Engines Out, Empires Shift: IEA Says Global Car Industry Flipped Since 2017
The global automotive landscape just got its report card, and let's just say some very large automakers might need to have a sit-down conversation with their parents. The International Energy Agency released fresh data showing that internal combustion engine sales have cratered by 30% since peaking in 2017, while China now manufactures a staggering 40% of the world's cars. If you're keeping score at home, that's a complete reversal of decades of Western automotive dominance.
The report shows total global car sales hit 80 million units in 2024, finally bouncing back from pandemic lows. But here's the kicker: all that growth came exclusively from electric and hybrid vehicles, which now account for 45% of total sales. Meanwhile, pure ICE cars are in freefall. We're not talking about a gentle decline here. Sales of traditional gas-only vehicles in China peaked at around 24 million units in 2017 and have been dropping ever since.
China's transformation from automotive afterthought to global manufacturing powerhouse happened faster than anyone predicted. After more than doubling production between 2010 and 2024, Chinese factories now churn out vehicles at a scale that makes traditional automaking regions look quaint. Europe and North America each account for just 15% of global manufacturing capacity now. China also became the world's largest car exporter in 2024, surpassing the European Union. Around 70% of electric cars sold worldwide today roll off Chinese production lines.
The economics tell an uncomfortable truth for Western automakers: producing cars in China is cheaper, especially for EVs. Large-scale manufacturing operations and vertical integration drive most of that advantage, though lower energy prices and labor costs contribute. Battery costs alone explain nearly 40% of the manufacturing cost difference. Average battery cell prices in China run over 30% lower than in Europe and over 20% lower than in the United States.
What makes this shift particularly brutal for incumbent automakers is that they're being forced to compete in a technology transition moving at wildly different speeds across markets. Sales of traditional ICE vehicles are trending downward in China and most advanced economies, but they're still likely to rise in some developing regions. So legacy manufacturers have to simultaneously master EV production while maintaining profitable ICE operations in markets that still want them.
New market entrants are capturing an increasingly large share of electric car sales. Chinese automakers and Tesla sold 45% of all electric cars in 2024. These aren't fringe players anymore. They're eating market share from brands that have dominated global sales for generations. The compact car segment, which accounts for 17% of global sales, is particularly vulnerable to this disruption.
The report notes that passenger cars represent 25% of total global oil demand today. How quickly this transitions to alternative fuels will reshape not just the automotive industry but global energy markets. The IEA expects oil demand from road transport to peak around 2025 in current policy scenarios, with electric vehicles displacing more than 5 million barrels per day by 2030.
For American and European automakers, the path forward requires navigating protectionism, investing billions in new manufacturing capacity, and somehow competing with companies that have massive cost advantages and home-market scale. Whether traditional automotive powers can adapt fast enough to reclaim manufacturing momentum remains the trillion-dollar question. But one thing's certain: the industry that looked essentially the same for decades just went through a revolution, and the old guard is playing catch-up on someone else's court.
