China is leading the charge in providing affordable electric vehicles (EVs), backed by government support and a wide range of low-cost options, according to a recent study. Â
Despite a global slowdown in the EV transition, a report by S&P Global Ratings and S&P Global Mobility highlighted the effectiveness of China’s efforts. The key factor is the near price parity between battery-electric vehicles (BEVs) and internal combustion engine (ICE) vehicles in the country.
In the first quarter of 2024, China saw a BEV penetration rate of 25 percent, showcasing rapid adoption driven by low manufacturing costs and strong government incentives.
Challenges in Western markets
In contrast, Western markets face higher costs and diminished subsidies, making BEVs significantly more expensive than their ICE counterparts. Concerns over range, charging infrastructure, and technological obsolescence have further dampened consumer enthusiasm in Europe and the US.
While Western automakers are developing more affordable models, these are not expected to hit the market until 2025-2026 and will only represent a small portion of available options.
Battery costs remain a barrier
The high cost of battery packs, which make up around 40 percent of an EV’s price, remains a significant barrier to affordability.
However, regulatory changes and environmental policies are expected to drive long-term growth in the BEV market. The EU and China have set ambitious targets for emission reductions and EV adoption, with Beijing aiming for 50 percent “new-energy” vehicle sales in key regions by 2030.
As the global market adapts, the automotive supply chain is undergoing a transformation, with battery technology and production becoming central to the industry.
Middle East’s EV ambitions
While China currently dominates this sector, efforts in Europe and the US to localize production and develop alternative battery technologies are underway. The Middle East is also seeing a focus on growing the EV sector, with Saudi Arabia leading the charge.
Saudi Arabia’s EV initiative
In 2022, Saudi Arabia launched its first automotive brand, Ceer, to produce and sell EVs, aiming to attract investments, create jobs, and boost gross domestic product. The Kingdom has also set a goal to transition 30 percent of all vehicles in Riyadh to electric by 2030 as part of a larger strategy to reduce emissions.
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