Elon Musk once predicted that all forms of transport, except for space rockets, would become electric. This prediction is beginning to come true, as the markets for electric cars, trucks, buses, boats, two-wheeled vehicles, and air taxis reached new heights in 2021.
Electric cars are now the largest market, with sales more than doubling in 2021 to over 6.4 million units. IDTechEx predicts that this will remain the case for the next twenty years, with cars making up 79% of electric vehicle market revenues and 83% of battery demand. The reason for this is scale – cars have long been at the center of government policy due to their popularity and significant contribution to transport emissions. In 2021, around 81 million cars were sold worldwide, compared to 3.3 million medium and heavy trucks and 0.2 million city buses.
Despite record growth, the tragic war in Ukraine brought new challenges to both car and electric vehicle markets, which were already complicated by two unpredictable years of the pandemic.
After the easing of COVID-19 restrictions and the imposition of sanctions against Russia, which limited oil and gas supplies, electricity and gasoline prices rose sharply. This brought electric vehicle markets to the forefront, yet automakers are facing a prolonged chip shortage, new lockdowns in China due to COVID, rising raw material prices, and shortages of auto parts, including wiring harnesses produced in Ukraine.
Many electric vehicle manufacturers are responding to this by raising prices or limiting and delaying production. These price hikes are not insignificant: in 2020, Tesla’s base Model 3 cost $39,990, and by 2022, it had risen to $46,990. In March, Rivian announced a $14,500 price increase on its models (R1T), though it later faced backlash from customers and investors. In addition to startups, automotive giant VW also reported that by 2022 it had effectively sold out of all its electric vehicles in the US and Europe.
Batteries remain the largest cost component for vehicles, and the rise in raw material prices for batteries, including lithium and nickel, is a significant factor in this increase. This is due to raw material shortages, lockdowns in China, and the war between Russia and Ukraine, as much of the world’s lithium is processed in China, and Russia is an important supplier of Class 1 nickel. Continued shortages, along with competition from the automotive sector for raw materials, may impact other industries using the same technologies.
An example is the electric truck market, which, according to IDTechEx forecasts, will become the second-largest consumer of batteries by 2042. The Tesla Semi, a class 8 electric truck for long-distance transportation, was expected to be released in 2020 but is now expected in 2023. The Semi requires new large-format 4680 cells, but due to limited battery production, priority was given to high-demand models that generate more profit per kWh. These delays allowed companies like Volvo, Daimler, and PACCAR to catch up with Tesla and are now poised to begin mass production of new BEV truck models. However, they may face similar issues.
Another example is electric recreational boats. Sales surged in 2020 and 2021 as people spent more time outdoors. These boats often use automotive-grade batteries. For example, BMW supplied batteries for Torqeedo, a manufacturer of electric outboard motors, and Corvus Energy, a supplier of commercial marine batteries, uses automotive-grade NMC battery cells. As the shortage continues, the industry will need to find new suppliers.
Although non-automotive sectors require fewer batteries, they still need them for their technologies. Improving the efficiency of the overall electric vehicle powertrain, rather than just developing batteries, will be key. This includes using silicon carbide-based power electronics, more efficient motors, 800V platforms, solar bodies, and less wiring.