Vehicle Electrification Market

The Vehicle Electrification Market is valued at USD 79.7 Bn in 2026 and is projected to reach USD 138.4 Bn,  growing at a CAGR of 8% by 2033

Market Analysis in Brief

The volatility of fossil fuel costs as well as availability, in conjunction with the noticeable impacts of greenhouse gas emissions on the environment are major elements leading to greater adoption of vehicle electrification solutions by various individuals around the world. This is expected to drive the growth of vehicle electrification market. Moreover, commendable strides being made in innovation and technology have led to the development of more efficient and reliable electric vehicles in recent years. While these vehicles may cost more than conventional ICE vehicles and lack in certain areas of operation like range, they offer a wide range of benefits that could sway a larger number of consumers eventually.

Key Report Findings

• Global battery production for electric vehicles is expected to reach 2.85 Terawatt-hours (TWh) by 2025
• In the US, 80-90% of the energy consumed by the transportation sector comes from gasoline
• Europe to account for the majority vehicle electrification market share over the forecast period
• In 2020, over 3 million electric vehicles were sold
• As of 2021, there were over 1.4 million publicly accessible electric vehicle charging stations worldwide

Growth Drivers

Soaring Demand for Cleaner Transport

Electric transportation offers benefits such as a clean mode of transport and affordability, and this is expected to drive demand in vehicle electrification market. Minimal dependency on fossil fuels, a reduced negative impact on the environment, and economic incentives are elements expected to help manufacturers transition from a passé perspective of automotive engineering.

These factors have led to the commercialization and adoption of electric vehicles. A change in thinking toward mobility and energy solutions have made it clear that the automotive industry is on the cusp of a mobility revolution. Globally, automakers have experienced a soaring demand for electric vehicles as end-user perception changes.

Pollution, and Regulations Create Twofold Impact on Phasing-Out ICE Vehicles

Rising pollution levels combined with radically changing climatic conditions are leading to pressure being exerted on manufacturers to develop more effective and sustainable transportation solutions. As a result, fossil fuel-powered vehicles are now facing stiff competition from the electric vehicle sector. Furthermore, developed nations, with better EV policies, and infrastructure, are also encouraging the sales of EVs as compared to conventional vehicles, which highlights ample opportunity arising for the vehicle electrification market.

As per the Energy Information Administration (EIA), the second-largest energy consumer in the U.S. is the transportation sector. About 80%-90% of the energy consumed by the transportation sector comes from gasoline. Globally, the transportation sector represents a significant share of the total greenhouse gas emissions. Continued use of internal combustion engine (ICE) vehicles is expected to tremendous contribute towards a surge in carbon emissions, especially in nations like China and India. To combat the same, governments are expected to invest in electrification programs to reduce emissions, minimize oil dependency, and have the potential to curb oil prices due to price volatility.

Tesla, GM, Lucid, BMW, and Nissan among other key players are leading the way in vehicle electrification, while the remaining industry players are likely to follow suit. For instance, major commitments from automakers like Volvo include a planned end of ICE vehicles starting 2019, with higher investments being made toward EVs. Additionally, the VW group has been scheduling plans to offer over 70 EV options by 2025. Meanwhile, Ford is increasing its EV investment from US$4.5 Bn to US$11 Bn.

Expanding Charging Infrastructure Across Developed Regions

Significant infrastructural changes in Europe, China, and the U.S. have been precursors to the rise of the EV market. Countries are investing in building robust charging infrastructure to reduce fossil fuel emissions and boost the uptake of electric vehicles. EV demand grew by almost 40% and 80% in the U.S., and Europe respectively, depicting an upward trajectory between 2017-2018.

During the first half of 2020, overall vehicle sales declined by nearly 35% in Germany compared to 2019 and during strict COVID-19 lockdowns in April, sales historically slumped by 61%. Nonetheless, the EV car segment has bucked the trend and outperformed despite plummeting vehicle sales. Similar trends were seen in other European countries too, which aided the growth of the region’s vehicle electrification market by almost 25-28%.

