18th August 2023

Electric Vehicle Review 2023

The surge of the electric vehicle (EV) revolution has remained a central concern for investors in battery metals, driven by the escalating demand for essential resources like lithium and cobalt due to the growing sales of EVs. Despite a volatile 2022, the EV market retained its spotlight, finishing the year on a robust note as anticipated. The outlook for 2023 is similarly promising.

Given the significance of the EV narrative for battery metals and the broader commodities linked to the EV supply chain, the Investing News Network (INN) engaged experts to gather insights on the preceding year's trends and the prospective EV landscape.

How did the EV market perform in 2023?

The past year witnessed electric vehicle sales surpassing the 10 million mark. China continued to lead the EV market in 2022, accounting for approximately 60 percent of global electric car sales, followed by Europe and the United States.

The International Energy Agency (IEA) anticipates a surge in new EV purchases in the latter half of this year, aiming for a cumulative total of 14 million sales by the close of 2023. The agency forecasts that electric vehicles will constitute around 18 percent of all global car sales in 2023, a substantial rise from the mere 2.5 percent recorded in 2019.

The IEA's Global Electric Vehicle Outlook 2023 underscores the rising demand for electric vehicles propelling the need for batteries and crucial minerals. In the preceding year, EV batteries accounted for roughly 60 percent of lithium demand, 30 percent of cobalt demand, and 10 percent of nickel demand. These figures represent a substantial increase from 2017, where the respective shares were approximately 15 percent, 10 percent, and 2 percent.

In terms of H1 2023 electric vehicle sales, data from Rho Motion indicates approximately 5.8 million sales of passenger cars and light-duty EVs.

Regarding the top performers in terms of sales, China's BYD emerged as the leader, with sales nearly doubling in H1 2023 compared to H1 2022. BYD has also expanded its vehicle exports to Europe and other Asian nations. Tesla follows closely, with a year-to-date increase of about 60 percent in EV sales in 2023.

Key Developments in H1 2023:

Charles Lester of Rho Motion highlights a significant development in the EV sector during the initial months of 2023: the introduction of new emission standards by the Environmental Protection Agency (EPA) in the US. These standards outline the penetration rates of different vehicle categories to comply with the new regulations, reflecting an ambitious effort to reduce greenhouse gas emissions. Meeting these standards will necessitate substantial investments across the EV, battery, and charging supply chain.

The proposed CO2 emission targets for various vehicle classes entail a 56 percent reduction from the 2026 target, according to Lester. EPA estimates suggest that up to 67 percent of new light-duty vehicles sold in 2032 might need to be electric for carmakers to meet compliance requirements.

Another noteworthy trend in the EV industry during the first half of 2023 has been a price war in China that originated with Tesla's price reduction in January. As of April 2023, around 30 original equipment manufacturers (OEMs) joined this price competition through direct price cuts or offering sales coupons. Despite the discontinuation of the national subsidy scheme for new energy vehicles (NEVs) in December 2022, falling battery material costs have provided room for OEMs to decrease vehicle prices. This move is also driven by efforts to reduce inventory.

Factors Shaping the EV Market in 2023:

While some supply chain limitations persist, sales of light-duty EVs set a new record at 10.4 million units in 2022, indicating a year-on-year increase of 66 percent. S&P Global Commodity Insights predicts that EV sales will reach 13.8 million in 2023 and project a remarkable surge to over 30 million by 2030.

Although the acceleration in EV sales is gradually manifesting in global car fleets, the process is slow due to production challenges over recent years, resulting in low replacement rates.

China remains a significant market to watch in the second half of the year. The country's implementation of China 6b emission standards on July 1 has introduced stricter regulations compared to Euro 6 standards, particularly concerning nitrogen oxide (NOx) emissions. While a buffer period has been granted to sell existing inventory, OEMs are motivated to offload outdated models at discounted prices. Lester is also attentive to China's ongoing promotion of NEVs in rural areas.

Furthermore, reductions in prices of internal combustion engine vehicles are projected to eventually impact NEV sales.

Looking ahead, S&P Global Mobility envisions a landscape where leading automakers increasingly dominate the electric vehicle market, accounting for over 70 percent of global EV production by 2030—a substantial rise from the 10 percent recorded in 2022. However, addressing consumers' range anxiety, particularly for those without garages or those covering long distances, remains a significant challenge for the industry.

In summary, the electric vehicle market's momentum continues to grow, marked by significant sales figures, evolving emission standards, and ongoing market dynamics. The shift toward electric mobility is driving demand for crucial minerals and reshaping the automotive landscape, with both challenges and opportunities on the horizon.