Global EV Outlook report. The organization attributed the growth to lower vehicle costs and government initiatives.

The U.S. had about 564,000 electric vehicles in use, while China had nearly 649,000 vehicles, the IEA found. Together, the two countries make up more than roughly two-thirds of electric vehicles sold in 2016. The report noted another 200 million electric two wheelers and 345,000 buses are on the roads, primarily in China.

While still a small portion of the overall market, electric cars reached reached 1.10% market share in 2016, with the U.S. market share at 0.91% and China at 1.37%. Norway, a stand-out in supportive policies for electric vehicles, market share exceeded 28%.

However, electric vehicles still only made up 0.2% of total passenger light-duty vehicles in circulation last year. IEA estimates the number of electric cars would need to reach 600 million by 2040 in order to keep temperature increases below 2 degrees Celsius by the end of the century.

Driving the increase in electric cars has been significant reductions in battery costs in recent years. Battery costs have been cut by a factor of four since 2009, the report said, while energy density has increased sixfold. Manufacturers have also been entering the market or expanding their efforts.

In just the last several years, nine automakers have announced plans to significantly widen their electric vehicle efforts. For example, Tesla Inc. announced in 2016 that it was aiming to deploy 1 million sales by 2020, while Volkswagen AG said it expects to produce at least 30 electric models by 2025.

The advancements have been part of the Electric Vehicles Initiative, a multigovernment policy forum founded in 2009 focused on rapidly adding electric cars across the globe. While its goal is to have 20 million electric vehicles internationally by 2020, IEA expects between 9 million and 20 million cars to be on roads by then and between 40 million and 70 million by 2025.

Encouraging electric vehicle deployment will take a combination of policy support, stringent fuel economy and emission standards and purchase incentives, IEA said. In the U.S., new electric cars are eligible for tax credits capped at $7,500 at the federal level, in addition to their states' incentives. However these tax credits may soon begin to phase out for some manufacturers. Owners in other countries, such as China and Netherlands, are exempt from certain taxes.

Reliable charging infrastructure will also factor into whether or not more people can start driving electric cars. Electric cars still outnumber public charging stations by more than six to one. The U.S. installed 41,540 public chargers in 2016, though private charging stations vastly outnumber public entities.