Zemo Partnership’s Neil Wallis and Neil Stockley detail the growing EV market, with a focus on the UK, and explain how countries must keep pace with electric vehicle innovation to ensure a sustainable industrial future.
The transition to electric vehicles (EVs) is accelerating at a pace that few would have predicted a decade ago. What began as a climate change imperative has evolved into one of the defining industrial and economic opportunities of the 21st century. For the UK, the transition to electrification in transport (and other sectors) is much more than just a green initiative, it is a strategic investment in the resilience, competitiveness and technological leadership of our economy.
The economic case for electrification is becoming increasingly compelling. It was recently reported that renewable energy has overtaken coal as the world’s main source of electricity. This is being driven by the plummeting costs of solar power (especially) and wind energy, as well as batteries and storage. Declining battery prices are lowering the cost of electric cars.
From energy security to job creation, digital innovation and trade advantages, the transition to EVs is now a cornerstone of sustainable growth strategies.
Changing global market
Electric vehicles are decisively moving from niche to mainstream. The International Energy Agency (IEA) reports that global EV sales will exceed 17 million units in 2024, more than five times the level recorded in 2020. Global EV sales will increase by a further 26% in the first nine months of 2025 compared to the same period in 2024. This explosive growth is redefining global supply chains, stimulating capital investment and reshaping the competitive landscape of the automotive sector.
Major economies are already reaping the benefits. China’s integrated battery supply chain and the EU’s Clean Industries Agreement signal global industrial restructuring. Significantly, of the 17 million electric vehicles sold in 2024, more than 11 million were sold in China.
The UK, among other countries with industrial interests in the automotive sector, needs to keep up with the pace of this transition, not only to achieve net zero targets, but also to ensure a sustainable industrial future.
For example, the UK car industry currently contributes around £67 billion a year to the UK economy and supports over 780,000 jobs. As the phase-out of internal combustion engines accelerates around the world, countries without a strong EV manufacturing base risk losing this economic value to international competitors. Economic issues are therefore as much about safeguarding long-term prosperity as sustainability.
In a landmark 2006 analysis, British economist Sir Nicholas Stern concluded that taking action on climate change is less costly than the damage caused by doing nothing, and he said climate change is the biggest market failure the world has ever experienced.
In his new book, 21st Century Growth Stories: The Economics and Opportunities of Climate Action, Stern argues that investing in climate change is an opportunity for economic growth in the 21st century, and warns that fossil fuel-based growth will ultimately be self-defeating.
Building industrial competitiveness
As the transition to electric vehicles accelerates, a whole new industrial ecosystem is emerging. At the heart of this transformation will be large-scale battery production factories known as “gigafactories” that will attract clusters of suppliers, manufacturers and innovators.
According to the Advanced Propulsion Centre, the opportunity for passenger vehicle electrification in the UK could be worth £24 billion over five years. The benefits extend beyond car manufacturing. The Gigafactory will foster research and development not only in materials science, but also in recycling technology and grid integration. This could help promote regional revitalization in areas of the country that have hitherto suffered from economic decline.
Importantly, the rise of electric vehicles is stimulating a range of new technologies. Electrification will merge with data analytics, artificial intelligence, and connectivity to create new service-based business models. The UK’s strengths in fintech (technology used to support or enable banking and financial services), digital infrastructure and software innovation position us to lead the next stage in the evolution of cars.
Energy security and economic stability
Economic instability in recent years, combined with fossil fuel price shocks related to geopolitical instability, has highlighted the risks of relying on imported oil and gas. Electrification allows countries to power mobility with domestically generated and increasingly renewable electricity, reducing or eliminating vulnerability to foreign conflicts, such as Russia and Ukraine, and many other sources of energy supply and price instability.
This volatility is also evident in a report from UK Offshore Energies, which shows that the country’s energy imports more than doubled from £54bn in 2021 to £117bn in 2022. Every electric car on Britain’s roads reduces this drain, helping to keep more wealth within the domestic economy and strengthen the country’s fiscal resilience.
In related news, a study published by University College London (UCL) found that between 2010 and 2023, wind energy development reduced UK energy bills by a net £104.3 billion, after taking into account the £43.2 billion of policy costs paid by consumers (‘green subsidies’).
