Global Clean Investment Monitor: Electric Vehicles and Batteries

In this first edition of the Global Clean Investment Monitor series, we explore how—after decades of national policy support, primarily in the US, China, and Europe—electric vehicles (EVs) and batteries have been catapulted into mass commercialization. Demand for EVs and batteries has risen sharply as EVs reach cost competitiveness with combustion vehicles across many regions. In this report, we share insights from our tracking of 1,248 EV and battery manufacturing facilities around the world—including investment levels, project construction status, and EV and battery production capacity—providing real-time data for policymakers, investors, and other decision-makers seeking to understand if EV and battery demand can be met primarily through domestic production in the coming decade, and the extent to which excess capacity by foreign suppliers will compete for market share. We examine four key dynamics that will determine the future of the electric vehicle transition:

How will China’s automakers and the rest of the world react to China’s massive overcapacity in batteries—and to a lesser extent EVs—over the coming years?

Thanks to sustained state support for EV and battery manufacturing and deployment, as well as a massive domestic market, China has been home to two-thirds of global growth in EV sales and manufacturing capacity and over 80% of the growth in battery manufacturing capacity over the last 15 years. Fierce competition among EV and battery manufacturers in China for state-based incentives has led to a sharp decline in EV and battery prices, helping scale deployment, but has led to massive overcapacity in batteries. Today, China’s battery manufacturing capacity is 2x demand in China and 1.2x global demand.

How will Europe’s near- and long-term zero-emission vehicle ambitions fare as European OEMs contend with the potential for a wave of cheap EV imports from China?

After China, Europe is the world’s second-largest EV market, and current and planned policies put the region on track to achieve 100% zero-emission vehicles in the coming decades. Unlike China where nearly all EV sales are produced domestically, almost a third of Europe’s EVs are imported. In 2024, 15% of EVs sold in Europe were Chinese brands, most of which offer a significant cost advantage compared to European brands. Cost parity with ICE vehicles will be critical to achieving Europe’s zero-emission vehicle ambitions, making cheap imports from China a boon to scaling EV deployment. Looking ahead, the big question for Europe is to what extent it will continue to open its doors to EV imports from China? What will cheap imports from China mean for the competitiveness of European OEMs and their willingness to go along with stringent zero-emission vehicle policy? How will policymakers balance the dual goals of maintaining domestic political support for the EV transition with the need to ensure access to cost-competitive EVs?

What is the outlook for the EV transition in the United States? Unlike China and Europe, where EVs have reached escape velocity, the potential for the US to follow suit is at risk as the Trump administration threatens to repeal policies that support EV sales and domestic manufacturing.

The passage of the Inflation Reduction Act (IRA) in the US in 2022 kicked off unprecedented investments in domestic EV supply chains by providing direct subsidies for domestic manufacturing of battery cells and EVs. These supply-side policies, coupled with consumer EV tax credits tied to domestic content requirements and stricter tailpipe regulations, have spurred a wave of investment in domestic EV supply chains over the past few years.

In contrast with Europe, the US has been on track to establish a competitive EV industry based on a largely domestic EV supply chain, but just as the EV transition is gaining steam, the EV and battery manufacturing sectors are now at risk of having core policy support revoked. President Trump’s trade policy and signs of slowing demand cast further doubt on the outlook for EVs in the US. Going forward, key questions about the future of an electric vehicle transition in the US include: What happens to domestic production and sales if key policies, including the IRA tax credits and federal and state EV and GHG standards, are rolled back? How might trade policy, especially an escalation with China, reshape domestic manufacturing? If market conditions weaken, do planned manufacturing investments become redundant? In the absence of policy to encourage innovation, will US companies be able to compete in a world moving increasingly toward EVs? If not, what does that mean for the prospects of electrifying US transportation if major domestic automakers aren’t producing the EVs of the future?

How will the rest of the world respond to these dynamics emerging among China, Europe, and the US?

While China, Europe, and the US dominate EV markets today, sales in the rest of the world are rising rapidly. We project that by 2050, EV sales outside of China, Europe, and the US will grow from 10% to 30-40% of global EV sales. Just in the last few years, sales have surged in Turkey, Brazil, and many Southeast Asian countries, driven in large part by low-cost Chinese models. For consumers in emerging economies, EVs must be affordable to gain market share. Low-cost imports from China and foreign investment present opportunities for widespread adoption and local manufacturing, but risk crowding out domestic manufacturers.

Investments in EV and battery manufacturing outside of China, Europe, and the US are ramping up rapidly. As the rest of the world seeks to participate in and benefit from the EV transition, they will need to understand how they can position themselves in the global EV supply chain. How do EVs compete with traditional vehicles outside of China, Europe, and the US? Where are EV sales beginning to take off? Which countries are investing in domestic manufacturing? To what extent are both sales and manufacturing driven by Chinese imports and investment, versus domestic brands? What pressures do policymakers face to carve out market share for domestic manufacturers, versus allowing access to low-cost Chinese EVs?

The world is at a critical inflection point when it comes to global auto manufacturing. The global transition to electric mobility has finally achieved escape velocity as EVs reach cost parity with internal combustion engine vehicles. In fact, even absent an acceleration in clean transportation policy, the Rhodium Climate Outlook projects that passenger EVs will very likely (greater than 95% probability) make up at least half and as much as 80% of global sales by mid-century. While the Big Three—China, the US, and Europe—will represent the majority of sales for the next decade or so, demand growth in the rest of the world is set to accelerate sharply.

Who will produce the vehicles driving the future of mobility? China’s head start and massive domestic market have given it a leg up, but policy-driven upticks in US and European investment in recent years have tightened the race, and the rest of the world is investing rapidly to serve the Big Three and their own growing domestic markets.

In the full report, we dive into the policy and market dynamics driving EV investments in the three main EV markets—China, Europe, and the US—and provide a comparative look across these regions. We also look at the emerging EV dynamics in the rest of the world to explore how they may respond in the coming decades as they seek to find their place in the global electric vehicle supply chain.

The auto sector’s outsized role in economic, political, and, increasingly, national security dynamics will create significant trade-offs for policymakers. To what extent will countries look to secure largely domestic or friend-shored supply chains, and what will that mean for EV affordability and the ultimate pace of EV adoption? To arm these policymakers with real-time information to inform them as they navigate this critical inflection point, in the coming months and years the Global Clean Investment Monitor will track quarterly investments in EV and battery manufacturing, capacity additions by project status, EV sales, and trade flows to provide a real-time window into how these dynamics are at play across the world.

Read the full report

This nonpartisan, independent research was conducted with support from Breakthrough Energy and the Hewlett Foundation. The results presented reflect the views of the authors and not necessarily those of the supporting organization.