Electric Car Market Size & Forecast

The Electric Car Market is expected to reach $5,634.6 billion by 2031, at a CAGR of 29.2% from 2024 to 2031. In terms of volume, the market is expected to reach 140.7 million units by 2031, at a CAGR of 27.7% from 2024 to 2031. The growth of the electric car market is driven by supportive government policies and regulations, increasing investments by leading automotive OEMs, rising environmental concerns, and decreasing prices of batteries. Furthermore, the growing adoption of autonomous driving vehicles and increasing focus on electric mobility in emerging economies are expected to offer significant growth opportunities for players operating in the electric car market.

Electric Car Market Growth Drivers

Supportive Government Policies and Regulations

The global automotive industry is gradually transitioning from fossil fuel-based vehicles to electric vehicles. Governments around the world are implementing policies and regulations to support EV adoption. Financial incentives, such as tax credits and rebates, are being offered to encourage consumers to purchase electric vehicles. These incentives are helping reduce the upfront costs of electric car, making them more affordable for consumers.

Technological advancements and increasing investments in EV development by automotive OEMs, coupled with decreasing battery prices, are driving the growth of this market. For instance, in June 20223, the Chinese government set targets to build a high-quality charging infrastructure system by 2030 in order to support the development of the new-energy vehicle (NEV) industry and achieve the goal of reaching carbon neutrality. China's State Council released guidance that detailed five major targets in building a high-quality charging infrastructure system by 2030, with extensive coverage, moderate scale, reasonable structure, and perfect functions basically completed. In December 2022, the Government of Canada proposed regulations that set ZEV sales targets for manufacturers and importers of new passenger car, SUVs, and pickup trucks. This will help families save money on monthly bills due to the rising and unpredicted oil prices. In July 2022, the Government of Chhattisgarh (India) announced an electric vehicle (EV) policy to help create robust EV charging infrastructure in the Indian state of Chhattisgarh, accelerate the transition from Internal Combustion Engine (ICE) vehicles to electric vehicles, and incentivize EV manufacturing. Such supportive government policies and initiatives towards EVs are expected to further boost the growth of the electric car market during the forecast period.

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Decreasing Prices of Batteries

Battery electric vehicles majorly include private car and public transport vehicles for shared mobility. However, the cost and range limitations associated with electric car batteries are a major restraining factor for the complete transition to electric mobility. However, technological advancements have brought down the cost of electric car batteries. Today, battery manufacturers are aiming to provide EV OEMs with high-capacity batteries at reduced prices to ensure the overall cost of a vehicle falls under the subsidized range. According to BloombergNEF’s annual lithium-ion battery price survey, average pack prices fell to INR 139 per kilowatt hour this year, a 14% drop from INR 161/kWh in 2022.

Moreover, battery cost reductions often coincide with improvements in battery technology, leading to increased energy density and longer driving ranges for electric vehicles. Longer-range batteries alleviate range anxiety, a common concern among potential EV buyers, making electric car more appealing to a broader market. The decreasing cost of batteries incentivizes innovation in battery technology and manufacturing processes. This innovation leads to further cost reductions and improvements in performance, durability, and safety, driving even greater adoption of electric car.

Electric Car Market Opportunity

Growing Adoption of Autonomous Driving Vehicles

Autonomous vehicles can potentially move people and goods simultaneously. They make deliveries more convenient and efficient. Autonomous vehicles are called self-driven or driverless vehicles that use advanced technologies, including artificial intelligence (AI), light detection & ranging (LiDAR), computer vision, GPS, and RADAR sensing technology and sensors to operate with minimal human interference. These vehicles include e-buses, light & heavy commercial vehicles, passenger vehicles, and e-scooters that reduce carbon emissions while boosting transportation and logistics efficiency. Autonomous electric car can provide people with disabilities and senior citizens access to self-driven mobility. Several automotive manufacturers are aggressively working towards innovative and advanced technologies to incorporate autonomous driving capabilities in their electric car and enhance vehicle safety. For instance, in January 2024, Nvidia Corporation (U.S.) announced that Li Auto Inc. (China), a pioneer in extended-range electric vehicles (EVs), selected the NVIDIA DRIVE Thor centralized car computer to power its next-generation fleets. The company also announced that EV makers Great Wall Motor Co., Ltd. (China), Zhejiang Zeekr Intelligent Technology Co., Ltd. (China), and Xiaomi Corporation (China) adopted the NVIDIA DRIVE Orin​​ platform to power their intelligent automated-driving systems.

