The energy transition powers ahead, as Electric Vehicle sales continue to ramp up

The energy transition continued to power ahead last year. Global spend was up 17% versus 2022 as the chart from BloombergNEF’s new annual review shows, at a new peak of $1.8tn. As Reuters notes:

“Major oil consumers, including the U.S. and the European Union, have adopted policies aimed at transitioning away from fossil fuels to cleaner energy which has discouraged investment in oil and gas amid concerns about future demand.”

Investment in the energy transition has more than trebled from 2019’s spend of $565bn, despite the disruption caused by Covid. And Bloomberg note that all major regions and sectors are showing major gains:

“The largest country for investment by far was China, with $676bn invested in 2023 – equivalent to 38% of the global total. Although China remains dominant, its lead has been reduced. Taken together, the European Union, US and UK outpaced China with $718bn… Investment in the US jumped 22% year-on-year, to $303bn as the effects of the Inflation Reduction Act started to be felt.”

Importantly, transport electrification has now overtaken spend on renewable energy, as the Electric Vehicle (EV) revolution takes off. As the chart shows from Bloomberg’s 2024 EV market report:

  • EV sales reached 14m last year, and are expected to rise 21% to 16.7m in 2024
  • They were 17% of global sales last year, double the percentage 2 years ago
  • China’s sales are ramping up fast, averaging 36% in 2023 – and 43% in December

WINNERS AND LOSERS ARE STARTING TO APPEAR

Globally, Bloomberg expect EVs to take 20% of sales in 2024. And, of course, volumes are set to accelerate further next year, as Western automakers start to offer more affordable models.

Essentially, this means EVs are seeing exponential growth. They aren’t growing by 1% or 2% a year, as in mature markets. But of course, there are still plenty of doubters.

As the chart from the Dallas Fed shows, American oil executives were very negative even in 2021:

  • They asked top oil executives for their forecast of US EV sales in 2030
  • As the chart shows, more than half expected them to be less than 19%
  • Only 1% thought they would be >50%

Yet today, it seems increasingly likely that the 1% will be proved right. California is the largest market, and its CARB Rules mean EVs will have to be 68% of automakers’ sales by 2030.

California’s laws also set the trend for other major states including New York. So up to 40% of the US market may well end up adopting this target.

In turn, of course, this makes it uneconomic for automakers to produce cars for the other 60% of the market. And they are all keeping a very wary eye on Tesla.

Tesla took 4% of the total market last year, selling 655k EVs. And its volume jumped 25% from 2022.

Essentially, the mobility market is repeating the transformation seen a century ago, when cars replaced stagecoaches.  Autos are the world’s largest manufacturing industry, employing millions of people directly and in supply chains.

Those companies that learn to ride the wave will likely be very successful for years to come.