US Crosses the Electric-Car Tipping Point for Mass Adoption
Many people of a certain age can recall the first time they held a smartphone. The devices were weird and expensive and novel enough to draw a crowd at parties.
US Crosses the Electric-Car Tipping Point for Mass Adoption
Many people of a certain age can recall the first time they held a smartphone. The devices were weird and expensive and novel enough to draw a crowd at parties. But then, less than a decade later, it became unusual not to own one.
That same society-altering shift is happening now with electric vehicles, according to a Bloomberg analysis of adoption rates around the world. The US is the latest country to pass what’s become a critical EV tipping point: 5% of new car sales powered only by electricity. This threshold signals the start of mass EV adoption, the period when technological preferences rapidly flip, according to the analysis.
For the past six months, the US has followed Europe and China in moving beyond the 5% tipping point for electric cars. If it follows the trend of 18 countries before it, a quarter of new car sales could be electric by the end of 2025. This would be a year or two ahead of most major forecasts.
How Fast Is the Switch to Electric Cars?
19 countries have reached the 5% tipping point—then everything changes
Why is 5% so important?
The sales of most new technologies follow an S-shaped curve. This means that the sales move slowly at the beginning with only a few people buying the product. But once more people start to buy the product, the sales increase quickly. This happens with things like electricity, televisions, mobile phones, and even LED lightbulbs.
Electric vehicles seem to be more popular when around 5% of the population owns them. Before that, not many people buy them and it's hard to predict how many will sell. After that, a lot more people start buying them and it happens quickly.
Countries around the world are following similar patterns of EV adoption. This is because there are many common problems that need to be solved before more people will buy electric cars. These include a lack of public chargers, the cars being expensive and in limited supply, and buyers not knowing enough about them. Once the road has been paved for the first 5%, the masses soon follow.
Thus, the adoption curve followed by South Korea starting in 2021 ends up being similar to the one taken by China in 2018. This is also similar to Norway after its first 5% quarter in 2013. The next major car markets that are approaching the tipping point this year include Canada, Australia, and Spain.
US Joins the List of Big EV Adopters
Countries where fully electric cars make up more than 5% of new vehicles
A higher bar for hybrids
The analysis above is only for vehicles that run on batteries. Some countries, primarily in Europe, were quicker to adopt plug-in hybrids. These cars have smaller batteries and also a gasoline-powered engine. The world just surpassed 20 million electric vehicles on the road. This number will double again by the end of next year, according to a recent report by analysts at BloombergNEF.
A plug-in hybrid doesn't need as much infrastructure or consumer awareness as a fully electric car, so the early phase of adoption was less consistent. A consistent tipping point for this broader category of EVs wasn't achieved until 10% of new vehicles had a plug. The US and China mostly skipped plug-in hybrids and went straight to fully-electric vehicles, but the US hasn't yet crossed the 10% threshold.
Plug-in Cars Are Driving Away
Including plug-in hybrids, 17 countries have crossed a 10% threshold
A country is more likely to reach an EV tipping point if it has a program of federal incentives and pollution standards. The United States did this in 2020 when the Biden administration issued an executive order calling for EVs to make up half of new vehicles by 2030. This goal is likely to be reached several years before the deadline thanks to this initiative.
Tipping the carmakers
If automakers and their suppliers want to continue to grow, they need to be able to increase production quickly. Volkswagen, Ford, and BMW all plan on having 50% or more of their sales come from fully electric cars by the end of the decade.
Automakers have tipping points too. Factories must be retooled and supply chains reconfigured in order for them to achieve the most cost savings. In Europe, once 10% of an automaker’s quarterly sales come from electric cars, that number triples in less than two years.
The chart below does not include Toyota, which is the biggest automaker that has not reached the 10% EV threshold in Europe. Toyota's target of 3.5 million annual EV sales by 2030, as a share of its 10 million annual vehicle sales, is among the least aggressive of the major automakers. The chart also does not include Tesla, the world's biggest EV maker, whose sales are entirely electric.
Automakers Have a Tipping Point, Too
Once 10% of a company’s European sales went electric, that figure quickly tripled
Is the world’s transition to EVs inevitable?
So far, 90% of the world's electric vehicle sales have come from the US, China and Europe. That means countries responsible for about a third of global annual auto sales haven't passed the tipping point. None of the countries in Latin America, Africa, or Southeast Asia has made the jump yet. If they do, it’s uncertain whether global miners will be able to keep up with demand for battery metals.
The International Energy Agency reports that electric vehicle sales tripled in the last two years. In 2021, electric cars accounted for all of the net growth in global car sales. This trend is likely to continue in the future, as BloombergNEF forecasts suggest. This year could be the high water mark for vehicles without a plug.
According to recent data, the number of electric vehicles worldwide has surpassed 5%. This number is only going to grow in the coming years as more and more people adopt this technology. By 2021, it is estimated that 10% of all vehicles will be electric. This shift in transportation will have a large impact on the environment and our economy.
