Wiktor Wise
Electric vehicles are a rapidly growing market, with global sales passing a million units in 2017. McKinsey's Electric Vehicle Index (EVI) is a proprietary tool that assesses the e-mobility performance of 15 key countries worldwide. The EVI provides a detailed view of the electric-vehicle (EV) market, including market demand and industry supply, and highlights potential future trends. The index is designed to help organisations in the automotive, mobility, and energy sectors understand the evolution and trajectory of electric-vehicle dynamics.
| Characteristics | Values |
|---|---|
| Purpose | To measure the performance of companies in the electric vehicle sector |
| Focus | Battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) |
| Analysis | Global electric vehicle sales and trends across 15 key countries |
| Market Demand | Share of EVs in the overall market, incentives, infrastructure, and range of EVs |
| Industry Supply | Share of a country's OEMs in the production of EVs and EV components |
| Sales | Over 14 million in 2023; expected to be around 17 million by the end of 2024 |
| Sales Growth | 20% year-on-year increase expected by the end of 2024 |
| Market Share | Electric vehicles account for 18% of total car sales in 2023 |
| Cost | More affordable models are needed to accelerate the transition to EVs |
| Competition | Prices are decreasing as competition intensifies, especially in China |
| Environmental Impact | Electric vehicles are key to decarbonising road transport, which accounts for around one-sixth of global emissions |
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What You'll Learn
Electric vehicle market analysis
The global electric vehicle (EV) market is a rapidly growing and highly competitive industry, with an estimated market size of USD 500.48 billion in 2023, projected to reach USD 671.47 billion in 2024 and USD 1,891.08 billion by 2032, exhibiting a compound annual growth rate (CAGR) of 13.8%. This growth is driven by several factors, including favourable government subsidies, strict emission regulations, and increasing consumer demand for sustainable mobility options.
Regional analysis reveals that the Asia Pacific region dominated the global EV market in 2023, with a share of 51.24%, led by China's significant demand for passenger cars. North America is also expected to witness significant growth, with the U.S. market projected to reach USD 233.70 billion by 2032, driven by government initiatives to expand EV charging infrastructure. Europe is another key player in the EV market, with governments taking steps to reduce carbon emissions.
The EV market's growth is closely tied to advancements in technology and infrastructure. Improvements in battery technology, such as energy density and cost reduction, have increased driving ranges and made EVs more affordable. The development of fast-charging infrastructure, including Volkswagen's "Electrify France" network, also enhances the convenience and accessibility of EVs for long-distance travel.
To secure their position in this dynamic market, EV companies are focusing on scaling production while maintaining quality and managing costs. Collaborations and strategic partnerships, such as Daimler Truck AG and Gehring Technologies GmbH's agreement to develop commercial vehicle-specific electric motors, are also driving innovation and expertise in the industry.
Market analysis reports provide valuable insights into the EV industry's growth, challenges, and future trends. These reports include sales data, cost analysis, customer segmentation research, and forecast models, enabling stakeholders to make informed strategic decisions in this rapidly evolving market.
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Electric vehicle market growth
Electric vehicle (EV) market growth is influenced by a combination of factors, including consumer trends, government policies, technological advancements, and investment from key market players.
One of the primary drivers of EV market growth is the increasing consumer preference for environmentally friendly and sustainable transportation options. Consumers are becoming more conscious of their carbon footprint and are attracted to the lower operating costs of EVs compared to traditional internal combustion engine vehicles. The rising cost of fuel and the desire for energy efficiency have also contributed to the rising demand for EVs. This trend is particularly prominent in countries with high population densities and well-established charging infrastructure, such as Japan and some European countries, where compact EVs are in higher demand.
Government policies, regulations, and incentives also play a pivotal role in EV market growth. Stringent emissions standards and fuel efficiency regulations are driving the adoption of EVs as automakers strive to meet these requirements. Additionally, government initiatives, such as subsidies and investments in EV startups, further boost market growth. For example, China's Ministry of Transport provides grants and incentives for developing low-emission bus fleets, while Norway leads the way in Europe for electric mobility relinquishment.
Technological advancements in battery technology and charging infrastructure have also been critical in the growth of the EV market. Improvements in energy density and the development of fast-charging options have increased the driving range and convenience of EVs, making them more appealing to consumers. Architectural breakthroughs, such as 800V E/E systems and better vehicle performance, have also contributed to the market's expansion.
Lastly, the EV market is influenced by investments and funding from key players in the industry. Companies like Ford, Mercedes-Benz, and Electrify America have made significant investments in electrifying their fleets and improving EV performance and range. These investments attract customers and expand the market for EVs.
Overall, the combination of consumer preferences, supportive government policies, technological advancements, and investments from key market players is driving the significant growth and development of the global EV market.
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Electric vehicle stock performance
Electric vehicle stocks have gained prominence since the 2020 presidential election, and the future looks promising. In the next decade, it is expected that one in five cars sold will be electric, with electric vehicles comprising about half of car sales by 2030. This shift in the automotive industry is driven by technological advancements, government incentives, and environmental concerns.
The S&P Kensho Electric Vehicles Index is a notable example of an index designed to measure the performance of companies in the electric vehicle sector and its supporting ecosystems. This index includes companies focused on producing electric vehicles, associated subsystems, powertrains, energy storage, clean fuel technology, and charging infrastructure.
Some of the top-performing electric vehicle stocks include Tesla (TSLA), Nio (NIO), Li Auto (LI), and Blink Charging Co (BLNK). As of April 2025, Tesla's stock price was $252.31, with a 12-month price target of $305.93. Nio's stock price was $3.52, with a 12-month target of $4.86. Li Auto's stock traded at $23.23, with a 12-month target of $33.70. Other notable mentions include Rivian Automotive, General Motors, XPeng, Inc., and Plug Power.
