Battery-electric vehicles could account for approximately 10% of light-vehicle sales globally by 2025, according to a Feb. 21 report by S&P Global Ratings.
The transition to electric vehicles will happen faster in Asia, followed by Europe and the United States, according to the report. A spokesman for S&P Global Ratings defined electric vehicles as solely battery-electric vehicles, noting that the 10% estimate does not include plug-in hybrid or fuel-cell electric vehicles.
Exactly how fast the rate of EV adoption will occur depends on several factors, including tightening emissions regulations, government incentives, range anxiety, battery costs and infrastructure suitability.
"As the global car parc becomes larger, emission standards for many countries have become stricter and continue to converge," the report said.
Regulations in China limit the average fleet carbon dioxide, or CO2, emissions to 117 grams per kilometer, whereas the U.S. limits emissions to 119 grams per kilometer and Europe is pushing for 95 grams per kilometer by 2021.
A major concern of potential EV consumers is knowing that their vehicle can make it to the destination without running out of power or that there will be enough charging stations along their route. To accomplish this, countries must develop the infrastructure to support EVs.
In 2017, there were more than 3 million battery-electric vehicles, plug-in hybrid vehicles and fuel-cell electric vehicles, according to the report, which cited the International Energy Agency. And there are currently about 3 million chargers in work buildings and households globally. S&P analysts estimate in the report that there could be more than 300,000 EV charging stations open to the public, with fast chargers accounting for about one-third of those. Even fast chargers, however, take about 20-30 minutes to charge an EV.
The report cites the high cost of EVs, mainly from battery prices, as an obstacle to mass adoption. S&P Ratings analysts wrote in the report that costs of battery packs are expected to become more affordable from economies of scale and that lithium-ion batteries will be the primary battery technology for EVs.
"We think any alternate approach would need to have substantial advantages to displace the lithium ion battery as the primary technology for EVs in the near and intermediate term, especially given the level of investment in research and development (R&D) and manufacturing capacity to date," the report said.
The strongest push on the policy side is in Asia, according to the report. China's state-controlled economy allows the government to mandate the adoption of EVs to reduce emissions, the report said. In 2018, Chinese companies made and sold 1.26 million electric vehicles, up 61.7% year over year, the report said. In 2017, China made up 40% of the global EV fleet, and its government is targeting new energy vehicle sales of at least 7% of domestic market share by 2020 and 20% by 2025.
Chinese consumers who purchase an EV receive such incentives as access to carpool lanes, the report said.
However, China plans to shift the responsibility of incentives to the auto industry by 2020 by mandating production requirements for EVs. Automakers must then earn new energy vehicle credits by manufacturing or importing EVs or buying these credits from other automakers. Credits are earned depending on the energy efficiency and range of the vehicle.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.