According to the same report, the prices of smaller EV models will also be dropping to rival those of combustion engine cars in North America and Europe by the mid-2020s.

The agency raised its EV sales forecasts in part because of the US Inflation Reduction Act, which supports green industry and subsidises consumers' buying electric vehicles (EVs), IEA executive director, Fatih Birol, said on a media call.

China features prominently, making up half the EVs on the road worldwide, including battery-electric cars and plug-in hybrids, and with 60% of EV sales taking place there last year, according to the IEA's annual outlook on EVs.

The country has also seen prices for some smaller EV models edging lower towards those of their combustion engine equivalents, said the IEA's energy technology policy head, Timar Guell.

Electric car sales globally are expected to surge by 35% this year to 14 million units, the report said, comprising 18% of the passenger car market, up from just 4% in 2020.

"Our current expectation is that we can see price parity in small and medium-sized electric cars in North America and European markets somewhere in the mid-2020s... for larger cars like SUVs and pick-ups, purchasing parity is likely to come later, probably into the 2030s," Guell said.

Governments are investing in EV expansion out of concerns over the environment, to boost industrial policy and decrease dependency on oil, demand for which will fall by 5 million barrels a day by 2030 because of the EV transition, Birol said.

SUVs and large cars account for nearly two-thirds of EVs in China and Europe and a greater proportion in the United States.

In emerging and developing economies, two- and three-wheel electric vehicles outnumber cars. Over half of India's three-wheeler registrations in 2022 were electric, according to the study.