EV Market Forecast 2023: Top Trends That Will Affect EVs in 2023

The electric vehicle (EV) revolution has been top of mind for battery metals investors for quite some time now, as increasing EV sales mean more demand for essential elements such as lithium and cobalt.

Despite a volatile 2022, the EV market remained in the spotlight, finishing the year strong as many had predicted.

Given the importance of the EV narrative for battery metals and all the commodities associated with the EV supply chain, the Investing News Network (INN) reached out to experts to ask for their thoughts on the year that was and the EV outlook to come.

How did the EV market perform in 2022?

At the end of 2021, analysts were expecting the EV market to see another stellar year of growth. In 2021, sales of EVs doubled from 2020 to a new record of 6.6 million, with nearly 10 percent of global car sales being electric.

2022 proved to be interesting for the EV market, Iola Hughes of Rho Motion told INN at last year’s Benchmark Week. Headwinds for the sector came following Russia’s invasion of Ukraine and China’s lockdowns in the first few months of the year.

“As we’ve progressed throughout the year, we’ve seen a much stronger recovery than anticipated, largely coming from the Chinese market, and significant ramp-up of original equipment manufacturers (OEMs),” she told INN.

Many regions had strong EV sales in 2022’s final quarter, bringing sales of global passenger cars and light-duty vehicles to over 10 million battery EVs (BEVs) and plug-in hybrid EVs (PHEVs), according to Rho Motion data.

“A reduction in subsidies/incentives in key countries, such as Germany, Norway and China, resulted in strong pre-buying before incentives were reduced in the new year,” Charles Lester of Rho Motion explained to INN. “The EV industry had its first ‘1 million’ EV sales month in September 2022.”

EV-volumes.com sales data shows that the global total for last year came in at 10.5 million units across BEVs and PHEVs.

“An impressive growth of 55,4 percent in a difficult vehicle market as a whole. BEV sales increased by 59 percent to 7,65 million units, PHEVs by 46 percent to 2,86 million units,” the firm states. “The global EV share in light vehicle sales is 13 percent for 2022.”

In terms of regions and how they grew in 2022, China saw the biggest increase. Sales in the Asian country almost doubled in 2022 compared to 2021, as OEMs ramped up their EV production capacity and battery manufacturers increased their output of lithium-iron-phosphate and nickel-cobalt-manganese chemistries.

“European EV sales grew by 16 percent in 2022 (versus 2021), which was hindered on the production side by supply chain difficulties throughout the year,” Lester said. “Many OEM delivery times earlier in 2022 were up to a year; however, lead times for EVs have been alleviated somewhat as the supply chain issues have eased.”

In North America, sales rose to 1,108 million BEV and PHEV units, as per EV-volumes.com data, an increase of 48 percent. “90 percent of the sales occurred in the US with 80 percent BEV in the North American mix,” the outlet states.

The number of electric car models increased over 15 percent year-on-year in 2021, coming in at 450; that’s also more than twice the number of models that were available back in 2018. In 2022, despite challenges, automakers continued to roll out new models, expanding segment and price point availability for EVs.

“The increase in model availability was expected, will continue and is critical to increasing EV adoption,” Stephanie Brinley of IHS Markit told INN back in October.

About half of the world’s electric cars are being sold in China, making it a leader in adoption. But an interesting trend seen last year has been Chinese OEMs expanding further than the domestic market.

“As Chinese OEMs are looking for more market share globally, more automakers or battery producers are entering overseas markets,” Lester said. “Compared with North America, OEMs prefer to take the first step in Europe.”

Similar to 2022, Rho Motion expects the vast majority of EV sales growth — more than two-thirds of the units added — to come from China as the Asian nation extends its lead over other regions.

What factors will move the EV market in 2023?

Despite some hiccups, last year continued to see growth for the EV market, not only in key markets, but also in the rest of the world, including Australia, New Zealand and South Korea. “The reasons are better availability of products, EV incentives introduced and lowered import tariffs for EVs in some countries,” EV-volumes.com says. “We expect growth to continue in 2023.”

When asked about sales expectations for 2023, Lester said that for passenger cars and light-duty vehicles, Rho Motion forecasts over 14 million global BEV and PHEV sales in 2023.

“Supply chain constraints appear to be easing, though it remains to be seen whether semiconductor capacity coming online will be the appropriate technology level to abate issues there,” he said. Global economic factors and potential recessions in Europe and North America have the potential to sandbag these markets to some extent.

“We expect Chinese OEMs to continue to expand into Europe, as they started in H2 2022, from the likes of BYD (SZSE:002594), Great Wall Motor (OTC Pink:GWLLF,SHA:601633) and NIO (NYSE:NIO,HKEX:9866),” Lester added.

Similarly, analysts at BloombergNEF are calling for higher EV adoption in 2023, but anticipate a slightly slower pace than was seen in the last two years. During that period, sales rose from 3.2 million in 2020 to over 10 million in 2022.

“We expect 13.6 million plug-in passenger vehicle sales in total for this year, with around 75 percent of those being fully electric,” they said. “There are now 27 million electric vehicles on the road globally, and this should cross 40 million by the end of the year.”

There could still be some challenges ahead when it comes to model availability.

“Lead times for EVs in Europe still vary considerably from OEM to OEM,” Lester said. “For example, Tesla’s (NASDAQ:TSLA) lead time can be less than two months as other European OEMs can range anywhere between three to 12 months.”

Government subsidies and incentives will key to watch in 2023. In China, subsidies have been phased out over the past few years.

“It was reduced by 30 percent on January 1, 2022, and eliminated on January 1, 2023,” Lester said. “Despite this, the EV market is maturing and the EV penetration rate is rising, therefore the impact should be limited compared to the reduction in 2019.”

Looking over to Europe, Lester explained that many EV subsidies in the region have been decreasing after incentives were provided during the pandemic. “Watching how these fare in 2023 will be a test of the point at which consumers are ready to transition to a mature market,” he noted.

In the US, the introduction of the Inflation Reduction Act is expected to support the EV market growth in the country.

“The Inflation Reduction Act will stimulate EV growth for 2023 in the US and the EV portfolios are strengthened with new models in the Full-size SUV and Pick-up segments,” EV-volumes.com says. “Even if some parts of the Inflation Reduction Act requirements are unclear, we believe the growth will be impressive in 2023.”

Looking even further ahead, Reuters notes that carmakers have plans to build 54 million battery EVs in 2030 — that would be over 50 percent of overall vehicle output. Analysis also suggests that the world’s biggest automakers want to spend close to US$1.2 trillion through 2030 with the goal of developing and producing millions of EVs, as well as batteries and raw materials.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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