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January 27, 2022

Electric vehicles grabbed a much bigger share of the global car market last year as sales more than doubled despite turbulent economic conditions and a severe shortage of computer chips.

Global sales of battery electric vehicles increased to 4.5 million last year from 2.1 million in 2020, according to data from consultancy LMC Automotive. Electric cars made up 6.3% of global vehicle sales in 2021, tripling their market share from 2019, before the coronavirus pandemic.

Overall passenger vehicle sales remain depressed, with just under 72 million rolling off dealer lots worldwide after the pandemic caused a shortage of computer chips that forced many automakers to temporarily close plants. More than 80 million passenger vehicles were sold in 2019.

Al Bedwell, director of global powertrain at LMC Automotive, told CNN Business that the chip shortage "perversely sort of helped" boost electric vehicle sales.

"Certainly, in Europe and certainly in China ... very often it was the low emission, new generation of electric vehicles that got prioritised because they're the ones that were needed," he said. Consumers wanted to buy electric cars, and automakers needed to sell them to meet regulatory targets, he added.

"It was a prime opportunity I think for the industry to focus on those," said Bedwell.

Carrot and stick
Governments have increased pressure on automakers to slash carbon emissions and shift production towards electric vehicles, sometimes with a carrot — by offering emissions credits for electric vehicles or paying for charging points — but also with a stick.

The European Union, for example, will fine automakers if they fail to cut average yearly emissions of their fleets by 15% by 2025, and up to 37.5% by 2030 compared to 2021 levels. It wants to raise this to a 55% reduction under far more ambitious proposals adopted last July.

From 2035, the bloc wants to impose an effective ban on the sale of vehicles powered by fossil fuels.

Governments have also tried to entice consumers with subsidies and tax breaks. Last year, Germany extended a €9,000 ($10,000) bonus for new electric vehicles up to €40,000 ($45,000) for another four years. The country more than doubled its share of electric vehicle sales in 2021 to 14%.

Dan Ives, equity analyst at Wedbush Securities, told CNN Business that subsidies have been a "clear tailwind" boosting electric car sales in Europe and China, estimating they had "positively influenced roughly 15% of EV sales over the last year."

The final month of 2021 may have offered a glimpse into the future.

Electric vehicles snatched 10% of the global market share in December, according to LMC Automotive data. The same month, more electric vehicles were sold in Western Europe than diesel cars for the first time, according to data covering 18 markets compiled by Matthias Schmidt, publisher of the European Electric Car Market Intelligence Study.

Bumper figures for December are likely a "distortion," Bedwell said, and probably won't be replicated in the early months of 2022. That's because automakers would have been pushing to sell lots of electric cars in the final month of the year in order to meet CO2 reduction targets.

"It's going to take a few more years before we see those kinds of shares of electric vehicles widely across the region each year," Bedwell added.