The global shift to electrification has gained traction as battery electric vehicles (BEVs) now represent 14.3% of the global market. However, consumer demand, incentives, pricing, and strategic positioning all play a vital role in regional adoption.
Analysis by: Nikhil Bhardwaj, Senior consultant for India & Middle East
Key summary points:
The automotive market is undergoing a significant transformation as it shifts from traditional combustion engines to electrified powertrains.
- Shift to electrification: BEVs now represent 14.3% of the global market and have surpassed 10 million units for the first time.
- Regional variations: China leads in EV adoption, Europe favours hybrids, while North America and other regions show slower electrification progress.
- Price trends: Premium electrified powertrains command substantial prices, with significant regional variations in pricing strategies.
- Market dynamics: Despite a slight global price decline, premiumisation of electrified powertrains continues, driven by consumer demand and regulatory pressures.
- Strategic positioning: Europe adopts a strong premiumisation strategy, while China uses aggressive pricing to drive mass-market adoption.
In 2024, combustion engines for passenger cars still held a 58.7% market share but saw an 8% decline in volume, and a 6.7 percentage point drop in market share year-over-year. In contrast, all electrified powertrain types, except for fuel cell EVs (FCEVs), experienced growth. Notably, extended range EVs (EREVs) and plug-in hybrid EVs (PHEVs) saw dramatic global volume increases of 46% and 34%, respectively.
BEVs now account for 14.3% of the market, up from 12.6%, with a 15% increase in volume to more than 10.5 million units. This marks a significant milestone as BEVs break the 10 million threshold for the first time.
The overall passenger car market grew by 3%, from approximately 71 million to 73.4 million units, indicating that electrification is driving market expansion, despite the decline in combustion engine vehicles. The combined market share of all electrified powertrains rose from 34.6% to 41.3%, reflecting accelerating consumer adoption of alternative propulsion technologies.
Regional insights:
- China: Leading the global shift, China's EV adoption saw combustion engine market share drop from 54.7% to 42.2%. China’s aggressive transition outpaces overall global trends.
- Europe: Strong regulatory pressures have driven hybrid (HEV) and mild hybrid (MHEV) vehicles to 11.8% and 17.5% market shares, respectively.
- North America: With a high preference for combustion engines (74.9%), it is no surprise EV adoption is much lower compared to global averages.
- Other regions: South America and Africa remain heavily reliant on combustion engines (90%+ market share), with minimal electrification progress.
Price premium analysis:
The global weighted retail price saw a slight decline of 1% from 2023 to 2024, indicating a minor overall market adjustment. However, premium electrified powertrains, such as fuel cell EVs, mild hybrid EVs, and extended range EVs, continue to command substantial price premiums.
FCEVs held the highest price premium at 38% above the global average in 2024, which may explain their limited adoption. Although there was a general downward price trend, HEV prices still
increased by 2% year-over-year, suggesting growing consumer willingness to pay for mainstream hybrid technology.
Note: Price refers to retail price without options and average prices are volume weighted.
BEVs experienced a significant price reduction of 7% year-over-year, yet still maintain a modest premium positioning at 2% above the global average in 2024. This price drop likely reflects increasing production efficiencies, battery cost reductions, and intensifying competition in the EV space.
PHEVs did however, see a dramatic 20% price decline from 2023 to 2024, potentially due to changes in subsidies, increasing production efficiencies, and competitive pressures.
Regional pricing strategies:
- Each region has deployed a different pricing strategy and approach to EV adoption.
- Europe and North America: Both regions maintain prices approximately 23% above the global average, reflecting strong premiumisation of electric vehicles.
- China: Even with a 6% year-over-year price decline, China's vehicles are still priced 21% below the global average in 2024, indicating an aggressive pricing strategy to drive mass-market adoption.
- Emerging markets: With little appetite towards electric powertrain vehicles in Africa, Asia, and South America, EV price changes remained lower than global averages, caused by purchasing power differences.
Conclusion:
As battery technology continues and consumers’ appetite for EVs grow, 2025 could be the first time we see combustion engines and BEVs competing in the same pricing category. This would be a major step forward in driving mass adoption, which has been hindered by higher priced vehicles only available to an elite number of consumers.
While it still remains to be seen whether BEVs will embrace a lower pricing strategy to make them more appealing to a wider audience, we have seen a significant price reduction of 7% year-over-year, which is helping to narrow the gap between BEVs and traditional combustion vehicles. This reduction is due to increasing production efficiencies, battery cost reductions, and intensifying competition in the EV space.
The data certainly suggests most regions will continue with a premiumisation strategy for electrified powertrains, with regional pricing adapting to local market conditions, while maintaining the relatively higher-end positioning of advanced powertrain technologies.
China's sophisticated market strategy balances premium positioning for specialised technologies with competitive pricing for mass-market electrification, effectively accelerating the transition away from combustion engines. Europe, on the other hand, leverages regulatory incentives and consumer preferences to maintain higher pricing across all electrified powertrains, driving the shift away from devalued combustion technology. To achieve widespread EV adoption in Europe and other regions, pricing and positioning strategies must be carefully considered. China serves as a valuable benchmark, offering insights into successful approaches that can inform global efforts.