With an emphasis on the UK, Neil Wallis and Neil Stockley from Zemo Partnership detail an overview of the growing EV market and explain how nations must keep pace with electric vehicle innovation to secure a sustainable industrial future.
The transition to electric vehicles (EVs) is accelerating at a pace few predicted a decade ago. What began as a climate-driven imperative has evolved into one of the defining industrial and economic opportunities of the 21st century. For the United Kingdom, the shift to electrification in transport (and other sectors) is far more than an environmental commitment – it is a strategic investment in economic resilience, competitiveness, and technological leadership.
The economic case for electrification is becoming increasingly compelling. It was recently reported that renewables have overtaken coal as the leading global source of electricity. This has been driven by the tumbling costs of solar (in particular) and wind energy, as well as in batteries and storage. Falling battery prices are driving down the cost of electric vehicles.
From energy security to job creation, through to digital innovation and trade advantage, the EV transition is now a cornerstone of a sustainable growth strategy.
A transforming global market
Electric vehicles are moving decisively from niche to mainstream. The International Energy Agency (IEA) has reported that global EV sales exceeded 17 million units in 2024 – more than five times the level recorded in 2020. Global EV sales are up a further 26% in the first nine months of 2025 compared with the same period in 2024. This tearaway growth is redefining global supply chains, stimulating capital investment, and reshaping the competitive landscape of the automotive sector.
Leading economies are already reaping the benefits. China’s integrated battery supply chains and the EU’s Clean Industrial Deal signal a global industrial realignment. It is significant to note that, of the 17 million electric vehicles sold in 2024, over 11 million were in China.
The UK – amongst other nations with an industrial stake in the automotive sector – must keep up with the pace of this transition, not only to meet net zero goals but also to secure a sustainable industrial future.
The UK’s automotive industry, for example, currently contributes around £67bn annually to the country’s economy and supports over 780,000 jobs. As the global phase-out of combustion engines accelerates, nations without a robust EV manufacturing base risk losing this economic value to international competitors. The economic case is therefore as much about safeguarding long-term prosperity as it is about sustainability.
In his landmark 2006 analysis, the British economist Lord Nicholas Stern concluded that taking action on climate change would cost less than the damage caused by inaction – climate change, he said, was the greatest market failure the world had ever seen.
In his new book, ‘The Growth Story of the 21st Century: The Economics and Opportunity of Climate Action’, Stern argues that investment in climate action is the economic growth opportunity of the 21st century – any growth based on fossil fuels, he warns, ultimately destroys itself.
Building industrial competitiveness
As the drive to electric vehicles accelerates, it is giving rise to entirely new industrial ecosystems. Central to this transformation are large-scale battery production plants – known as ‘gigafactories’ – that attract clusters of suppliers, manufacturers, and innovators.
According to the Advanced Propulsion Centre, the UK opportunity for electrification of passenger cars is likely be worth £24bn over five years. The benefits extend beyond automotive manufacturing: gigafactories stimulate R&D in materials science as well as in recycling technologies and grid integration. This could help to catalyse regional regeneration in areas of the country that have previously suffered economic decline.
Significantly, the rise of electric vehicles is stimulating a range of new technologies. Electrification converges with data analytics, artificial intelligence, and connectivity to create new service-based business models. The UK’s strengths in fintech (the technology used to support or enable banking and financial services), digital infrastructure, and software innovation position it well to lead this next phase of automotive evolution.
Energy security and economic stability
The economic volatility of recent years, combined with fossil fuel price shocks linked with geopolitical instability, underscores the risks of being reliant on imported oil and gas. Electrification allows nations to power mobility with domestically generated and increasingly renewable electricity, reducing or eliminating their vulnerability to foreign conflicts – such as Russia-Ukraine – and the many other causes of energy supply and price instability.
This volatility is evident in a report from Offshore Energies UK which shows that the country’s energy import bill more than doubled in 2022 to £117bn, up from £54bn in 2021. Every electric vehicle on British roads helps to reduce this outflow, keeping more wealth within the domestic economy and strengthening the nation’s financial resilience.
In related news, a study published by University College London (UCL) found that, between 2010 and 2023, developments in wind power lowered UK energy bills by £104.3bn (net) after the policy costs (‘green subsidies’) of £43.2bn paid by consumers have been taken into account.
Electric vehicles can also play a vital role in the energy transition itself. There’s growing awareness that, as mobile storage assets, EVs can support grid stability by helping to balance fluctuating renewable generation, particularly from wind and solar. Vehicle-to-grid (V2G) technologies are beginning to show how aggregated EV batteries can reduce curtailment (when surplus renewable energy on the system cannot be used), enhance grid resilience, and open new revenue streams for both consumers and utilities.
