By the end of 2017, there were more than 3 million electric vehicles worldwide (Global EV Outlook 2018, International Energy Agency, 30 May 2018). Although this is less than 1% of the total parc, electrification is undoubtedly at the top of OEMs’ agendas. With future bans announced for internal combustion engine (ICE) vehicles across much of the developed world, OEMs have little choice but to adapt. Volvo has pledged to manufacture only fully electric or hybrid models by 2019 and it is not alone; almost every major automaker has pledged significant investments in electric technology. Given these trends, OEMs are striving to win the battery technology race and secure access to essential raw materials.
From a consumer perspective, uptake has varied significantly by country, heavily affected by local policies. For example, the Norwegian government’s generous subsidies meant nearly 40% of new passenger vehicle sales were for either battery electric vehicles (BEVs) or plug-in hybrid vehicles (PHEVs) in 2017.
Similarly, the US and China have both offered strong financial incentives and, in combination now, make up well over half of the current global EV parc (Global EV Outlook 2018, International Energy Agency, 30 May 2018). The UK has also made steady progress, with growth set to accelerate, by 2030 EVs could account for 69% of passenger car sales and 57% of light commercial vehicle (LCV) sales (KPMG Mobility 2030 analysis). In its strategy paper, The Road to Zero, the UK Government has reaffirmed its proposed 2040 ban on conventional cars, setting a clear direction and aligning itself with similar commitments in France, China, Norway and India, amongst others.
The UK government’s environmental and health policies are arguably the biggest catalyst for consumers going electric. These include higher vehicle excise duty (VED) on diesel cars, continuation of the plug-in car grant and London’s ‘T-charge’ (emissions surcharge) zone – all introduced in 2017. Such incentives will complement the roll-out of the supporting charging infrastructure, rising consumer awareness, and reductions in total cost of ownership (TCO), which is expected to achieve parity with ICE by 2021.
Meanwhile the economics for LCVs are even more compelling, thanks to fleet scale economies and high utilisation, which should bring TCO parity earlier than for passenger vehicles. The acute price and TCO sensitivity of LCV has the potential to make this sector a leader in EV adoption; however, a lack of sufficient viable models on the market means that adoption currently lags behind that of passenger vehicles.
Heavier commercial vehicles, on the other hand, may take considerably longer to go electric, due to the large battery sizes required for long-distance haulage and the time taken to charge. Alternative fuels such as natural gas and hydrogen remain realistic alternatives.
EV take-up may have gathered momentum, but requires a number of societal and behavioural changes to become truly widespread, with three key barriers remaining.
Click on each of the sections below to find out more about these key barriers:
Achieving TCO parity with ICE vehicles will be critical for EV adoption. In the absence of further government incentives, we expect this to occur around 2020 for LCVs, with passenger vehicles to follow soon after, driven by a number of developments:
A significant increase in public charging points is required to give users confidence and to support the UK government’s vision for EV uptake. Although EV charging is currently dominated by home charging, we expect public charging to make up an increasing proportion of charging behaviour over time (please refer to appendix 1 for more information). Infrastructure roll-out presents a dilemma, with the business case for comprehensive charging coverage largely unproven until mass take-up, which cannot happen without network scale.
Add to this the infrastructure required to provide more electricity, and it is clear that public and private collaboration is needed to facilitate roll-out, with either party potentially taking the lead. The UK government has already announced a >US$500 million private/public charging infrastructure investment fund (CIIF). Although this is a good start, far more capital will be needed.
The benefits case for EV adoption is clear: cleaner air, quieter streets, and a chance to meet global carbon emissions reduction targets to address climate change. Governments also see an opportunity to stake a leadership position for domestic industries in the emerging EV value chain. Overall, this is a promising start, but progress depends upon continued collaboration from the various ecosystem participants
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