Rapid development in commercial vehicle electrification has been rejuvenating the market. Public transportation and logistics vehicles are the backbone of any urban sector. European countries in conjunction with Australia, and some of the ASEAN countries observed high demand for an improved public transit system. Existing transportation facilities are likely to be inadequate in the coming years. This in turn is likely to pose new opportunities for OEMs and thus potential market expansion. With emission norms being made stricter by the day, most OEMs have aligned their product portfolios with EVs.

PHEV, and HEV Race Ahead of the Pack

Alternative technologies to ICE-run vehicles include biofuels, and electric vehicles. Technological developments have contributed towards bettering the efficacy of automobiles thus leading to the deployment of hybrid electric vehicles (HEV), plug-in hybrid electric vehicles (PHEV), and battery electric vehicles (BEV). EVs in the global market include these three types of electrified vehicles. The demand for PHEVs and HEVs was soberly higher until advanced lithium-ion, and similar battery technology began to be incorporated in BEVs, in turn fostering the vehicle electrification market revenue.

Growth Challenges

High Cost, Limited Driving Range, and Inadequate Charging Infrastructure

While there may be many benefits to using electric vehicles, the inflated costs associated with the batteries of these vehicles is a factor that could deter potential customers. Moreover, in comparison to conventional vehicles, EVs offer a limited driving or operational range. Another major element that could hinder the adoption of electric vehicles in the coming years is the lack of charging infrastructure in western nations, and more specifically in various developing countries around the world. Without reliable access to charging infrastructure a greater number of individuals may take look in making the transition to using electric vehicles, thus hampering the global vehicle electrification market.

Growth Opportunities Across Regions

European Countries Pave the Way for EVs

By 2040, nearly half of car sales are likely to be powered by electric power trains with approximately 45% share in the vehicle electrification market contributed by Europe, and 40% by China. Electric vehicle sales substantially grew by 60%, through 2017-18; however, the sales followed a slower growth of 9% in 2019. Global EV sales slowed down in 2019, thus affecting EV industry growth. This decline is attributable to cyclical demand fluctuation in the automotive industry, supplemented by costlier and lesser energy-dense battery technology.

Presently, European countries like Norway, Iceland, the Netherlands, and Sweden are leading the race followed by Finland, and China, and then by the U.S. among other countries. Despite vehicle electrification being highly practised in European nations, EVs and batteries are not manufactured in the same region. Due to economical labour overheads, Asian countries are reaping the benefits of the same.

Key Market Players – Vehicle Electrification Landscape

Some key companies in the global vehicle electrification market include 

• Tesla, Inc.
• Toyota Motor Corporation
• Volkswagen AG
• General Motors Company
• Ford Motor Company
• BYD Company Ltd.
• Nissan Motor Co., Ltd.
• Hyundai Motor Group
• BMW Group
• Daimler AG (Mercedes-Benz)
• Honda Motor Co., Ltd.
• Volvo Group
• Rivian Automotive, LLC
• Lucid Motors
• XPeng Inc.

Recent Notable Developments

• In July 2021, Suzuki Motor Corporation and Daihatsu joined forces to accelerate the electrification of mini vehicles through the Commercial Japan Partnership commercial vehicle project
  
  
• In June 2021, XL Fleet Corp., collaborate with Rubicon, a software provider. This was done to supply XL Fleet’s offering for fleet electrification to Rubicon’s waste and recycling hauling partners
  
  
• In June 2021, Ford announced the acquisition of Electriphi, a California-based charging management and fleet monitoring software provider for electric vehicles
  
  
• In February 2021, Ford Motors Company announced that its European division would soon phase out fossil fuel vehicle production, and by 2026, will only offer plug-in hybrid and electric models

Global Vehicle Electrification Market Segmentation is Listed Below:

By Product Type

• Start/Stop System
• PTC Heater
• Electric Air Conditioner Compressor
• Electric Vacuum Pump
• Electric Oil Pump
• Electric Water Pump
• Starter motor & alternator
• Integrated Starter Generator (ISG)
• Actuators

By Vehicle Type

• Passenger Car
• Light Commercial Vehicles
• Heavy Commercial Vehicles

By Regin

• North America
• Eurpe
• Asia Pacific
• Latin America
• Middle East & Africa