Earlier this month, the Los Angeles Times reported on IHS Automotive’s expectation that global electric vehicle (EV) production will rise a whopping 67 percent this year, compared to only 3.6 percent for all automobiles. In terms of number of vehicles, this surge would result in 403,000 EVs produced, up from 242,000 in 2013 an an increase of more than 160,000 units. As a part of its forecast, IHS Automotive included both all-electric, battery EVs and plug-in hybrids.
It is important to realize that this expected production jump is a global one, and it will differ slightly across major world markets. The Europe, Middle East, and Africa region, for example, is expected to see the greatest gains, accounting for 40 percent of increased production amidst more stringent air pollution regulations in Europe. The United States and Asia, on the other hand, are expected to account for roughly 27 and 30 percent of increased production, respectively.
So what are the drivers of this increased production? As noted, new air pollution restrictions in Europe are expected to have a significant effect, but IHS outlines some other key reasons. For one, new EV models, such as the BMW i3 and i8, Audi A3 e-tron, Cadillac ELR, Porsche Panamera S E-Hybrid, and others, have either just recently been introduced or will be later this year.
Another major reason for IHS’s expectations is falling lithium-ion battery and EV prices. As major battery makers, such as LG, Panasonic, and Samsung, go head to head, competing for lithium-ion battery market share, the prices of EVs have been falling as well. Last year, some of the most popular nameplates, including the Nissan LEAF and Chevy Volt, showcased a true EV price war as greater competition continues to benefit consumers.
One more interesting observation is that China’s aggressive pro-EV policies and quotas will play a major role in boosting EV sales and use in order to mitigate major air pollution problems. Not only will China continue to offer very high EV incentives in 2014, but it is also imposing adoption mandates. The city of Beijing, for example, will be restricting new, gasoline-powered car sales while also deploying 20,000 EVs this year.
Ultimately, the factors influencing IHS’s predictions all lead to one thing, greater consumer demand for EVs. Whether the drivers for greater EV production in 2014 are policy-related or price-related, they are going to result in more EVs on the roads, and as basic economics tells us, as demand goes up, so does supply.
If IHS’s forecast proves to be true, 2014 will see a great boost to the EV industry and the prospect for its future success. More EVs being built will have long-term benefits, since as with most new high-tech industries, production requires streamlining and perfecting. As production ramps up and automakers learn how to build EVs quicker and more efficiently, economies of scale are sure to go up, prices will continue to fall, and demand will continue to grow. It is hard to understate how important efficient manufacturing truly is to the continued growth and maturity of the EV market and industry.