Electric vehicles (EVs) are central to decarbonising transport, a sector responsible for 23% of global energyrelated emissions, and their adoption carries both economic and societal implications. This paper provides an economic review of EV transitions, synthesising theory, stylised 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. Building on these stylised facts, we review recent evidence on monetary and non-monetary drivers that distinguish the current wave from earlier episodes, as well as frictions that may hinder broad diffusion. On the supply side, we highlight how electrification reorganises supply chains, reallocating labour toward battery, software, and grid activities while concentrating adjustment costs on regions specialised in internalcombustion production, with distinct implications for resource-rich developing countries and for advanced economies with established internal-combustion industries. Finally, we emphasise the systemic, path dependent, and platform nature of this EV transition and highlight the importance of innovation in sustaining momentum as concentrated critical-mineral and manufacturing supply chains emerge as its binding constraint. We conclude by identifying important 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.

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17 March 2026     Paper Number CEPDP2164

Download PDF - The economics of the electric vehicle transition: demand, supply chains, and innovation

This CEP discussion paper is published under the centre's Growth programme.

This publication comes under the following theme: Technology adoption and diffusion