A rocky start to 2023 has been followed by resurgent sales growth in electric vehicles, continuing the high-growth trend observed in recent years. 

Lots of mixed signals for EV (electric vehicle) sales landed in the first quarter of 2023. As China EV subsidies rolled-off at the end of 2022, and with the lunar new year falling in late January, the early data pointed towards a significant slow down in EV sales growth in China. While some of this slow-down was anticipated, the resulting price cuts by auto-manufacturers were deeper and more widespread than forecast. China’s March EV sales point towards these discounts beginning to restimulate the high levels of EV sales growth associated with a market that accounted for nearly 63% of 2022 global EV sales by volume.

Outside of China, the data is similarly mixed. Q1 EV sales in the US were up 54% year-on-year, with the incentives included as part of the 2022 Inflation Reduction Act beginning to stimulate domestic demand. In Europe, EV sales growth continued to be more modest, with a year-on-year increase of 10%. As in China, some European countries including Germany also felt the effect of 2022 EV subsidies and incentives winding down in 2023.

Based on the most recent data, Project Blue anticipates that strong EV growth will continue in 2023. An increased and improved range of electric vehicles are being brought to market at prices that will begin to approach parity with similar ICE alternatives. The 2023 EV market by volume sales will reach 14.4 million units, a 38% increase over 2022, adding roughly the same amount of additional EV sales in 2023 as were added in 2022 (around 4 million).

As a result of the strong demand for EVs, the total required battery production for EVs, energy storage systems and consumer electronics will approach 1TWh in 2023 – a 5-fold increase from 2019 levels. The last three-to-six months has given us plenty to consider with regards to how EV and battery demand impacts on the demand for critical materials, with recent declines in lithium prices linked to the effects of weakening demand across the EV supply chain. However, the overarching 2023 narrative will return to the continuation of the transition towards electric transportation involving sustained growth in the demand for EVs, batteries and the associated critical materials.