Consumer economics: Lower costs, higher value
From a consumer perspective, the economic logic of electrification is becoming increasingly compelling. Although EVs have not quite reached like-for-like purchase cost parity (in most cases), upfront costs have been falling while performance – particularly vehicle range – continues to improve rapidly. In many EV use cases, the total cost of ownership (TCO) is now well below that of EVs’ internal combustion-engine counterparts.
Charging an electric car at home in the UK can cost less than 2p per mile – far cheaper than the 13-18p per mile it costs to drive a petrol or diesel car. Maintenance expenses are also 30-40% lower, reflecting the mechanical simplicity of electric drivetrains. For fleet operators – who account for over half of new vehicle sales – the savings on fuel and servicing translate into rapid payback periods and long-term cost stability.
As battery costs continue to fall – analysts predict that prices will fall below $60 per kWh by 2030 compared with over $85 today – EVs are expected to become the vehicles of choice by economic default. Their growing cost competitiveness will, in turn, drive demand for ancillary services such as charging infrastructure, software integration and energy management systems, further multiplying the economic impact across sectors.
Rethinking public revenue models
Changing automotive sector dynamics will, of course, bring adjustment challenges. In the UK, for example, fuel duty revenue currently provides around £25bn per year to the UK Treasury but electricity used in EVs is currently lightly or completely untaxed. Policymakers will need to develop taxation systems that maintain public revenues while incentivising efficient transport behaviour and continued innovation.
Innovative fiscal measures, dynamic congestion charges, and differentiated electricity tariffs could help to create a fair and sustainable fiscal framework.
Global trade and innovation advantage
The EV transition is also reshaping global trade. Demand for critical minerals – including lithium, nickel, cobalt, and rare earth elements – is rising rapidly, prompting new international partnerships and investments. The UK’s Critical Minerals Strategy, coupled with alliances with resource-rich nations such as Australia and Canada, aims to secure sustainable and resilient supply chains.
Beyond raw materials, British expertise in battery research, power electronics, and smart-charging technologies offers significant export potential. By aligning trade policy with industrial innovation, the UK can capture a larger share of the global EV value chain. Wood Mackenzie says that the battery supply chain alone will reach $1tn by 2040.
Policy coherence and long-term vision
To fully realise these economic gains will require coherent and far-sighted policy. The UK’s Zero Emission Vehicle (ZEV) Mandate, which requires an increasing proportion of new cars and vans sold to be electric, provides vital regulatory certainty for manufacturers and investors.
However, industrial competitiveness also depends on effective, parallel action in other areas, including:
- Infrastructure: Accelerating national charging network deployment and grid upgrades.
- Skills: Expanding training in, for example, battery technology, power electronics, and software systems.
- Innovation: Strengthening partnerships between universities, start-ups, and OEMs.
- Finance: Supporting private capital through green bonds and investment guarantees.
An integrated strategy connecting energy, transport, and industrial policy will be key to ensuring that the UK doesn’t merely adopt electric vehicles but also helps to define the global standards, technologies, and business models that underpin them.
In the UK, considerable progress has been made over the last year, for instance, through the government’s new Industrial Strategy. Action has been taken to fast-track grid access and new regulatory reforms will enable swifter approval for grid connections. The government has announced an extra £1.2bn per year for skills by 2028-29 with net zero as one sector of focus. Further action is needed, however, in improving strategic planning of the grid, speeding up connections for EV charging hubs, reforming apprenticeships for zero emission transport, making EV supply chains more resilient, and unlocking access to finance. Above all, rapid and consistent delivery is needed.
Electrification as an economic imperative
The global shift to electric vehicles has been prompted by the need to cut carbon emissions, but the transition has now become an economic imperative as well. For the UK, it presents an opportunity to revitalise manufacturing, strengthen energy independence, and secure leadership in clean technology innovation.
Inaction would not preserve the status quo (as some would like to believe); it would risk economic marginalisation as global industries retool for a zero emission future. The economic necessity of the demand for EVs is already clear and compelling – just as it has become for renewable energy technologies’ lower lifetime costs, greater resilience, and stronger industrial returns.
The electric vehicle revolution is, in essence, an investment in long-term prosperity. The nations that act boldly and strategically today will be the economic leaders of tomorrow.
Please note, this article will also appear in the 24th edition of our quarterly publication.
