The International Energy Agency (IEA) predicts that the prices of smaller electric vehicle (EV) models will drop in North America and Europe, rivaling those of combustion engine cars by the mid-2020s, as the sales of EVs are expected to climb. Here are some key takeaways from the IEA’s annual outlook on EVs:

Electric Cars Sales Surge

The report highlights that global electric car sales are expected to surge 35% this year to 14 million, comprising 18% of the passenger car market, up from just 4% in 2020. Moreover, nearly one in five cars sold worldwide this year will be electric, reflecting the growing demand for sustainable modes of transportation.

China Leads the Charge

China is a global leader in EV sales, making up half of the EVs on the road worldwide, including battery-electric cars and plug-in hybrids. Sixty percent of EV sales last year took place in China, according to the IEA’s report. The country has also seen prices for some smaller EV models edging lower towards those of their combustion engine equivalents, which is a positive sign for the affordability of EVs.

Price Parity in Sight

The IEA raised its EV sales forecast, citing the US Inflation Reduction Act, which supports the green industry and subsidizes consumers’ purchases of EVs. The agency now predicts that price parity in small and medium-sized electric cars in North America and European markets is possible in the mid-2020s. For larger cars like SUVs and pickups, purchasing parity is likely to come later, probably into the 2030s.

Government Incentives

Governments around the world are investing in EV expansion out of concerns over the environment, boosting industrial policy and decreasing dependency on oil. Demand for oil will fall by 5 million barrels a day by 2030 because of the EV transition, according to the IEA’s executive director, Fatih Birol.

Regional Differences

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.

Conclusion

The IEA’s report indicates that EVs are gaining ground in the global market, and the prices of smaller models are expected to drop in the coming months. With governments supporting the expansion of EVs, demand for oil is predicted to decline, emphasizing the importance of sustainable modes of transportation for the future. The shift to electric transportation will undoubtedly take some time, but the IEA’s outlook suggests that we’re making progress toward a more sustainable and green future.