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Electric dreams

Electric dreams

Why are sales of electric vehicles slowing – and how long will it last?

Long stories short

  • COP28 President Sultan Al-Jaber told a gathering of oil and gas companies at CERAWeek that emissions from methane must be eliminated.
  • Five airlines sued the Dutch government over plans to cut the number of flights operating out of Schiphol, Europe’s third-busiest airport.
  • Polish politicians traded accusations of planning to push the country’s meat-loving citizens into eating worms.

Electric dreams

After a boom year, electric vehicle sales are sputtering. In China, the world’s largest EV market, January sales fell 50 per cent month-on-month and were flat year-on-year. In the UK, the market share of EVs narrowed from 40 per cent of all car sales in December to 20 per cent the following month.

Another straw in the wind: at Tesla’s first investor day last week, executives said the company was working on producing a cheaper vehicle, but did not give details of when this new model would be available or how much it would cost. Tesla shares fell by around six per cent.

So what? Electrifying road transport has been one of the bright spots in the energy transition, with EVs going from near-zero a decade ago to 10 per cent of the global car market last year.

Emissions from transport are still rising though, with the end of pandemic restrictions fuelling demand for travel. To hit net zero by 2050, carbon dioxide emissions from transport need to fall 3 per cent every year to the end of this decade, the IEA says.

Why are sales falling now? One reason is that subsidies in China and many European countries were cut at the start of this year. While consumer appetite to go electric is strong, tax credits have played a big part in getting motorists to make the switch. Carmakers may need to respond by cutting prices, suggests Abhishek Murali, clean tech analyst with Rystad Energy.

In the short term, the US Inflation Reduction Act doesn’t help either, as EVs assembled overseas are not eligible for subsidies (Hyundai and Kia are among manufacturers that assemble abroad for the US market).

Rising electricity prices are a further deterrent; power prices in the UK were up 67 per cent year-on-year in January, while petrol was up 10 per cent year-on-year according to the ONS.

But there are reasons to believe this is just a speed bump.

Technology. Goldman Sachs forecasts that global EV sales will rise to 16 per cent of the market by 2025 and reach 50 per cent by 2035. Goldman’s analysts suggest the industry will overcome its hurdles through technological innovation. For example, one way of bringing prices down is by switching to batteries that are less rich in nickel – this is less costly, though it reduces range.

Prices. On Monday Tesla cut prices in the US for the Model S and Model X, its two most expensive vehicles. (Ford has also cut the price of its Mustang Mach-E this year, though so far other manufacturers have not joined in). Meanwhile Elon Musk’s company is extending control of its supply chain, moving forward with plans for a lithium refinery in Texas. The future for EV makers looks like a squeeze on profits, combined with a push for greater integration. Goldman suggests the turning point for consumers, when the cost is conducive to widespread ownership, will be 2027.

Regulation. President Biden has set a target for half of all new vehicles sold in 2030 to be zero emissions. Sales of new petrol and diesel vehicles will end in the UK on the same date. In 2021, EVs enabled a net reduction of 40 million tonnes of carbon dioxide equivalent, the IEA says, or roughly what Finland’s energy sector emits.

Sandra Roling, director of transport at Climate Group, a non-profit focused on climate action, said government action was the most important factor: “Clear signals such as the UK’s 2030 phase out target… stimulate the market and give both businesses and manufacturers the confidence to invest.”

The year ahead may be rocky, but the long-term trajectory is clear.



A rivalry is emerging between countries in the Congo basin hoping to secure western funds to protect the region’s tropical rainforest. France’s President Emmanuel Macron travelled to Gabon’s capital Libreville last week for the One Planet Summit where he said another $53 million in nature funding was up for grabs. Small fry compared to the billions available for decarbonising energy, but still of interest to Gabon, which is attempting to kickstart credit sales to developed countries for every hectare of forest left standing. The Democratic Republic of Congo seems interested too. Following the announcement last July that it would be auctioning 27 blocks of land for oil exploration there’s been some good news: a New York investment firm has launched a $400 million bid for the blocks – some of which cover endangered gorilla habitat – in order to flip them for an estimated $6 billion in carbon and biodiversity credits.


Carbon country

Warm weather and a push into renewables helped UK greenhouse gas emissions to fall 3.4 per cent last year even as the economy grew, according to analysis from Carbon Brief. Emissions are 49 per cent lower than they were in 1990 (due largely to a switch away from coal), and the UK is edging closer to its 2030 goal to cut them by 68 per cent. That said, the government is still lagging on its net zero pledges – so much so that senior civil servants are warning ministers they may face action in court. Grant Shapps, as Secretary of State for Energy Security and Net Zero, is apparently the most at risk if the UK’s legal net zero obligations are not met. But the Department for Environment, Food and Rural Affairs, led by Thérèse Coffey, is the worst performing, lagging 24 per cent behind its target. Finding a way to cut emissions from agriculture without tackling meat consumption is a dilemma that won’t go away.


Deep trouble

After two decades of planning, UN member states have agreed on the wording of a treaty to protect biodiversity on the high seas. The result is a rare win for global cooperation in an increasingly fractured era, and a critical step forward when the oceans face multiple threats: familiar ones like overfishing and new ones such as seabed mining. The treaty will take a while to bring to life: countries have to formally adopt and ratify it first (which can require support from national parliaments). Only then does the real work begin. In the meantime, the Deep Sea Conservation Coalition, which brings together scores of NGOs, called on states to support an immediate moratorium on deep-sea mining and end bottom trawling on underwater mountains, which are delicate ecosystems.


Vulnerable Vanuatu

105 nations are backing Vanuatu’s historic legal bid to get the UN’s International Court of Justice to define what legal responsibility countries have for climate change. The US, China, Indonesia and India were all conspicuous absentees, while Australia, with one eye on its influence in the Pacific, has signed up. Apart from being a diplomatic coup for a nation with fewer than 320,000 people, the resolution would also set a legal precedent for cases by vulnerable states against the big emitters. Vanuatu’s own vulnerability was made evident this week after it was hit by two cyclones and an earthquake in as many days.

Thanks for reading.

Jeevan Vasagar

Additional reporting by Barney Macintyre.

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