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Our analysis suggests that EV sales may overtake ICE sales globally as early as 2033, though this will depend on EV battery costs, battery power density, the provision of sufficient charging infrastructure, and the legal requirements and incentives that will drive investment, manufacturer and customer decisions.

The development of EV sales in comparison to ICE sales is dependent on an enormous number of factors. At the recent Financial Times Future of the Car Summit (which took place in May 2019 in London and was sponsored by Linklaters), four key drivers for EV sales were highlighted:

  • The price of EVs needs to fall so that parity is achieved with ICE vehicles. In particular, the scaling up of EV battery production will be key to achieving the economies of scale necessary to reduce the price of batteries. The battery is a significant driver of total EV cost: analyst research suggests that “for a midsize U.S. car in 2015, the battery made up more than 57 percent of the total cost. This year [2019], it’s 33 percent. By 2025, the battery will be only 20 percent of total vehicle cost.”
  • Battery power density needs to be improved. Improving the power levels of EV batteries will also mean longer journeys, which is a vital component of driving demand: recent research in the UK, for example, suggests that “a range of 320 km (200 miles) was needed for 50% of participants to consider owning a fully electric car. Increasing the range to 480 km (300 miles) meant 90% would consider electric.” Advancements in battery power density will also allow for heavier cars, taller cars, and so on. This would allow an ever-widening range of products to come onto the market, allowing more segments of the market to consider purchasing an EV.
  • Sufficient charging infrastructure needs to be built in order to mitigate customer anxiety about their ability to recharge their cars wherever required – primarily at home and within cities. The visual presence of charging infrastructure will also help to drive demand by improving customer familiarity with EVs and their usage.
  • Laws and regulations such as subsidies, incentives, and emissions targets and performance requirements will be key catalysts for driving EV sales. Many countries are introducing new regulatory measures tightening emissions performance requirements, enhancing air quality and offering subsidies to incentivise the purchase of EVs. The role of subsidies in incentivising the purchase of EVs may diminish in the medium to long term.
Key drivers for EV sales include: cost parity with ICE vehicles, improved battery power density, the roll-out of sufficient charging infrastructure, and a regulatory environment that incentivizes the take-up of EVs."

The EU leads on stringency of global emissions performance standards. However, China is set to implement its China VI Standards which will both combine and add to best practice from both European and US regulatory requirements. The US Corporate Average Fuel Economy (or CAFÉ) standards are in the process of being challenged by the Trump Administration, and litigation has begun with respect to the ability of the State of California to set its own emission performance limits. The Trump Administration’s proposed “Safer Affordable Fuel-Efficient Vehicles Rule” would freeze fuel economy standards at 2020 levels through 2026, and reverse the increases scheduled in 2012 under President Obama.

Across EU Member States, targets for the reduction of carbon emissions are underpinned by policy initiatives seeking to reduce those emissions associated with the use of vehicles including the creation of aspirational longstop dates for the sale (and eventually use) of only those vehicles which emit low or zero emissions. Various countries are deploying low emission zones in their cities to enhance air quality (London, Paris, Amsterdam, Brussels) and we expect to see the expansion of such zones in the years to come. Some countries, like France, have set targets for electric vehicle volumes.

On subsidies, whilst China has poured billions of dollars into the EV industry since 2012 as part of its efforts to combat air pollution, it has begun to phase out subsidies and expects subsidies to be completely phased out by 2020. Subsidies are available across the EU and in certain states of the US, and can vary significantly from one country to another both in absolute terms and in relative terms, as shown in the chart below:

Commercial opportunities and legal developments across the EV batteries lifecycle

The EV battery lifecycle

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Powering the future:

Commercial opportunities and legal developments across the EV batteries lifecycle

Powering the Future
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