Electric vehicles have taken the world by storm in recent years, with Norway leading the way measured in new sales and market penetration. About 90% of new cars sold in Norway are now EVs, and several other countries are following suit. Moreover, electrifying road transportation is a pillar in many countries’ energy transition strategy, with policymakers around the world offering significant incentives to those who make the switch to EVs. The world’s largest oil importer, China, which displays the largest difference between oil produced and oil consumed by a country, is lowering its dependence on oil imports via oil demand destruction thanks to the vast expansion of its EV fleet. The EU is showing a similar trend. 

Rystad Energy forecasts that 14.5 million passenger EVs will be sold globally in 2023, accounting for a 19% market share of the total car market. This would represent a 38% increase year-on-year.

Does this mean the end of the ICE age is just around the corner? Do we see empirical evidence of gasoline and diesel demand destruction as EV penetration increases? And are countries ready to introduce bans on the sale of new ICE vehicles from a certain year? The answer to all of those questions appears to be yes.

However, as we approach the target year for banning ICE sales in some regions (2035 in the EU and 2025 in Norway), some countries are looking to opt out of their stated commitments. Germany and Italy have expressed resistance to commit, and other countries may follow, jeopardizing the EUs goals to cut emissions from road transport.

The United States has historically been slow to embrace the electrification of transportation, but the EV movement is finally gaining momentum. All 50 states are now moving forward to build out a national EV charging infrastructure network with funding from the Infrastructure Investment & Jobs Act (IIJA), in association with the Bipartisan Infrastructure Law (BIL). The state of California has expressed a desire to introduce a complete ICE ban by 2035. In India and other countries, electric scooters are taking over for the equivalent ICE models. This will also lead to demand destruction.

You may have heard of the great horse manure crisis of 1894. Cities were drowning in horse manure, with London (50,000 horses and one million pounds of horse manure each day) and New York (100,000 horses) wondering if urban civilization was doomed. The Times wrote at the time that within 50 years every street in London would be buried under 9 ft of manure. Thankfully, however, Henry Ford’s ICE car represented a ‘green solution’ to the horse manure crisis. This also shows the importance of non-linear thinking when looking for new solutions. Henry Ford famously remarked that if he had asked people what they wanted, they would have asked for faster horses. Instead, he made a car that put horses out of business. 

In Rystad Energy, we are in no doubt that EV penetration will continue to soar. In the year 1900, everybody knew that cars would beat out horses, but nobody knew which car company would be the winner. You may have seen a picture of 5th Avenue in New York in 1900 alongside another photo taken 13 years later. The first is called ‘spot the car’ while the second ‘spot the horse’. Everything changed in just 13 years! As with most other developments, regional and infrastructure considerations may cause the transition to be non-linear and interrupted, but the longer-term trend is clear. And car companies have seen the ‘ICE-berg’ ahead, prompting initiatives to offer only EVs in the model lineups in just a few years.

Electrification is growing and with that the proportion of EVs is soaring in the road transportation market. The end of the ICE age is coming! In Rystad Energy, we believe that the world will manage to produce the critical metals, minerals and batteries required to make it happen. Please be sure to sign up for the upcoming Rystad Talks Energy for the latest updates on the future of metals, materials and batteries.