IEA: What Comes Next for EVs in the Automotive Landscape?

EVs are having a big impact on the automotive sector.

According to the International Energy Agency 's (IEA) report, What Next for the Global Car Industry, global car sales neared 80 million in 2024, with growth being driven by the sales of hybrid and electric cars by around 30%.

Worldwide sales of pure internal combustion engine (ICE) vehicles have declined by 30% since peaking in 2017. 

“The global car industry is a cornerstone of many national economies, directly employing more than 10 million people worldwide and supporting millions of additional jobs,” says Fatih Birol, Executive Director, IEA.

“The market for cars is one of the largest for a single product and cars are the single largest source of global oil demand today.”

China's automotive growth

China and emerging economies now represent more than half of global car sales, with a 20% increase since 2000.

Beyond expanding its domestic market, China has significantly scaled its manufacturing capabilities.

The nation more than doubled car production between 2010 and 2024, now accounting for 40% of global automotive manufacturing.

By comparison, Europe and North America each contribute just 15%.

In 2024, China surpassed the European Union to become the world's largest car exporter.

The IEA estimates that approximately 70% of EVs sold globally are manufactured in China.

Structural changes to the industry

The IEA says structural changes are already reconfiguring how and where value is generated across the automotive industry, demonstrating that no universal approach guarantees success.

Automotive manufacturing continues to function in regional clusters, influenced by scale and proximity.

The sector accounts for roughly 6% of global steel demand and 17% of aluminium demand, with even higher proportions in major automotive economies.

These clusters increasingly reflect varying technology choices and market priorities.

Detroit and Nagoya maintain limited battery manufacturing footprints, while Shanghai operates 26 battery plants representing over 5% of global capacity.

This divergence extends across the US$1.3tn automotive supplier market.

Legacy internal combustion engine components remain dominated by Europe, Japan, Korea and North America, while Chinese firms control around 80% of battery-related manufacturing capacity as EV components continue to scale.

The report finds that manufacturing cars in China costs less than in advanced economies, particularly for EVs, largely due to large-scale production and extensive vertical integration.

Lower component costs account for nearly 40% of the manufacturing cost gap for EVs, driven primarily by battery economics.

Average battery cell prices are more than 30% lower than in Europe and in excess of 20% lower than in the US.

“The global car industry is currently undergoing major changes that have significant implications for economies around the world and for the energy sector,” says Fatih.

“Three structural shifts are underway, in terms of the geography of production, in terms of the regions that are driving sales growth and in terms of the technologies that car buyers are choosing. 

“Against this backdrop, this new IEA report provides a strong basis to inform discussions and decision-making by governments and industry, noting that there is no one-size-fits-all model.”

Policy considerations for transition

Batteries have become a key differentiator in regional manufacturing costs and domestic value creation.

Regions such as the European Union import a considerably higher share of battery components than engines, while China and Japan maintain integrated supply chains across both technologies.

The report acknowledges the complexity facing established manufacturers.

"There are no easy responses for incumbent manufacturers to the challenges posed by the major shifts in global car markets," it reads.

"Many are currently working to balance their portfolios in a way that leverages their strengths in producing ICE and hybrid cars, while also improving competitiveness in EVs."