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The Future Is Electric: The Electric Vehicle Market is Just Charging Up

By Aidan Berry (University of California Los Angeles) & Mayank Killedar (University of California Los Angeles)

Section I - Synopsis

The electric vehicles (EVs) market has seen massive growth in the past decade. The Low Carbon Fuel Standard, projected tax breaks, and the decline in electric vehicle prices have driven ever-climbing sales. As the institution of a robust charger network and further governmental support continue to foster the emergence of electric vehicles, we see that the future is truly electric.

Section II - Table of Contents

1. Summary

2. Trend Overview

3. Trend Drivers

a. Tax Brakes

b. Low Carbon Fuel Standard

c. Price Reduction

4. Further Trend Analysis

a. Government Regulations

b. Charger Availability

c. Introduction of new Competitors

d. Biden’s Presidency

e. Conclusion

Section III - Summary

It hasn’t been easy for electric vehicles to break into the automobile industry. For decades, they have lagged behind their gas-powered counterparts for various reasons: lack of infrastructure, costly battery technologies, and the accessibility of gas are just a handful of the reasons why EVs were left behind. Nevertheless, there has undoubtedly been a recent resurgence of interest in these vehicles. Widespread private and public support dovetailed to drive greater growth in the industry which shows no signs of slowing down. It is evident that this trend is here to stay.

Section IV - Trend Overview

The release of the 2011 Tesla Roadster began to shift the narrative around electric-powered cars. It was able to run over 200 miles per battery charge, a major step toward widespread electric viability. However, its cost restricted the market to enthusiasts, failing to gain traction with a larger population. Key infrastructure continued to lag behind: charging stations are vital to electric vehicles and there were only approximately 3,000 EV charging stations in 2011 and roughly 17,000 EVs on the road in 2010. This number was sharply juxtaposed with the number of gas stations in the United States coming in at a total of 114,533 gas stations, according to a conservative number by the US Census Bureau. Gas continued to dominate the market for vehicles.

This did not remain the case for long. Tesla led the charge in increasing the efficiency of its battery and driving the cost of its cars down. Manufacturers such as BMW, Nissan, and Chevy all came out with their own vehicles as not having an electric car quickly meant being left behind. The rise in availability of EVs has coincided with record-breaking sales: the International Energy Agency determines that EV sales exceeded 2.1 million globally, a 6% growth from 2018, and over 30% year-over-year growth. The total number of EVs on the road stands at 7.2 million electric cars, a reality that is reflected in the over 63,000 EV charging stations in 2019. These leaps in sales and charging stations are massive increases in the past ten years.

EVs have seen a marked growth, particularly in China with the country possessing 47% of the 7.2 million EVs on the road today. This growth was driven by subsidies which enable many consumers to purchase these vehicles for an even more competitive price. However, the country has begun to slowly phase out purchase subsidies in 2016, with sharper cuts in late 2019. Due to the fact that these cuts closely aligned with a drop in Chinese EV sales, the government elected to extend subsidies through 2022 while the United States continued rolling back subsidies. Even though personal car sales declined in 2019, China has also led the way in transforming other transportation methods. The country contains the vast majority of the 500,000 electric buses that currently exist.

Section V - Trend Drivers

The race towards EV adoption has steadily increased over the past decade. A number of factors have contributed to this trend, of which we will explore in further detail.

Tax Breaks

Governments in myriad countries have begun looking for methods to encourage the manufacturing and sale of electric vehicles.

In the United States, the government is “subsidizing electric cars with a $7,500 consumer tax break for the first 200,000 vehicles an automaker sells.” The credit is precedingly cut in half for production over the next 6 months. At the end of 2019, Congress debated over reformatting the tax break to include 600,000 vehicles produced rather than the original 200,000. Unfortunately, the proposal was eventually turned down, but its mere debate is a step in the right direction.

In Norway, the government has dismissed a 25% value-added tax for battery-powered vehicles, contrary to diesel and petrol car owners who are still expected to pay this tax.

China, which has been a long time proponent and an advocate for electric vehicles, has been offering subsidies since 2010. China set a precedent by offering these subsidies starting over a decade ago, however, it is expected that they will eventually be phased out, due to many automakers’ reliance on them.

The United States, Norway, and China are just a few examples of the numerous countries across the world including the United Kingdom, Canada, and the Netherlands, which are offering similar EV tax breaks. These breaks have been strong drivers in the production and consumption of electric vehicles. However, it is important to note that these subsidies can not be sustained forever. Once electric vehicles become the norm, we expect to see a phase-out of such strong tax breaks from these governments to decrease the reliance upon them and increase competition amongst individual automakers. Nevertheless, it will be sometime before that happens.

Low Carbon Fuel Standard

California is a major player in leading the promotion of electric vehicle production through their Low Carbon Fuel Standard program (LCFS). Through this program, companies that fall below the carbon emission standard, a limit decided by the state, earn LCFS credits. These credits can be sold on the LCFS market to other automakers who don’t meet the threshold of carbon emissions, allowing them to offset their deficits.

So far, the program has been fairly effective. It has encouraged the use of renewable energy sources to fund transportation rather than traditional internal combustion engines. This has enabled California to achieve a “5% decrease in the carbon intensity of transportation fuel” over a seven-year period. According to a report done by the Union of Concerned Scientists, the use of alternative fuels grew by 50% from 2011 to 2016, and 25 million metric tons of carbon were reduced during that time frame, both in large part due to the implementation of the LCFS program.