Electric Car Market Challenges

Low Cold Weather Performance of Electric Car

Reduced battery efficiency and heating energy consumption are key contributors to electric vehicles’ diminished performance in cold weather. Electric vehicles’ suboptimal cold weather performance (reduced range and overall efficiency) is also a major factor hampering EV adoption.

Cold weather can affect the efficiency of electric vehicle batteries. Batteries tend to operate less efficiently in colder temperatures, which can result in reduced range per charge. This is because low temperatures slow down the chemical reactions within the battery, leading to decreased energy output. Concerns about reduced range in cold weather can contribute to range anxiety among electric vehicle owners, particularly during long trips or in areas with extreme winter conditions. However, advancements in battery technology and vehicle design are continuously improving cold-weather performance and reducing range anxiety. With proper planning, awareness of reduced range in cold conditions, and the availability of charging infrastructure, EV owners can effectively manage the impact of cold weather on their vehicles.

Range Anxiety among Consumers

Range anxiety is a common concern among consumers considering purchasing electric car. Range anxiety is the fear or worry among EV drivers that their EV’s battery will run out of power before reaching the destination or the nearest charging station. Range anxiety is a significant concern among consumers considering EV adoption. Publicly accessible fast chargers that facilitate longer journeys can be the ideal solution to help overcome range anxiety and encourage more consumers to adopt electric vehicles. Countries around the world are strengthening and expanding their EV charging networks to overcome the range anxiety barrier to EV adoption. For instance, in February 2023, in China, over 40% of publicly available charging units are fast chargers, which is well above other major EV markets. The rapid deployment of public chargers in China is driven by government subsidies and active infrastructure development by public utilities. Moreover, continued improvements in battery technology, charging infrastructure, and consumer education are expected to help the EV industry overcome the challenge of range anxiety and encourage more people to adopt electric car.

Electric Car Market Analysis: Key Findings

By Propulsion Type: In 2024, the Hybrid Vehicles Segment to Dominate the Electric Car Market

Based on propulsion type, the electric car market is segmented into battery electric vehicles, hybrid vehicles, and fuel cell electric vehicles. The hybrid vehicles segment is sub-segmented into plug-in hybrid electric vehicles and pure hybrid electric vehicles. In 2024, the hybrid vehicles segment is expected to account for the largest share of above 66.8% of the electric car market. The growth of the segment is attributed to increasingly stringent automotive emission regulations across the world, consumer demand for high fuel efficiency vehicles, increasing investments by automotive OEMs for hybridization of vehicle powertrains, and the low cost of hybrid vehicles compared to battery electric vehicles.

However, the fuel cell electric vehicles segment is expected to register the highest CAGR during the forecast period. The growth is mainly driven by several advantages, such as fast refueling, zero tailpipe emissions, lighter and smaller battery packs with increased driving range, increasing government initiatives for setting up hydrogen fuel cell charging stations, and increasing investments by leading automotive OEMs worldwide in the research and development of hydrogen fuel cell technology.

By Power Output: In 2024, the Less Than 100kW Segment to Dominate the Electric Car Market

Based on power output, the electric car market is segmented into less than 100kW and 100kW to 250kW. In 2024, the less than 100kW segment is expected to account for the larger share of above 83.2% of the electric car market. The segment's growth is attributed to the increasing use of light electric car in the central business districts of major cities across the world, increasing implementation of electric car for shared mobility services in the major cities, falling battery prices, and increasing investments in electric vehicle startups in this segment.

However, the 100 kW to 250 kW segment is expected to register the highest CAGR during the forecast period. The growth is mainly driven by increasing initiatives by leading automotive OEMs to launch more powerful electric car, increasing regulations to reduce tailpipe emissions, increasing adoption of electric car in developed economies, and governments' targets to phase out diesel vehicles by 2030.

By End Use: In 2024, the Private Use Segment to Dominate the Electric Car Market

Based on end use, the electric car market is segmented into private use and commercial use. In 2024, the private use segment is expected to account for the larger share of above 86.2% of the electric car market. The segment's growth is attributed to increasing consumer demand for fuel-efficient and zero tailpipe emission vehicles, government incentives to promote sales and manufacturing of electric car, tax rebates, the decline in battery costs, and increasing fuel prices.

However, the commercial use segment is expected to register the highest CAGR during the forecast period. The growth is mainly driven by the increasing use of electric car in shared mobility services and corporate taxi fleets, increasing regulations to reduce fleet emissions, growing adoption of mobility-as-a-service (MaaS), and growing demand for energy-efficient commuting, increasing fuel prices, and encouragement by global and state-level regulatory bodies to deploy policies promoting the adoption of electric car for mobility services.

