EV sales Plummet As Subsidies And Tax Breaks Are Phased Out - Rystad

The global electric vehicle (EV) market is reeling from one of the most precipitous drops in monthly sales to date, with only 672,000 units sold in January, accounting for nearly half of December 2022 sales and a 3% year-on-year increase over January 2022. Rystad Energy, based in Oslo, said in a statement on Wednesday (March 1) that the EV market share among all passenger car sales fell to 14% in January, down from 23% in December.

Aside from periods impacted by Covid-19 pandemic-related supply chain issues, EV sales have been on a relatively consistent upward trajectory in recent years, according to the firm, and a significant drop in sales is concerning news for the industry. Tax credits and government subsidies have bolstered the EV market to date, according to Rystad, as countries identify passenger car fleet electrification as a key strategy for meeting net-zero emissions targets, but the reduction or elimination of these subsidies this year has dampened consumer sentiment.

According to the report, automakers are now scrambling to reverse the downward spiral and save the market by 2023. Rystad stated that, the automotive market is typically cyclical, with sales dropping after new subsidy rules go into effect at the beginning of each year, followed by a gradual recovery.

However, it claimed that the cuts in January of this year were more severe than usual, resulting in the dramatic collapse. "The ramifications of this will be long-lasting and will impact sales through the first quarter of the year and potentially the rest of 2023.

"EV subsidies were cut in many European countries and mainland China at the start of the year, and a significant return is highly unlikely in the near future," it said. According to Rystad, one ray of hope for the global outlook is the US market, which is just starting its electrification journey and implementing tax credits as a result of the Inflation Reduction Act.

The report signified that, the United States was the only major market that saw an increase in both EV sales and market share year on year, though its contribution to the global total remains relatively minor. According to Abhishek Murali, a clean tech analyst at Rystad Energy, the sands are shifting in the global EV market.

"Consumer appetite for electric cars remains strong, but it's clear that tax credits and subsidies still play a significant role in convincing consumers to make the switch. "Carmakers may have no choice but to respond with lower prices," Murali said.