Although well known electric vehicle manufacturers like Tesla (NASDAQ: TSLA) are struggling for a variety of reasons, most of that has come down to questionable management decisions rather than an underlying weakness in the industry.
In fact, electric vehicles as a market are projected to grow at an astonishing rate. A new report from the International Energy Agency (IEA) has estimated that electric vehicles will end up representing up to 20 percent of the world’s vehicle supply by 2030.
Already consumers have seen newer and less expensive EV’s hitting the market, with Tesla’s recently proposed $35,000 Model 3 sedan offering a lower entry point into this type of car. While the company itself has been struggling to make sales, however, these types of cars are becoming more popular.
The IEA reported that 5.1 million EV’s were sold last year, not including alternative electric vehicles such as scooters, e-bikes or low-speed electric cars, which represented around 5 million sales alone in 2018.
“Good news – the number of electric cars on the road continues to grow,” said Mechthied Worsdoffer, the IEA’s director of sustainability and technology. “The electric car deployment since the early 2010 decade was really fast.” Overall, the agency projects global EV sales to hit 22 million by 2030, or a 431 increase over a 10-year period. Under these projections, it would bring the total number of EV’s being driven globally to 130 million.
This is assuming that there aren’t any drastic policy changes. However, under a more aggressive policy scenario where governments such as China – which has been the largest adopter of EV’s due to Beijing’s attempts to curb emissions – push for greater CO2 emission restrictions, this figure could spike even more. Under such a case, the IEA sees the total EV count growing to 210 million. In comparison, there are around 1 billion vehicles in the world currently being driven.
So far, the leading adopter of EV’s has been China, much to the surprise of many, which currently accounts for 45 percent of sales figures from 2018. The next major market opportunity for EV manufacturers will be in the form of urban buses.
Already, China bought 90,000 of these new buses, with 460,000 currently in use across the country. These eco-friendly buses represent the next low hanging fruit for global manufacturers.
Additionally, the difference between car ownership percentages in Western countries as opposed to China is drastic. While developed countries like America and Canada already approach peak car ownership, with most families owning one or two vehicles, there remain hundreds of millions of Chinese families that still don’t own a car of any type.
Many of them are now opting out of traditional vehicles. Even as far back as 2015, China already surpassed the U.S. in terms of EV sales nor does it seem likely that this will ever reverse.
When coupled with the fact that vehicle battery prices have fallen by over 80 percent in the past ten years, electric vehicles are going to become cheaper and more accessible in the years to come. For investors, it means that the industry is poised for growth, regardless of whether popular companies like Tesla succeed.