Electric vehicles can also play an important role in the energy transition itself. There is growing recognition that EVs as mobile storage assets can support grid stability by balancing variable renewable energy, particularly wind and solar power. Vehicle-to-grid (V2G) technology is beginning to show how aggregated EV batteries can reduce curtailment (when excess renewable energy on the system is unavailable), strengthen grid resiliency, and open up new revenue streams for both consumers and utilities.
Consumer economy: lower costs, higher value
From a consumer perspective, the economic logic of electrification is becoming increasingly compelling. Although EVs have not (in most cases) reached parity with comparable purchase costs, initial costs are decreasing and performance, especially range, continues to improve rapidly. For many EV use cases, the total cost of ownership (TCO) is now significantly lower than the cost of EVs with internal combustion engines.
Charging an electric car at home in the UK costs less than 2p per mile, much cheaper than the 13-18p per mile it costs to drive a petrol or diesel car. Maintenance costs are also reduced by 30-40%, reflecting the mechanical simplicity of electric drivetrains. For fleet operators, who account for more than half of new vehicle sales, fuel and maintenance savings translate to faster payback times and long-term cost stability.
As battery costs continue to fall, analysts predict they will fall below $60 per kWh by 2030, compared to more than $85 today. EVs are expected to become the economic default vehicle of choice. Increasing cost competitiveness will drive demand for ancillary services such as charging infrastructure, software integration, and energy management systems, further increasing the sector’s overall economic impact.
Rethinking the public revenue model
The changing dynamics of the automotive sector naturally poses adjustment challenges. In the UK, for example, fuel tax revenues currently pay around £25bn a year to the UK Treasury, but the electricity used in EVs is currently lightly or completely tax-free. Policymakers need to develop tax systems that preserve public revenues while encouraging efficient transport behavior and continued innovation.
Innovative fiscal measures, dynamic congestion pricing and differentiated electricity tariffs can help create a fair and sustainable fiscal framework.
Benefits of global trade and innovation
The transition to EVs is also reshaping global trade. Demand for critical minerals such as lithium, nickel, cobalt and rare earth elements is rapidly increasing, spurring new international partnerships and investments. The UK’s Critical Minerals Strategy, coupled with partnerships with resource-rich countries such as Australia and Canada, aims to ensure a sustainable and resilient supply chain.
Beyond raw materials, the UK’s expertise in battery research, power electronics and smart charging technology offers significant export potential. By aligning trade policy with industrial innovation, the UK could capture a greater share of the global EV value chain. Wood Mackenzie says the battery supply chain alone will reach $1 trillion by 2040.
Policy coherence and long-term vision
Fully realizing these economic benefits will require consistent and visionary policies. The UK’s Zero Emission Vehicle (ZEV) mandate requires an increased proportion of new cars and vans sold to be electric, providing vital regulatory certainty for manufacturers and investors.
However, the competitiveness of the industry also depends on effective parallel activities in other areas, such as:
Infrastructure: Accelerate nationwide charging network rollout and grid upgrades. Skills: Expand training in battery technology, power electronics, software systems, and more. Innovation: Strengthening partnerships between universities, startups, and OEMs. Finance: Supporting private capital through green bonds and investment guarantees.
An integrated strategy that links energy, transport and industrial policy is key to not only helping the UK adopt electric vehicles, but also defining the global standards, technologies and business models that will support them.
In the UK, considerable progress has been made in the last year, for example through the government’s new industrial strategy. Measures are being taken to speed up access to the grid, with new regulatory reforms allowing for faster approval of grid connections. The Government has announced it will spend an additional £1.2bn a year into skills by 2028-29, with net zero one of its focus areas. But further action is needed, including improving strategic planning for the grid, faster connections for EV charging hubs, reforming apprenticeship schemes for zero-emissions transport, increasing the resilience of EV supply chains and unlocking access to finance. Above all, you need fast and consistent delivery.
Electrification as an economic imperative
The global transition to electric vehicles has been driven by the need to reduce carbon emissions, but the transition is now also an economic imperative. For the UK, this is an opportunity to boost manufacturing, strengthen energy independence and secure leadership in clean technology innovation.
The status quo will not continue if we do nothing (although some would like to believe that). As global industries reshape towards a zero-emissions future, they risk being economically marginalized. The economic imperative for EV demand is already clear and compelling, as are the lower lifetime costs, increased resiliency, and increased industry profits of renewable energy technologies.
The electric vehicle revolution is essentially an investment in long-term prosperity. Countries that act boldly and strategically today will be the economic leaders of tomorrow.
This article will also be published in the quarterly magazine issue 24.
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