- Electric vehicle sales in Europe is slowing down as incentives and the effects of war take their toll.
- Asia, specifically China, is showing strong numbers of electric vehicle sales, but the sourcing of key minerals could curb supply globally.
- Environmental concerns persist. The production of one tonne of lithium uses over 400,000 litres of water.
The poster child for the green revolution, electric vehicles (EVs) were the driving force behind retail transportation demand in 2022, a reality nicely exemplified by the fact 79% of the cars sold in Norway last year were entirely electric.
In part a result of government incentives to go green, this upswing could be coming to an end as the tap runs dry. The government of Norway lost $4bn in revenue as a result of EV tax exemptions in the same year; German EV tax incentives have also been reduced, while British EV drivers will be required to pay a car excise levy (also called road tax) beginning in 2025. Denmark’s EV sales dropped by more than 60% after its tax incentives for EVs were eliminated.
In addition, new data from Auto Trader shows demand in the UK for used EVs is down year over year for the first time since the pandemic began, with a double-digit (12.6%) decline in 2022.
But does this mean that the environmentally friendly and green features of EVs will be put on hold this year? Is it influenced by additional factors, such as supply and production?
How many electric vehicles have been sold worldwide?
The 2022 EV sales report states that during the first half of the year, 4.3m brand-new battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) were supplied. Between used and new, over 10.6 million EVs were sold in 2022, which represents a 57% increase from 2021.
However, sales growth is declining in Europe as a result of economic problems exacerbated by the ongoing war in Ukraine and global component shortages.
Outside of Europe, EV sales have surged 49% in the first half of 2021 year on year in the US and Canada. China steals the spotlight with a phenomenal 113% increase in EV sales for the first half of 2022 compared to the first half of 2021, despite Covid and real estate crises.
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Due to the high cost of living and scepticism toward the government’s plans for electrification, demand for electric cars is falling in the UK. According to Auto Trader, in December 2022, EVs represented fewer than a fifth (19%) of new car inquiries received from stores. Rising energy costs and reduced prices for gasoline and diesel are correlated with a fall in the demand for EVs.
Editorial director of Auto Trader Erin Baker commented: “Although current sales figures look positive, the rapid decline in consumer appetite for electric vehicles reveals the market is on thin ice where mass electric adoption is concerned.
“There are some positive signs with running costs still in EVs’ favour and more affordable models in the pipeline, particularly those from Asia. But [the] slowdown in demand for EVs translates into lower sales as we enter 2023.”
Due to supply chain concerns and growing power costs, analysts are sceptical that the performance of EVs in 2023 will be able to be replicated. More positively, Ralf Brandstätter, head of Volkswagen’s China operations, predicted that the number of EVs will soon surpass that of conventional vehicles in the country: “We haven’t reached the tipping point yet, but we’re expecting to get there between 2025 and 2030.”
Who supplies the key materials for electric vehicles?
Together with the demand for EVs, the requirement for batteries is rising. Establishing long-term battery supply chains that reduce risks to the environment and general public health is necessary.
The epicentre of lithium mining is Chile. In recent years, the need for EVs’ batteries has boomed, and in 2022 lithium prices had become six times larger than 2021 levels. Because of this, the lithium triangle‘s output, which consists of Chile, Argentina, and Bolivia and contains more than half of the world’s verified lithium reserves, is just a small portion of what it might be.
Bolivia, for instance, produces very little because of environmental and technological constraints. Economic difficulties have prevented Argentina from creating any new mines, while Chile’s tight mining regulations and hefty taxes have only allowed for the operation of two foreign lithium firms.
In arid locations like the lithium triangle, the impacts of lithium mining can be more detrimental. In addition to its impact on the environment and other resource needs, the production of one tonne of lithium uses over 400,000 litres of water.
Therefore, further lithium mining could not be environmentally viable. As a result, negative changes in the area’s flora and fauna distribution, vegetation structure and water quality have already been noted, harming the local human population through decreasing agricultural productivity and job losses.
Andres Diaz, director of the Centre for Energy and Sustainable Development in Santiago, told NPR that Chile will have to start exporting more than only lithium since the mines use vast amounts of groundwater from the Atacama Desert.
Automobile and battery producers have already invested billions of dollars to reduce the price of producing and recycling batteries for electric vehicles. National research foundations have also set up centres to look into more efficient ways of producing and recycling batteries. However, because recycling metals is frequently less expensive than mining them, it is crucial to find methods for recovering precious metals at costs that are competitive with those of freshly mined metals.
Is there enough infrastructure to produce electric vehicles?
Numerous nations have developed industrial programmes intended to create and increase their importance in integrated supply chains, according to the Global Electric Vehicle Outlook 2022. The objective of many countries is to expand their presence in the auto-producing supply chain, from making EVs and parts to being able to refine and provide a steady supply.
Government programmes that have supported the industry for more than ten years have directly contributed to China’s rise to the greatest share of global EV battery production capacity (77%) today.
China’s 14th Five-Year Plan (2021-2025) focused on “strategic emerging areas” including new energy vehicles (NEVs). Since there are intentions to accelerate the expansion of the Na-ion battery industry in order to acquire lower prices and improved battery performance, this contributes to the previously mentioned mineral issue.
Recently, major financial measures to boost the competitiveness of their respective battery and electric vehicle sectors were announced by both Korea, which accounts for 5% of the global manufacturing capacity, and Japan, which accounts for 4%.
The development of the supply chains needed for an EU battery production industry will most certainly take some time, notwithstanding recent considerable investments made by the EU in manufacturing capacity for the manufacture of electric vehicles.
Similar to this, the US reaffirmed its commitment to building regional supply chains for batteries and EVs, particularly by utilising its significant automotive and mineral supply industries. About 7% of the world’s EV battery production capacity is located in the EU.
The main minerals that constitute EVs’ batteries are lithium, nickel, cobalt, manganese and graphite. Their sourcing, mining and refining pose a problem for battery supply chains.
The US Department of Interior has added the five necessary minerals to its list of critical minerals due to the limited domestic supply of EV battery minerals and recycled materials for battery manufacturing. The creation of a zero-emission vehicle (ZEV) will be possible only if the transition minerals – critical minerals and some other elements like copper – are sourceable. Due to the requirement for materials for electric car batteries, there will be a significant increase in the demand for transitional minerals in the next decades.
Since other supply chain operations, such as the fabrication of battery cells and the processing of minerals, are only happening in a handful of countries, the minerals and batteries offered can end up becoming a matter of geopolitical business, according to NRDC.
Attempts to reduce carbon emissions in transportation and other parts of the energy transition are relying more and more on battery technology. The Global Battery Alliance, founded by the World Economic Forum, brings together 42 manufacturers, raw material suppliers and other organisations with the goal of establishing guiding principles for a sustainable battery supply chain by 2030.
In the best-case scenario, initiatives to create a sustainable battery industry may, by the end of the decade, reduce greenhouse gas emissions from batteries by half. The Global Battery Alliance thinks that creating committed, determined and brave public-private cooperation is essential for success in this field.
