Electric vehicle (EV) sales have soared in recent months, potentially heralding the beginning of the end for internal combustion engine (ICE) vehicles.

Global electric vehicle registrations hit 321,000 in January this year, double the figure of any prior year and the fourth straight month of doubling sales. EV sales now account for over 5.1% of total passenger vehicle sales, which implies an almost 7% penetration rate by the end of 2021, or real disruption to global ICE vehicle sales by 2022.

China reclaimed the number one spot from Europe in January, with total EV sales of 173,000 units.

This growth was spearheaded by the unexpected success of one particular model, Wuling’s Mini EV, which is now selling more than Tesla’s Model 3 and Model Y combined. Indeed, more and more Chinese companies are starting to dominate global EV sales, and EV penetration into ICE vehicle sales in China may well end the year in double digits, unless subsidies and incentives are removed. BYD Auto’s Han EV is also making rapid inroads into Tesla’s share in the country.

Meanwhile, in Europe, EV sales also doubled in January on a year-on-year basis, with the highlight being that EV sales penetration in Germany during January reached an impressive 22%. VW’s ID.3 and ID.4 EVs are having a great deal of success.

Though sales of electric vehicles are rising strongly around the world, we may have seen even high figures were it not for the stubbornly high cost of producing their batteries.

Although there is some variation between models and powertrains, the production cost of a conventional electric vehicle fitted with an NMC622 (nickel: manganese: cobalt 6:2:2) battery was around $20,000 in mid-2020. Of that cost, the battery typically accounts for almost one third, and within the battery itself, the cathode accounts for over half of production cost. Work is underway to lower total battery costs, including the substitution of cobalt for nickel, the replacement of graphite in the anode with silicon, and the development of solid-state lithium-ion batteries.

However, efforts to lower battery costs have so far had a limited impact in lowering total EV costs, as prices for the underlying chemistries have risen significantly. Indeed, lithium, nickel, manganese and cobalt prices are all up strongly. China produces over 80% of the world’s refined battery materials, and it dominates production of battery components too.

With this in mind, the question we must consider is, will EV be the long-term solution, or should we be looking to hydrogen fuel cell development or even synthetic fuels? Time will tell.

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