Reports of a slowing down in the sales of electric vehicles (EV) in some markets, the announcement of scrapping an electric vehicle grant scheme in the UK and seemingly a waning appetite for electric vehicles in some parts of the world have raised questions about the state of the EV market and its future. In turn, this has raised questions about the procurement and sourcing of electric vehicle components as the market suffers from uncertainty.
Statistics on EV sales
Tracking the market and its trends is essential to understanding the knock-on effect it has on sourcing components, as suppliers navigate fluctuating demand. It’s equally important to look at statistics of EV sales and growth through a lens of the countries that are experiencing growth and those that are not, as well as the kinds of vehicles being sold. This is because while overall sales of EVs has been on a steady incline, sales of vehicles are concentrated in some markets and dwindling in others, and the differentiation is important.
For example, the International Energy Agency (IEA) reported that almost 14 million of electric cars were registered in 2023 – marking a total of 40 million cars on the road – with a 35% year-on-year increase compared with 2022. This is a positive sign, however, the IEA also reported that an increase of EV sales globally can be attributed to a few, concentrated markets – and that electric vehicles that are sold are not widespread across the world.
Furthermore, according to the IEA, in 2023 just under 60% of EV registrations were in China, just under 25% were in Europe and 10% in the US. Because of this, the manufacturing and stock of EV is concentrated in these markets.
What’s the reason for this concentration? The answer can be understood by exploring how different countries have responded to EVs through their support, and legislation. Although there has been an overall push from governments to incentivise the sale of electric vehicles – such as the UK government’s own target to ban sales of petrol and diesel cars by 2030 – legislation relating to encouraging end users to purchase EVs, which have historically been viewed as too expensive and unreliable due to charging anxieties, has been incredibly varied.
In China, support from national subsidies for purchases, which were only halted in 2023, have facilitated expansion for over a decade, while tax exemption for these purchases and non-financial support continue to fuel the growth. In the US the effect of government response through tax credit and price cuts was observed when sales of the Tesla Model Y increased by 50% compared with 2022 after it became eligible for the 7 500 tax credit. Phasing out of subsidies in Germany cut EV sales growth, including PHEV subsidies, which led to lower PHEV sales compared with 2022 figures.
The figures do not lie: decisions such as subsidies and tax credits have been beneficial to boosting EV sales. In January 2025, the UK government’s decision to scrap the Electric Vehicle Purchase Incentive in Jersey – which offered grants of up to £3500 towards the purchase of EVs – was met with heavy criticism, as vocal critics said that it would affect the government’s target of banning petrol and diesel cars by 2030. The government, as reported by the BBC, said that the £4.3 million set aside for the scheme had been allocated and they no longer had any more funds.
Sourcing EV components
An evolving supply chain has translated to shifting demand from traditional components for ICE (Internal Combustion Engine) vehicles to components that meet the needs of electric. The core components of an electric vehicle are typically lithium-ion technology for the rechargeable battery, a cathode made from LFP or NMC (lithium-ion phosphate or a combination of nickel, manganese and cobalt) and an anode made from graphite or silicon. The key metals are lithium, manganese, cobalt and nickel.
Sourcing components for EVs present their own, unique challenges. Mining and processing the raw materials required tends to take place in particular regions, such as cobalt production in the Democratic Republic of Congo. Vehicle manufacturers must adapt to this brave, new world if they are to ensure their own survival, while suppliers are expected to be challenged, as suppliers of components traditional to diesel and petrol cars, like exhaust systems, fuel systems and transmissions are threatened by the noticeable absence of these components in EVs. In other words, EVs have no use for these parts, and these suppliers could potentially face a dip in demand for these components.
PwC reported its view on suppliers facing two significant challenges as EV ownership grows: EVs are simpler in mechanical terms, as electric motors powering EVs comprise fewer components than an ICE (Internal Combustion Engine) and therefore have no need for turbo- or superchargers for example, but EVs are complicated when it comes to the overall value of a car; a lithium-ion battery makes up 50% of an EV, and legacy suppliers are challenged by battery manufacturers.
Nonetheless, the overall growth in EV sales has fuelled growth in demand for Lithium-ion batteries, as one core component powering EVs. According to the ‘Electric Vehicle Outlook 2024’ report from BloombergNEF in which factors such as electrification, shared mobility and autonomous driving were looked at for their influence over road transport in the coming years, lithium-ion battery demand reached 1000 GHw/year, it was predominantly fuelled by the manufacturing of passenger EVs, and manufacturing was predominantly isolated to China.
Chinese lithium-ion battery manufacturers have expanded into other countries in tandem with Europe and the US stepping up their own manufacturing, presumably to reduce their reliance on manufacturing in China. This has notably played out in the US, where President-to-be Donald Trump, when he is sworn in this month, has vowed to impose stricter tariffs on Chinese manufacturing.
Looking to the future
The recommendations, therefore, are for suppliers to assess the risk posed to them by a shift to EVs, and first and foremost, understand this risk before deciding how to proceed. Ultimately, the take-home message is for suppliers to adapt the components they offer in their portfolio if they aren’t already tuned into offering EV components, because concerted efforts from governments to rely on EVs to meet climate change targets have resulted in an increase in the sales of EVs. Suppliers of traditional components must pay heed.
Viewing this as an opportunity, rather than a threat can be a helpful way of reframing the conversation – as advice provided by the Society of Motor Manufacturers and Traders (SMMT), based in the UK, refers to specialised electric vehicle components as an opportunity for the UK supply chain to develop and supply these components for a growing market.
