The car market: forced march towards electric vehicles

19th March 2018

Hugues Chevalier, Economist

In 2017 the worldwide car market continued to grow at a steady rhythm. About 95 million new cars were sold, an increase of 2% compared to 2016. China has become the largest market. Furthermore, the strong progression of electric vehicles is another milestone of this evolution, which should even accelerate more during the years to come. As a matter of fact, in 2030, the share of electric cars should exceed cars with combustion engines. Two factors are the cause of this rapid structural change.

First factor is the tightening of environmental standards. Two years after the “Diesel gate”, European authorities have increased constraints related to emission levels of cars (PPM and CO2). New norms will be applicable as of 2021, such as 95 grams of CO2 for new cars. Yet these limits will be very difficult to achieve for car manufacturers. These are therefore compelled to launch new electrical (or hybrid) cars, in order to comply with these environmental constraints.

The second factor is the shift of the market with the explosion of matriculations in the emerging markets. China is now the first market, with a market share of 35%. In China, the car makers have to comply with the new quota of electric vehicles of 10% as of 2019 (12% 2020). In total electric cars should exceed 50% of the worldwide market in 2030 – a real forced march for the car manufacturers.