In 2024, the global fleet of EVs consumed around 180 TWh of electricity,1 almost 60% more than the previous year. To put this in perspective, 180 TWh is more than the annual electricity consumption of Argentina. At the global level, EVs represented about 0.7% of final electricity consumption in 2024.

The stock of EVs is set to more than triple to 2030, but electricity demand could increase more than fourfold, reaching 780 TWh in the STEPS. This is driven by increasing consumption from electric trucks, as well as greater EV uptake in markets where people drive more per year. Total energy demand for road transport increases by only 5% in 2030 in the STEPS, while total road activity (in terms of vehicle kilometres travelled) increases by almost 20% during the same period, reflecting the greater energy efficiency of EVs.

Globally, electric LDVs remain the greatest consumer of electricity for road transport, though their share of road electricity demand falls by around 5 percentage points in 2024 to slightly above 60% in 2030 in the STEPS. In China in 2024, LDVs were responsible for only around 55% of road electricity demand, and this remains the same in 2030 in the STEPS, illustrating China’s success in EV adoption across a range of applications. In contrast, over 90% of electricity demand for road in the United States came from electric cars in 2024, though this falls to around 75% in 2030 in the STEPS, as demand from electric buses and commercial vehicles picks up. In Europe, the increasing number of electric heavy-duty trucks means their share of road transport electricity demand increases from less than 5% to more than 20% in 2030 in the STEPS.

In both China and Europe, the share of electricity demand from EVs reached the milestone of 1% in 2024. By 2030 in the STEPS, the share of electricity for EVs in Europe exceeds the share in China, as electricity demand for other end uses, such as industry and buildings, grows faster in China than in Europe. Globally, EVs represent 2.5% of electricity demand in 2030 in the STEPS.

Expanding EV adoption continues to reduce oil demand, with oil displacement growing by 30% to over 1.3 mb/d in 2024 – equivalent to Japan’s entire transport sector oil demand today. By the end of the decade, EVs are set to displace over 5 mb/d of diesel and gasoline in the STEPS, and China’s EVs to account for half of displaced oil.

Electric LDVs drive most of the oil displacement, accounting for 80% today and around 77% by 2030. The relative impact of LDVs becomes smaller over time as technology developments and the expansion of charging infrastructure drive electrification in the heavy-duty segment, with electric trucks and buses together displacing nearly 1 mb/d in the STEPS by 2030.

One of the primary financial challenges of vehicle electrification for governments is the resulting reduction in revenue from fossil fuel taxes. While efficiency improvements in ICEs have already had an impact on tax receipts, the fuel shift could lead to a further decline in tax income. Although EV drivers contribute to additional revenue through electricity taxes, this remains insufficient to fully compensate for the loss in gasoline and diesel tax income.

In 2024, electricity tax revenue increased by nearly 50% to reach more than USD 2.5 billion globally, while gasoline and diesel tax revenues accounted for USD 560 billion. As the global EV stock continues to rise, fossil fuel tax revenue is projected to decrease significantly to nearly USD 520 billion by 2030 in the STEPS, while electricity tax revenue grows to over USD 10 billion. If the decline in fossil fuel tax revenue is not compensated with alternative taxation measures, the effect of electrification displacing gasoline and diesel would result in a net tax shortfall for governments reaching more than USD 65 billion globally by 2030. In this scenario, Europe would account for 55% of net tax shortfall if no changes are made to fuel taxation.

China’s fossil fuel tax revenues are projected to decrease from USD 45 billion to USD 41 billion as the share of electric cars in the total fleet rises to around 35% by 2030 in the STEPS. However, the increase in China’s electricity tax revenue due to vehicle fleet electrification would nearly fully offset the loss. In Europe, which sees the largest decrease in fossil fuel tax revenue, the net impact of electrification is expected to result in a tax revenue decline of USD 40 billion in the STEPS by 2030. In the United States, fossil fuel tax revenue is projected to increase by USD 0.1 billion due to slow electrification and growth in the overall vehicle fleet. Meanwhile, the rest of the world is set to experience an increase in combined fossil fuel and electricity tax revenue totalling around USD 6.5 billion by the end of the decade, driven by expected growth in both ICEs and EVs.

Tax reforms to address tax income loss due to rising electromobility have tended to target three main areas: energy use (e.g. fuel excise duty), vehicle stock (e.g. registration tax) or road use (e.g. road tolls). For example, New Zealand ended its exemption for EVs from road use charges in 2024, and its new rate of NZD 76 (New Zealand dollars) (USD 46) per 1 000 km for BEVs is estimated to have generated tax revenue in the order of USD 50 million in 2024. To stabilise tax revenues, Norway, a world leader on electromobility, with nearly 90% share of car sales being battery electric in 2024, introduced a vehicle weight tax of NOK 12.08 Norwegian kroner (USD 1.1) per kilogramme on BEVs, generating around USD 0.15 billion in 2024. Prior to this, in 2023, Norway introduced a 25% VAT rate on BEVs priced at more than NOK 500 000 (around USD 46 000), and estimates having earned around NOK 1.5 billion (USD 0.14 billion) in 2024 from this new VAT tax measure. However, maintaining the VAT exemption for battery electric cars priced below NOK 500 000 resulted in revenue loss of around NOK 13 billion (USD 1.2 billion).

Prior to 2025, the United Kingdom waived vehicle excise duty (VED) for electric, zero, or low-emission cars, vans and motorcycles. From 1 April 2025, however, new electric cars are taxed GBP 10 (USD 13) in the first year and the standard rate, GBP 195 (around USD 255), in subsequent years. This measure boosts government coffers by nearly USD 3 billion by 2030 in the STEPS. Considering the gain from EV VED alongside the reduction in VED from ICE vehicles, the net tax increase from total car VED is projected to reach more than USD 1 billion by 2030.

Another option open to policy makers could be taxing vehicles based on efficiency, rather than imposing a flat rate, which would mean owners of less efficient, older vehicles bear a higher tax burden. While this could further incentivise EV growth, it might disproportionally affect people in lower-income demographics who are more likely to own an older vehicle, potentially reducing the public acceptance of electromobility in the long-term.

Similarly, there is a risk of public pushback in response to the introduction of taxes on EVs to cover fuel excise duty losses. To minimise this risk, any tax reform will need to be designed in a way that protects low-income households, while avoiding penalising early EV adopters. As the shift towards EVs continues, it will be essential for governments to introduce tax measures that gradually address the revenue gap while continuing to incentivise a just transition to a low-emissions transport system.