Electric Vehicle Sales Top $1 Trillion in Wake-Up Call for Carmakers

Global spending on electric vehicles is surging. Annual spending on passenger EVs hit $388 billion in 2022 — up 53% from the year prior — according to a new BloombergNEF report on energy transition investment. With the 2022 tally included, the total value of electric vehicles sold to date in the passenger vehicle segment has now crossed $1 trillion.

Context: Big Number, Bigger Industry

A trillion dollars sounds enormous, but global auto sales are worth around $2.5 trillion per year. Over the last decade — since the modern EV era began — total car sales have been roughly $25 trillion. So while cumulative EV sales crossing $1 trillion is a landmark, it still represents a relatively modest share of the total. Profits from EVs remain even lower.

That said, growth rates tell a different story: nearly 60% of all EV spending on record occurred in just the last 18 months. In 2023, passenger EV sales are on track to exceed $500 billion for the year alone. This is now a very material, very fast-moving segment of global auto sales.

The Platform Problem — and Who's Behind

The auto industry runs on long product cycles. High-volume automakers develop vehicle platforms that underpin models for six to ten years — platforms that cost billions to develop and are designed for component sharing across many models. These long lead times mean that if an automaker bet wrong on EVs, it can take years for the full consequences to show up.

Japanese automakers illustrate this sharply. All Japanese brands combined sold less than 5% of EVs purchased globally in 2022, and none ranked among the top 10 EV brands by volume. That wasn't a problem in 2019, when plug-in vehicles were 2.6% of global auto sales — but it's becoming a serious issue as EVs approach 18% of global sales in 2023. In China, EVs are likely to exceed 30% of the market this year, up from just 5% in 2019. Japanese automakers' market share in China has already begun to slip, falling from 25% in 2020 to 21% in 2022.

Alarm bells are ringing. Honda is revamping its EV strategy. Toyota installed new management preaching an EV-first approach — but its new dedicated EV platform won't be ready until 2027 at the earliest. For many automakers, models due from 2026 to 2028 are largely already committed to existing platforms. Whether those bets were the right ones will become clear over the next few years.

The Road Ahead

Despite phenomenal recent growth, only about 3% of the 1.3 billion passenger vehicles on the road globally will be electric by end of 2023. Surging demand is also straining battery supply chains and public charging infrastructure. But the trillion-dollar milestone marks the beginning of real materiality in the auto sector. EVs have captured the imagination of industry watchers for years. Now, they're capturing real market share too.

Originally published by Bloomberg. Author: Colin McKerracher.