The shift toward sustainable vehicles

The automotive industry is undergoing a seismic shift as sustainable vehicles take center stage, reshaping global transportation with electrified propulsion and eco-conscious innovation. In this blog, Omdia analyst Christie Schweinsberg examines the transition from internal combustion engines to hybrids and battery-electric vehicles, uncovering the investments, challenges, and breakthroughs driving this revolution. Explore market trends, regional developments, and the future of green mobility as the industry navigates regulations, consumer demands, and environmental priorities.

 As countries and regions worldwide strive to combat climate change, national and regional governments have introduced regulations to make transportation more sustainable. Consequently, the automotive industry—responsible for approximately 100 million global light-vehicle sales annually—is undergoing its most significant transformation in 139 years. Over the past decade, electrified propulsion has emerged as a key strategy to reduce or eliminate tailpipe emissions from internal combustion engine (ICE)-powered vehicles.

Tens of billions of dollars, with and without government support, have been invested by both legacy and startup automakers in the transition from purely ICE-powered vehicles to those partially (hybrids, plug-in hybrids) or fully (battery-electric vehicles) battery-powered. This investment has led to a surge of eco-friendly models entering the global market, resonating strongly with consumers.

In major vehicle markets such as China, Europe, and North America, sales of plug-in hybrid (PHEV) and battery-electric vehicles (BEV) have at least tripled since 2019. Data from Wards Intelligence shows combined PHEV and BEV registrations in these regions are set to rise sharply as more models become available and consumer acceptance grows. In North America, the EV (electric vehicles) light-vehicle PARC (registrations) in 2023 was 4.7 million, projected to reach 6.4 million by the end of 2024. In Europe, EV registrations stood at 9.1 million in 2023 and are expected to rise to 13.2 million by 2024.

China, fueled by robust government support and a growing middle class, has seen the most remarkable growth in EV production and sales. Its EV light-vehicle PARC in 2023 was 20.4 million and is expected to reach nearly 29 million in 2024—almost a 50% year-over-year increase. By 2030, Wards Intelligence predicts China will have an astonishing 100 million PHEVs or BEVs registered, outpacing Europe and North America.

However, significant challenges remain in convincing consumers that electrified vehicles can replace ICE models. BEVs account for a small fraction of total new light-vehicle sales in Europe and North America, where their higher cost compared to ICE models makes them inaccessible for many, especially after a period of high inflation. Although public fast-charging infrastructure is improving in these regions, Wards Intelligence projects that it will soon fall short of demand.

Suppliers and automakers must also strengthen the supply chain for EV components, particularly lithium-ion (Li-ion) batteries. Currently, much of the global battery supply chain is concentrated in Asia, especially China. In response to geopolitical and legislative pressures, Europe and North America are working to develop local battery supply chains. In North America, 19 gigafactories producing Li-ion cells will be operational or starting operations in 2024, up from 12 in 2023, according to Wards Intelligence.

While from a well-to-wheel perspective BEVs produce 49% lower greenhouse gas emissions than ICE vehicles, according to Michigan State University research, the environmental impact of mining battery minerals—such as air and water pollution—remains a concern. Nevertheless, batteries are expected to become more sustainable. Localized Li-ion material supply chains in North America and Europe will reduce carbon emissions from transportation of materials, and a growing supply of end-of-life Li-ion cells will support advanced recycling measures. This shift toward "urban mining" could replace the need for extracting new minerals from the ground.

China’s outlook for BEVs remains robust, and Europe’s BEV sector is expected to stay strong. However, North America’s outlook has weakened amid the incoming Trump administration. President-Elect Donald Trump has proposed canceling the federal EV tax credit, which has played a critical role in fostering EV adoption. Automakers fear this move could slow BEV adoption in the U.S., hindering industry progress. This policy change could reduce investment in cleaner technologies and risk leaving U.S. automakers trailing their Chinese counterparts in the transition from ICE to EVs. Economic and employment concerns, particularly given the role of EV production in creating well-paying jobs in Republican-controlled states, may complicate the incoming administration's calculations, as social and environmental priorities seem unlikely to drive the decision-making process.

To discover more about the evolving automotive landscape and stay ahead of the latest trends in sustainable vehicles, explore our comprehensive research with Wards Intelligence. Our expert insights cover everything from market dynamics and regulatory developments to cutting-edge technologies driving the future of mobility.