Electric Cars Remodel Global Auto Trade

The push of government subsidies and pull of consumer demand are driving new markets for electric vehicles, which run on electric batteries instead of carbon-based fuel, with widespread repercussions on shipping, trade and supply chains.

Electric vehicles, which include cars, trucks and bicycles, are still less than 10% of the global $2 trillion auto market, but that number is expected to increase by over 20% a year, helping to increase electricity’s share of total energy production to 24% by 2040 from 19% last year, according to the International Energy Agency. By 2030, they could account for as many as a third of all cars on the road.

Investment in clean energy, including electric vehicles, is a key part of China’s Belt and Road Initiative, which aims to solidify the country’s status as the world’s dominant trading power, by improving transport and infrastructure with 68 countries, including 4.4 billion people, and $21 trillion in gross domestic product.

In the first quarter of 2019, China was the world’s second biggest importer of electric vehicles, according to Trade Data Monitor. It shipped in $866.4 million worth, up 112% from the year before. Over 90% of that came from the U.S., thanks to Tesla’s dominant position in the market. Other top electric vehicle makers include China’s BAIC, BYD and Chery, Japan’s Nissan and South Korea’s Hyundai.

Although Beijing recently shifted some investment to hydrogen fuel cars, electric vehicles are still a major part of its strategy for reducing pollution by weaning itself from carbon-based transportation. This decade, China has spent billions of dollars installing charging stations around the country. The new industry is also sparking new markets for batteries and materials like lithium, cobalt and manganese needed to make them, which account for around a quarter of the cost of every electric car, and China is the world’s biggest exporter of lithium batteries.

The world’s number one market for electric cars is the European Union, thanks to its sheer size and environmental and tax policies that make gasoline expensive. Other top import markets for electric vehicles include the European Union, Canada, Switzerland, South Korea, Japan, TDM figures show.

The world’s top exporter of electric cars in the first quarter of 2019 was the U.S., with $2.16 billion worth shipped out. Its main destinations, in order, were Belgium, China, Canada, South Korea and the Netherlands. A big portion of the exports to the first and fifth countries were reexports to Norway.

The best place to study how this trend will evolve, and number one importer by country, is a nation of only 5.3 million. Norway, surprisingly, is drawing record shipments of Teslas and other models from the U.S., South Korea and transshipment ports like Antwerp and Rotterdam. It imported $3.8 billion in 2018 and $1.01 billion worth of electric vehicles in the first quarter of 2019, roughly doubling amounts the previous year, beating bigger economies like China, France, Canada and the U.S. Norway’s top sources of electric cars over that 15-month period were the U.S. ($1.24B) and Germany ($793.3M).

Despite its legendary and lucrative gas industry, Norway has exempted electric vehicles from its 25% Value Added Tax (VAT) and carbon dioxide, nitrogen oxide and weight taxes imposed on gas and diesel vehicles. They also get discounts on parking, toll roads and ferries. It’s working: Gas and diesel-powered cars are at record low, and registrations of electric vehicles have doubled since last year.

For policymakers, Norway is proof that consumers might only need a slight nudge to embrace electric vehicles and knock smoky sedans back into the 20th century. Unlike some other green power products whose only appeal is cost, electric cars, with their low noise levels and stylish designs, are considered a luxury product consumers are willing to pay for.

 

John W. Miller is an award-winning journalist and filmmaker who covered trade, mining and global economics as a foreign correspondent for the Wall Street Journal.