Smaller EV Prices to Drop in Coming Months as EV Sales Climb, IEA Says

Nearly one in five cars sold globally this year will be electric, with the prices of smaller EV models dropping to rival those of combustion engine cars in North America and Europe by the mid-2020s, the International Energy Agency (IEA) predicted on Wednesday.

The agency raised its EV sales forecasts in part because of the US Inflation Reduction Act, which supports green industry and subsidises consumers’ purchase of electric vehicles (EVs), IEA executive director Fatih Birol said on a media call.

China features prominently, making up half the EVs on the road worldwide including battery-electric cars and plug-in hybrids, and with 60 percent of EV sales last year taking place there, according to the IEA’s annual outlook on EVs.

The country has also seen prices for some smaller EV models edging lower towards those of their combustion engine equivalents, said the IEA’s energy technology policy head, Timar Guell.

Electric car sales globally are expected to surge 35 percent this year to 14 million, the report said, comprising 18 percent of the passenger car market, up from just 4 percent in 2020.

“Our current expectation is that we can see price parity in small and medium-sized electric cars in North America and European markets somewhere in the mid-2020s… for larger cars like SUVs and pick-ups, purchasing parity is likely to come later, probably into the 2030s,” Guell said.

Governments are investing in EV expansion out of concerns over the environment, to boost industrial policy and decrease dependency on oil, demand for which will fall by 5 million barrels a day by 2030 because of the EV transition, Birol said.

SUVs and large cars account for nearly two-thirds of EVs in China and Europe and a greater proportion in the United States.

In emerging and developing economies, two- or three-wheel electric vehicles outnumber cars. Over half of India’s three-wheeler registrations in 2022 were electric, according to the study.

© Thomson Reuters 2023