It is worth noting that while the electric vehicle market is growing, sales in some countries, particularly developing and emerging nations, have been slower due to higher purchase costs and a lack of charging infrastructure. However, electric vehicles are crucial for decarbonizing road transport, a sector responsible for a significant portion of global emissions.
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Electric vehicle sales trends
Electric vehicle (EV) sales have been increasing steadily over the years, with more than 14 million sold in 2023. This represents a significant increase from around 4% of total car sales in 2020 to 18% in 2023. In the first quarter of 2024, over 3 million electric cars were sold, a 25% increase from the same period in 2023.
China, Europe, and the United States represent around two-thirds of total car sales, so the EV transition in these markets has a significant impact on global trends. China's electric car market has experienced robust growth, with new electric car registrations reaching 8.1 million in 2023, a 35% increase from 2022. This growth is notable as it occurred without support from national subsidies, which had facilitated the market's expansion for over a decade. In the US, EV sales jumped 15.2% year-over-year in the fourth quarter of 2024, setting a new record of 1.3 million sales for the quarter.
The EV market is highly competitive, with various models and manufacturers vying for market share. Tesla has been a dominant player, with its Model Y and Model 3 being the best-selling EVs in the US, accounting for over 40% of all EVs sold in 2024. However, their sales have been declining, with other manufacturers like Ford, Chevrolet, Hyundai, and Kia gaining traction. Ford's Mustang Mach-E and F-150 Lightning have been particularly successful, with Ford holding the second-largest market share in the US in the second quarter of 2024.
Improvements in battery technology and vehicle design have resulted in a significant increase in the sales-weighted average range of battery-electric cars, growing by nearly 75% between 2015 and 2023. The average range of small cars in 2023 was around 150 km, suitable for urban use, while medium-sized cars and SUVs have seen significant improvements, now offering a range of around 380 km.
National policies, incentives, and increasing price competition are expected to further bolster EV sales. In 2024, it is anticipated that electric cars will account for over one in five cars sold globally. By 2030, electric vehicles are projected to eliminate the need for nearly 6 million barrels of oil per day. While electric cars are generally getting cheaper due to intensifying competition, they remain more expensive than traditional cars in markets outside of China. However, price parity is expected to be reached by 2030 in major EV markets outside China for most models.
The S&P Kensho Electric Vehicles Index is a tool designed to measure the performance of companies involved in the electric vehicle sector and its supporting ecosystems, including charging infrastructure and clean fuel technology.
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Electric vehicle market demand
Electric vehicle (EV) market demand is influenced by a combination of factors, including consumer preferences, technological advancements, government policies, and economic conditions.
One of the primary drivers of EV market demand is the growing consumer preference for environmentally friendly and sustainable transportation options. Consumers are increasingly conscious of their carbon footprint and are opting for electric vehicles to reduce their emissions. This trend is particularly prominent in countries with high population densities and limited space, such as Japan and some European nations, where demand for compact EVs is higher. Additionally, the rising cost of fuel and the desire for energy efficiency further contribute to the increasing demand for EVs.
Technological advancements, such as improvements in battery technology, have played a pivotal role in enhancing the performance and affordability of EVs. As battery technology progresses, EVs are becoming more affordable, efficient, and capable of longer driving ranges. This addresses a significant consumer concern, known as "range anxiety," making EVs more appealing to a broader range of buyers. Moreover, advancements in fast-charging infrastructure have significantly reduced charging times, making EVs more convenient for everyday use.
Government policies and incentives also exert a substantial influence on EV market demand. Many governments worldwide have implemented stringent emission norms and fuel efficiency standards, driving the adoption of electric vehicles. Additionally, initiatives aimed at reducing carbon emissions and boosting local economies through the development of the EV industry further stimulate market growth. For instance, the U.S. government's investments in expanding charging infrastructure and its aim to replace delivery trucks in the federal workforce with EVs contribute to increased EV demand.
Economic factors, such as the availability of raw materials and the cost of electric vehicles, also play a role in shaping market demand. While EVs are becoming more affordable in some markets, particularly in China, they remain more expensive than traditional combustion engine vehicles in other regions, including Europe and the United States. However, price parity between EVs and combustion engine vehicles is expected to be reached by 2030 in major EV markets outside China.
Overall, the interplay of these factors indicates a strong and growing demand for EVs globally, with sales expected to continue rising through 2024 and beyond. The expansion of charging infrastructure and the increasing price competitiveness of EVs will be crucial in sustaining this market growth and accelerating the transition to electric mobility.
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Frequently asked questions
The Electric Vehicle Index is a tool that assesses the performance of the electric vehicle (EV) market in 15 key countries. It helps organisations in the automotive, mobility and energy sectors understand the evolution and future trends of the EV market.
The EVI explores two key dimensions of electric mobility: market demand and industry supply. It analyses the share of EVs in the overall market, as well as the incentives, infrastructure and range of EVs available. It also looks at how the automotive sector in each country has supported electric mobility, including the current and projected production of EVs and their components.
McKinsey created the EVI several years ago, and it has since been used as a critical tool for organisations to understand the dynamics of the EV market.
The EVI provides a detailed view of the EV market, highlighting potential future trends. It helps organisations make informed decisions about their electric mobility strategies and identify opportunities and challenges in the market.
The EVI focuses on battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). It assesses the market demand and industry supply dimensions by looking at various factors such as incentives, infrastructure, range of EVs, production numbers and the role of OEMs.
