Tuesday 13 November 2018
 
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ANALYSIS

Electric vehicles ‘to reach 12pc of car sales by 2025’

DUBAI, 20 days ago

Electric vehicles (EVs) will rise from 1 per cent of car sales in 2017 to 2.5 per cent in 2020, and 12 per cent in 2025 and 24 per cent when including full and plug in hybrid vehicles (xEVs), said the Bank of America Merrill Lynch (BofAML) in a new report.

The Thematic Investing report identifies the five most influential themes that will shape the world over the next five years: 1) Big Data & AI, 2) EVs & Mobility 3) Demographics 4) Climate Change 5) Privacy & Cyber.

Peak Oil will happen sooner than the 2050s with COP21, batteries, EVs, energy storage and declining cost of renewables converging to bring forward the date to 2030, according to the report.

Significant capacity investments and the launch of new models are underpinning the rising adoption of electric vehicles globally, and allowing cities to mandate stricter emissions regulations as more viable zero emission capable powertrains are available.

EV growth drivers: battery costs, increased vehicle range/models, regulation

•    There are several factors enabling this shift towards EVs, most notably the battery/drivetrain costs and number of available models on the supply side, with incentives and shifting consumer preferences impacting demand. In summary, the key drivers as:

•    Policy has been supportive for EVs in the short term (average global subsidies of >$7,000 on purchase/usage taxes) while disincentivising ICE vehicles, with low emission zones, access restrictions, and higher taxes/charges becoming more commonplace, and potential full bans on the horizon (eg, in the UK by 2040).

•    Batteries: The increased size, reliability and cycle lives and declining costs of EV batteries are making EVs more viable. At the end of 2017 an EV battery cost a fifth of the price in 2010 (Bloomberg), and our EV Battery research team forecasts a continued 6 per cent annual reduction to 2030. This would result in the average cost of a global EV powertrain reducing from $16k in 2016 to $7,000 in 2030, at parity with a combustion engine.

•    Total cost of ownership: EVs are already cheaper than ICE vehicles in some countries (ITS Leeds) and will continue to improve, largely driven by lower battery prices, and their relatively cheaper fuel, maintenance and tax.

•    Viable product: The number of EVs is expected to double in the next three years (116 available in 2016 to 246 in 2020, BNEF), with improved range (2017 typically 383km in US and 247km in EU) overcoming 'range anxiety'.

•    EV charging is becoming more accessible, but the majority is done at home (>90 per cent currently).

•    Latent demand: While EV sales were only 1 per cent of total in 2017, markets such as Norway (45 per cent of sales were EV in Sep'18) and China (risen from 1 per cent in 2016 to 2 per cent in 2017 and 5 per cent of sales in August 2018) mark the start of what we think will be a global ramp-up. In BofAML’s Global Mobility survey, 10 per cent of respondents (out of 26,022) said they would consider purchasing an EV as their next vehicle. The >400k Tesla Model 3 orders demonstrate latent EV demand.

What's changed? Increasing focus on air quality, viable vehicles

•    Cities and countries are becoming more punitive towards combustion engine vehicles (banning or restricting them by certain points in key markets such as Norway, France, the UK and China). There is a growing realisation from policy makers that we will not hit climate change emissions reduction targets with the status quo. EVs enable a more rapid reduction of tailpipe emissions that could lead to more aggressive emissions reductions.

•    Meanwhile, incentives are being offered for EVs in the form of purchase subsidies and ongoing tax breaks. Fleets are more likely to have higher adoption when the TCO (Total Cost to Own) becomes positive.

•    Initial Tesla Model 3 registrations showed mainstream OEMs latent EV demand and the need to launch products.

•    Lithium ion battery packs for EVs were a fifth of the price in 2017 vs 2010 (BNEF), with the cost reduction set to continue by virtue of scale and automation. Our chemicals/tech team forecasts a 6 per cent CAGR reduction to 2030, enabling larger/longer-range batteries to be used in vehicles, making EVs more viable for the mass market. Better energy density and cell technology are also allowing improved range for the same/less battery power.

•    The initial EVs launched of <100m range were insufficient to gain traction with customers (especially in the absence of a dense charging network and at a higher price point). However, with significant improvements to vehicle range and model availability/styling, EVs are becoming more appealing to the mass market.

•    Technology could evolve to support the rising EV adoption, especially in batteries (solid state, flow battery, different chemistries and energy densities (8:1:1 / NMC)) and charging (e.g. increasing charging speeds, inductive charging in roads/when vehicles are idle, and Vehicle to Grid (V2G).

Why is it transformative? Redefining autos value chain and several sectors

•    Easier/cheaper manufacturing has lowered barriers to entry. Several start-ups followed Tesla's approach (the logic being that starting with a clean slate is easier than adapting legacy OEMs production and engineering expertise).

•    Upfront investments in capex and higher battery costs in the short term make it difficult to make EVs profitable (VW recently stated the €20bn allocated will not be enough for the initial EV model push).

•    Potential to save lives/emissions goals (10k deaths per year in London alone to respiratory related illness, source: Kings College London).

•    Read-across impacts to several sectors: most notably utilities and oils (from pump to plug) and batteries.

What are the risks? Challenges to adoption are solvable, particularly charging

•    Battery cost: If battery costs don't fall as rapidly as expected, EV costs would be higher and market share lower.

•    Charging: Slow build out of the charging network could also delay adoption of EVs, especially for those without access to sufficient charging infrastructure.

•    EV Residual values worse than conventional vehicles, mainly due to battery degradation and new models. – TradeArabia News Service




Tags: Battery | Electric vehicles | BofAML |

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