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Global Outlook: demand trends and supply chain risks for electric vehicles

In EIU’s February 2024 Global Outlook video, director of industry analysis, Ana Nicholls, and automotive analysts, Arushi Kotecha and Nishita Aggarwal, discuss demand trends for electric vehicles (EVs) and supply-chain disruptions as a result of the China-US trade war.

EIU forecasts that global EV sales will grow by 29% to around 16.5m units, accounting for more than a quarter of the global automotive market in 2024. The market share of EVs is only set to increase as the 2035 target, set by several governments for phasing out fossil-fuel vehicles, draws closer. 

However, there are several obstacles that the market faces. China’s dominance of the sector has fuelled geopolitical tensions and subsequently increased trade barriers; supply chain disruptions in the Red Sea have adversely affected automakers, halting production. Also, the lack of EV charging infrastructure, and reliable power supplies in some countries, is deterring potential buyers. 

“China accounts for around 60% of global EV sales and 70% of EV production and controls a large percentage of production of batteries and their components. Major automotive exporters such as the US, EU and Japan need to maintain their EV sales to meet their emissions goals but are increasingly more concerned about Chinese competition. As a result, they have been undertaking several steps to mitigate China’s dominance.”

Nishita Aggarwal, Automotive analyst, EIU

Such steps include barring manufacturers from some countries (including China) from benefiting from sales and investment incentives in the US, as well as the EU’s investigation into Chinese subsidies.  In the short term, this will cause higher costs and more inefficiency as EV makers scramble to source parts from alternative markets. However, in the longer term, a bifurcation is expected to emerge between China and US-EU supply chains. 

Lastly, new battery types for EVs are being developed in the hope of increasing driving range, reducing charging time, cutting costs and improving safety. By improving EV technology, another goal is to divert supply chains away from China. EIU expects that there will be heavier investment in battery manufacturing, lithium processing and new battery types in the US, Asia and the EU over the next few years.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.