The global electric vehicle (EV) market is reeling from one of the most dramatic collapses in monthly sales to date, with Rystad Energy research showing that only 672,000 units were sold in January, almost half of December 2022 sales and a mere 3% year-on-year increase over January 2022.
According to the energy think-tank, the EV market share among all passenger car sales also tumbled to 14% in January, well down on the 23% seen in December.
“The sands are shifting for 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,” said Abhishek Murali, clean tech analyst, Rystad Energy.
According to the clean energy specialist, carmakers may have no option but to respond with reduced prices.
EV sales have been on a relatively consistent upward trajectory in recent years – aside from periods impacted by Covid-19 pandemic-related supply chain issues – and a significant collapse in sales is worrying news for the industry.
Tax credits and government subsidies have propped up the EV market to date as countries identify passenger car fleet electrification as a core tactic for meeting net-zero emissions goals, but the reduction or removal of these subsidies this year has dampened consumer sentiment. “Automakers are now scrambling to reverse the downward spiral and salvage the market in 2023.”
Rystad said that the automotive market is usually cyclical, with sales taking a hit after new subsidy rules come into effect at the start of each year, followed by a gradual recovery.
“However, the cuts in January this year hit harder than normal, triggering this 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.,” thde report read.