So far, LCFS markets are only present in California and Oregon. Other states have alternative methods geared towards EV production, but the LCFS has made tremendous strides in effectively encouraging the production of electric vehicles, as demonstrated by the corresponding reduction in carbon emissions.

Price Reduction

When electric vehicles started to gain commercial popularity, the price of lithium-ion batteries was unexpectedly high. The price in 2010 was $1,160/kWh. As seen on the graph below, this price has steadily declined as advancements in technology and manufacturing were made.

Figure 1 - Lithium-Ion Battery Price by Weight (Bloomberg)

The price of a lithium-ion battery today is less than $100/kWh, a decrease of roughly 91%. This decline has been accompanied by an increase in consumer spending on electric vehicles. While there have been a number of factors leading to the rise of electric vehicles, price reduction has been among the largest.

According to Geotab, one of the most significant advancements in battery manufacturing has been the shift “from cathode chemistries that are dependent on cobalt, toward nickel-based cathodes.” Cobalt represents the most expensive aspect of lithium-ion batteries, so this move was critical in reducing their previously high costs.

The decline in prices has also been supported by the U.S. Department of Energy’s Vehicle Technologies Office. The office has collaborated with laboratories and companies across the country in working to find methods to continually reduce battery costs.

Section VI - Further Trend Analysis

We have looked at some key factors that have driven electric vehicle production and sales in the past, however, it is important to see how this trend will continue to develop in the future.

Governmental Regulations

We have already seen many regulations put in place dedicated to reducing carbon emissions and promoting renewable energy. These policies will continue to carry the EV market forward, both domestically and internationally. For one, the United Kingdom has committed to a target of net zero emissions by 2050, as well as a proposed ban on all air-polluting vehicles by 2035. Similarly, Germany has plans to cut greenhouse gas emissions by 55% by the end of 2030, and again by 95% by the end of 2050. Both of these goals will be nearly impossible without an increasing sale of renewable energy vehicles.

Moreover, California is on track for a similar system. According to Businessweek, Governor Gavin Newsom will gradually dispose of internal combustion engine vehicles by 2035. California has long struggled with the effects of climate change, from erratic weather patterns to blazing fires. This decision will greatly reduce carbon emissions produced by the state, which has historically released over 400 million metric tons of carbon per year. This is also in line with California's plan to have 5 million electric vehicles on the road by 2030. With all these announcements, there is growing pressure for automakers and government institutions alike to enforce their plans and hold large corporations accountable.

Charger Availability

With the increase of electric vehicles on the road comes the pressing issue of keeping them charged. Currently, EVs do not have the range that typical Internal Combustion Engine (ICE) vehicles have. This has caused concern for many who believe there are not enough charging stations to remedy this disparity.

Touching back on the article by Geotab, in 2019, there were roughly 20,000 charging stations readily available to EV drivers. Alternative methods of charging are currently being deployed, though, such as ultra-fast chargers, wireless charging, and battery swapping. The strength of chargers is also being improved, as automakers look to power larger vehicles such as moving trucks and buses.

The electrification of heavier vehicles represents another segment of the EV industry that will significantly grow in the coming years. Companies such as Tesla have already begun to develop electrified commercial trucks, with their first model becoming available near the end of 2021. Delivery companies, such as Amazon, who are looking to deploy fleets of electric vehicles, would benefit tremendously from an increase in charging infrastructure across the country.

The following graphic displays further concerns related to EV adoption, in addition to charging infrastructure, driving range, and price.

Figure 2 - Consumer Priorities for EV Adoption 2018 & 2020 (Deloitte)

Introduction of New Competitors

As companies become pressured to switch from combustion to electric engines, there will be a surge in competition. The big names as of 2020 are Tesla, GM, Nikola, and Nio, to name a few. Traditional automakers, however, such as Volkswagen, Toyota, and Honda, are all looking to disrupt the market.

Stepping away from your typical big-name car companies, you can expect to see a rise in electric vehicles being produced by technology companies. Apple has already made an announcement that they will be developing a self-driving electric vehicle, with an availability date centered around 2024. Their project was formerly launched in 2014, however, it struggled to gain any real traction. Now, the iPhone maker is committing once again, with promises of paramount battery technology that will spur the creation of their vehicle. Apple certainly has the cash necessary to carry out this endeavor, but it will be interesting to see how a company historically focused on consumer technology will transition into the automotive industry.

Biden’s Presidency

New President-elect, Joe Biden, is taking office and has a planned $2 trillion dollar climate change proposal that aims to remedy the negative effects we have seen due to increasing levels of carbon emissions over the last decade.

Biden will have the ability to extend the EV tax credit, which was mentioned earlier, to 600,000 vehicles. Additionally, he has brought up the possibility of transitioning school buses from ICE to completely electric, equating to roughly 500,000 vehicles. This would be accompanied by a total of 500,000 charging stations spread across the United States. The lack of electric accessibility in rural areas has also been a longstanding issue, however, Biden is hoping to create a “national strategy to eliminate energy poverty.”

Lastly, Biden’s plan includes supporting smaller electric vehicle companies looking to expand into the global supply chain. This will be a huge step forward for smaller companies who have been hesitant to enter the market due to fierce competition and lack of infrastructure.


It is the culmination of the aforementioned drivers that will spur the growth of the EV industry over the next decade. As climate change continues to alter the global landscape, the prevalence of electric vehicles will play an instrumental role in reducing carbon emissions and promoting clean energy.


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