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Electrification Market Trends and Challenges: The Automotive Industry

July 12, 2019
Thanh Doan

Competition in the transportation sector between internal combustion engines (“ICEs”), which consume fossil fuels directly, and the electric engine has intensified over the last decade. More wide-spread installation and reducing cost of infrastructure components – such as charging station networks; energy availability; and battery technology – have been key factors in this competition.

There is a trend across all markets for enhanced connectivity and greater convenience. Part of this is digital disruption increasingly impacting transportation systems. For example, autonomous, self-driving cars and car sharing. Furthermore, consumer behaviour is reinforcing a multimodal mobility framework, particularly in urban settings. This use of various transport modes has influenced private and public sector investment. Additionally, growing focus of the general public on consumer safety and energy sustainability have provided the impetus behind business initiatives and growing political commitment.

Society’s Role in Driving Electrification and Electrification Policy

“Society’s influence on electrification usage initiatives is greater than ever.”

As societies become more technologically advanced, there is a greater awareness and transparency regarding the tension between the future possibilities and the current limitations of new technologies – an example being Uber’s fatal automation failure, in which a self-driving car struck and killed a pedestrian, in Tempe, Arizona, in March 2018.

Safety by Numbers and Electric Vehicle Growth Projections

Over the past five years, transportation electrification, particularly electric vehicles (EVs), has seen a significant uplift in adoption. Data published by the European Environment Agency (EEA) showed a 51% increase in Battery Electric Vehicle (BEV) registrations in 2017 compared to 2016. Of these estimated 97,000 BEV registrations, the three leading countries were France, Germany and the UK. When considering combined Plug-in Hybrid Electric Vehicle (PHEV) and BEV car sales global market EV sales topped 5 million vehicles for the first time in 2018. This was primarily due to manufacturing brands such as the Tesla Model 3 and a surge of charging infrastructure in EU and China.

Despite the record setting, regions with low fuel prices are discouraging consumer interest and affecting the sales potential of EVs. The best example of this is in North America. The market share of the global passenger vehicle market held by EVs remains very low – a little over 2% of the world’s total light vehicle fleet.

Generally, the world is on a path of electrification. EV growth projections and plans for electric scooters and buses are supporting trends. Ford announced their plans to buy the San Francisco scooter start-up, Spin, for a purchase price estimated to be around $40million; and record-breaking unicorn start-ups Bird Rides and Lime impressively achieved their $1 billion statuses 6 months from inception. Furthermore, Scania and Mercedes Benz, two of the primary manufacturers for London’s transport networks, are showcasing their belief in electric fleets and their solution to the common challenges of cost, capacity and efficiency. Mercedes Benz’s Citaro E-CELL all-electric bus series is an indicator of their goal of emission-free drive systems, with Gustav Tuschen, the Head of Development at Daimler Buses stating that by 2030, “seventy percent of all newly-registered urban buses will have emission-free drive systems”.

Resident’s access to transport is a crucial component of modern society. If other manufacturers responsible for public sector transportation adopt the same path as Mercedes, a cascade of rapid changes could occur: promoting policies around electrification-optimised route planning; transport management systems; and charging infrastructures, which would, in turn, boost consumer demand in the private sector – encouraging an increase in the usage of electric vehicles across nations globally.

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