cep.lse.ac.uk
The economics of the electric vehicle transition: demand, supply chains, and innovation
Electric vehicles (EVs) are central to decarbonising road transport, a sector responsible for 23% of global energy-related emissions, and their adoption carries both economic and societal implications. This paper provides an economic review of EV transitions, synthesizing theory, stylized facts, and frontier empirical findings. We document three key observations: EV adoption has historically occurred in waves that stalled and revived; contemporary adoption is highly heterogeneous across countries; and the transition reshapes automotive sector activities and supply chains, increasing reliance on geographically concentrated critical minerals and generating Environmental, Social and Governance (ESG) and political economy challenges. We then analyze the economic drivers of adoption, including total cost of ownership, network externalities, and complementary technologies such as charging infrastructure, grid integration, and digital innovations. Supply-side constraints, resource scarcity, and innovation dynamics are examined, highlighting how the EV platform interacts with broader technological and industrial systems. The analysis emphasizes the systemic, path-dependent, and platform nature of EV transitions and outlines policy-relevant insights for managing adoption, supply chains, and innovation. Finally, we identify avenues for future research, including the economics of end-of-life and used EVs, resilient supply chains, and the role of complementary technologies in accelerating low-carbon transitions.
