Electric cars pass a crucial tipping point in 23 countries

Ireland joined the 5% club by the end of 2019 and today, almost one in five new car sales are of electric vehicles. 

Convincing everyone to adopt a new technology can be a slog at first. The humble microwave oven, for example, took two decades of lukewarm sales to reach just a tenth of US households. But then came the 1980s, and microwaves had spread to nearly every kitchen.

That fast part of the technology adoption curve is happening now with electric vehicles, according to a Bloomberg Green analysis of adoption rates around the world. This threshold signals the start of mass adoption when technological preferences rapidly flip. Since then, five more countries have made the leap.

The recent newcomers — Canada, Australia, Spain, Thailand, and Hungary — join a cohort that also includes the US, China and most of Western Europe. The trajectory laid out by these early adopters shows how EVs can surge from 5% to 25% of new cars in just four years. Ireland joined the 5% club by the end of 2019 and today, just under one in five new vehicle sales are of pure electric vehicles. 

Why 5% is so important

Most successful new technologies — televisions, mobile phones, LED lightbulbs — follow an S-shaped adoption curve. Sales move at a crawl in the early-adopter phase, then quickly once things go mainstream. In the case of fully electric vehicles, 5% seems to be the inflection point. The time it takes to get to that level varies widely by country, but once the universal challenges of car costs, charger availability, and driver scepticism are solved for the few, the masses soon follow.

In the US, the EV tipping point didn’t arrive until late 2021 — relatively late for a country with its spending power. There were reasons for that delay. Americans spend more time in their cars than any other populace, and drivers demanded longer ranges than early models offered. Pickup trucks and large SUVs, which make up more than half of the US market, were also slow to electrify due to their massive battery needs.

Today, US EV sales are rising fast — up 42% in the second quarter compared to the same period a year ago — but haven’t quite matched the explosive trajectory of other countries that crossed over.

A tipping point may be on the horizon for India, the third-largest auto market after China and the US. EVs made up 3% of new car sales in the country last quarter, after doubling in just six months. India’s homegrown automakers have been investing heavily in electrification, and Tesla Chief Executive Officer Elon Musk met with Indian Prime Minister Narendra Modi in June. Musk said he plans to enter the market “as soon as humanly possible.” 

Countries that cross the tipping point have seen rapid rates of adoption, with a median sales growth of 55% last quarter compared to the same period a year ago. As with any new technology, growth rates will eventually slow as a market nears saturation — the top of the adoption S curve. There will always be holdouts. In Norway, the world’s EV pioneer, growth appears to be slowing after reaching 80% of new vehicles.

Is the global transition to EVs inevitable?

So far, 90% of the world's EV sales have come from the US, China and Europe. That means countries responsible for about a third of auto sales globally have yet to pass the tipping point. Just four of the 20 most populous countries have made the pivot. Even if the circles of demand continue to widen, it’s uncertain whether miners will be able to keep up the pace for critical battery materials.

Still, global sales of new internal combustion engines peaked in 2017, and net growth for car sales is now driven entirely by EVs.

Forecasting technology adoption is a treacherous business. Even the most careful outlooks can be knocked off course by supply-chain disruptions, economic shifts, politics, bankruptcies and popular culture. The advantage of the tipping-points approach is that it reveals a range of adoption curves that are at least known to be possible — because they’ve already occurred.

Applying the framework to the entire planet, the EV tipping point was passed in 2021. If the trends hold true, the rest of this decade will be remembered for doing for electric cars what the 1980s did for the microwave oven.

Bloomberg