Geographical Analysis

In 2024, Asia-Pacific to Dominate the Electric Car Market

In 2024, Asia-Pacific is expected to account for the largest share of above 41.9% of the electric car market. The large share of the Asia-Pacific region is attributed to the increasing demands for EVs and associated charging facilities, a growing number of start-ups offering numerous solutions and services in the electric mobility industry, attractive incentive programs for electric car buyers, and the presence of regional core competencies of countries such as China, Japan, South Korea, and India in manufacturing and technological developments.

In addition, various key players in this region are collaborating with automakers to promote, frame regulations, and invest in the electric vehicles industry. For instance, in January 2023, Tata Motors Limited (India) partnered with ICICI Bank Ltd (India) to offer the EV Dealer Financing solution to its authorized passenger EV dealers. Under this scheme, ICICI Bank will provide inventory funding to the authorized passenger EV dealers of Tata Motors. In March 2022, BYD Company Ltd. (China) signed a deal with the Chinese government to supply 10,000 electric taxis to Shenzhen. The company also plans to invest USD 1.5 billion to build a new factory in the city to produce electric vehicles and batteries. These instances support the growth of the electric car market in Asia-Pacific during the forecast period.

However, Europe is expected to register the highest CAGR of 41.8% during the forecast period. The factors contributing to the high growth of this regional market are consistent developments in making stringent emission regulations by the European Union, increasing focus of the countries in reducing the number of conventional car on the roads, extensive charging infrastructure network in Europe, and increasing investment for developing sustainable road transport infrastructure that can charge electric car on the go to minimize range anxiety associated with electric vehicles.

Norway is the frontrunner in promoting the adoption of EVs and has successfully encouraged people to switch from traditional gasoline and diesel car to EVs. Sweden is one of the fastest-growing countries for the electric mobility ecosystem and has made significant steps towards reducing its carbon footprint. The Swedish government aims to become carbon-neutral by 2045. Sweden is the first country to build an electrified road for En-route EV Charging. For instance, in May 2023, the Swedish government constructed the electric road system (ERS) that allows EVs to recharge while driving, allowing EV drivers to travel longer distances between charging station visits. This is implemented on the E20 highway, running through Stockholm, Gothenburg, and Malmö. They are also planning to electrify an additional 3,000 kilometers of roads by 2035. This initiative is expected to boost the demand for electric mobility in the country, creating significant opportunities for the growth of the electric car market.

Electric Car Market: Key Companies

The report offers a competitive analysis based on an extensive assessment of the product portfolios and geographic presence of leading market players and the key growth strategies adopted by them over the past 3–4 year. Some of the key players operating in the electric car market are Nio Inc. (China), Alcraft Motor Company Ltd. (U.K.), BMW Group (Germany), BYD Company Ltd. (China), Daimler AG (Germany), Faraday & Future Inc. (U.S.), Ford Motor Company (U.S.), General Motors Company (U.S.), Honda Motor Co., Ltd. (Japan), Hyundai Motor Company (South Korea), Nissan Motor Co., Ltd. (Japan), TATA Motors Limited (India), Tesla, Inc. (U.S.), Volkswagen AG (Germany), and Mahindra and Mahindra Ltd. (India).

Electric Car Industry Overview: Latest Developments from Key Industry Players

• In February 2023, Tesla (U.S.) announced plans to make at least 7,500 chargers from its supercharger and destination charger network available to non-Tesla EVs across the U.S. by the end of 2024.
• In April 2023, Renault Ireland Limited (Ireland) launched the new Megane E-Tech electric, the first of a new generation of electric vehicles built on the advanced CMF-EV platform. The Megane E-Tech electric comes with a 60 kWh battery with a 450 km range, a 220 hp electric motor, and 130 kW DC charging, and also with a 40 kWh battery with a 300 km range, a 130 hp electric motor, and 85 kW DC charging, with 22 kW AC charging standard on all versions.
• In August 2022, Apollo Tyres Ltd (India) launched EV Specific Tyres for passenger car and two-wheelers, with top-grade rolling resistance, low noise, electric tread pattern design, and aerodynamic sidewall, which will cater to the EVs in hatchbacks, compact SUVs, and sedan segments in India.
• In June 2022, Siemens AG (Germany) announced investing approximately USD 25 million in acquiring a minority stake in WiTricity Corporation (U.S.) to increase innovation in wireless EV charging systems for electric passenger vehicles.

Electric Car Market Research Summary

Key questions answered in the electric car market report: