Acceleration and Barriers in BEV market uptake | Impact on Supply Chain Industries
Dr. Evangelo Damigos; PhD | Head of Digital Futures Research Desk
- Competitive Differentiation
- Emerging Technologies
- Electric Vehicles
Publication | Update: Sep 2020
EV uptake typically starts with the establishment of a set of targets, followed by the adoption of vehicle and charging standards. An EV deployment plan often includes procurement programs to stimulate demand for electric vehicles and to enable an initial roll-out of publicly accessible charging infrastructure. Fiscal incentives, especially important as long as EVs purchase prices are higher than for ICE vehicles, are often coupled with regulatory measures that boost the value proposition of EVs (e.g. waivers to access restrictions, lower toll or parking fees) or embedding incentives for vehicles with low tailpipe emissions (e.g. fuel economy standards) or setting zero-emissions mandates.
Deloitte research, “New market. New entrants. New challenges. Battery Electric Vehicles,” estimates that the market will reach a tipping point in 2022 – when the cost of ownership of a BEV is on par with its internal combustion engine counterparts. With cost of ownership no longer a barrier to purchase, BEVs will become a realistic, viable option for any new car buyer. However, analysis of manufacturer capacity forecasts to 2030 suggests that there is a significant ’expectation gap’ growing. In fact, the overall industry capacity forecast for 2030 is approximately 14 million units above our projections for consumer demand.
Understanding the technological progress being made across these areas, alongside evolving customer expectations, gives us an insight into when customers’ anxieties will be eased. The Figure shows that the four most important customer concerns regarding BEVs are: driving range, cost premium, lack of infrastructure and time required to charge.
Customer concerns regarding battery electric vehicles
According to IEA report, “Global EV Outlook,” policies to support deployment of charging infrastructure include minimum requirements to ensure EV readiness in new or refurbished buildings and parking lots, and the roll-out of publicly accessible chargers in cities and on highway networks. Adoption of standards facilitates inter-operability of various types of charging infrastructure.
Technology developments are delivering substantial cost reductions. Advances in technology and cost cutting are expected to continue. Key enablers are developments in battery chemistry and expansion of production capacity in manufacturing plants. The dynamic development of battery technologies as well as recognition of the importance of EVs to achieve further cost reductions in the broad realm of battery storage has put the strategic relevance of large-scale battery manufacturing in the limelight of policy attention.
Other technology developments are also expected to contribute to cost reductions. These include the possibility to redesign vehicle manufacturing platforms using simpler and innovative design architecture that capitalize on the compact dimensions of electric motors, and that EVs have much fewer moving parts than ICE vehicles. As well as the use of big data to customize battery size to travel needs and avoid over sizing the batteries, which is especially relevant for heavy-duty vehicles.
A number of factors including a positive change in customer perceptions, technological advancements and greater intervention from governments are combining to focus attention on BEV adoption.
Deloitte estimates that the market will reach a tipping point in 2022 – when the cost of ownership of a BEV is on par with its internal combustion engine counterparts. With cost of ownership no longer a barrier to purchase, BEVs will become a realistic, viable option for any new car buyer. However, our simultaneous analysis of manufacturer capacity forecasts to 2030 suggests that there is a significant ’expectation gap’ growing.
In fact, the overall industry capacity forecast for 2030 is approximately 14 million units above our projections for consumer demand. This expectation gap between capacity and demand has serious implications for investment in R&D, tooling and talent. Based on current forecasts, the number of EV manufacturers appears unsustainable. Indeed, it is not inconceivable that some incumbent OEMs will be out of business by 2030. Those that survive may face significant changes to their existing business models, with the prospect of today’s powerful OEMs acting as white label suppliers to other brands a real possibility.
Next generation BEV driving range
Optimisation of existing lithium-ion cell chemistries, as well as the introduction of new battery cell materials will result in incremental improvements in energy density, charge discharge and thermal performance
Advances in battery management systems will contribute towards extending vehicle range while simultaneously improving safety and extending battery life •Increase in energy density of battery assembly through the use of new materials, improved pack design and optimized cooling will improve vehicle range.
Incremental improvement in range will also be achieved through continued reduction of vehicle and battery pack mass.
Beyond 2023: New breakthrough concepts such as: lithium-air, alternative metal-ion chemistries, solid state technology and higher energy capacitors may also enable advancements in vehicle range within the next 8 to 10 years.
Benefiting from battery technology improvements, the time required to charge at fast charging stations is predicted to decrease substantially in the next ten years.
The main impacts of all-solid-state batteries on the auto industry include an acceleration in BEV market uptake and changes in the BEV battery supply chain.
According to Arifumi Yoshida, Citi’s Japan Auto & Auto Parts Analyst, if BEVs replace ICE vehicles, there would be no need for engines, transmissions, and related parts, but there would be a new need for batteries, inverters, motors, and parts related to these systems. For conventional auto assemblers, which manufacture engines and transmissions in-house, ensuring that they have the capacity to develop all-solid-state batteries in-house is an important source of added value. For suppliers, it will be important to re-examine elemental technologies to develop new components. If there is an increase in BEV market uptake, there are also likely to be changes to national-level rules governing things such as taxes, energy policy, and resources.
A shift from liquid lithium-ion batteries to all-solid-state batteries would also mean a change from liquid electrolytes to solid electrolytes and a decrease in the need for separators, and there would be the potential to use new materials for cathodes and anodes. However, if we see material progress in research and development efforts, the all-solid-state batteries available in the second half of the 2020s and the 2030s are likely to be disruptive.
Barriers to Market-Uptake of All-Solid-State Batteries
Cost barriers are considerable, but there are potential cost benefits in terms of battery pack simplification and use of low-cost electrode materials.
Research and development aimed at the volume production of all-solid-state batteries has only just begun, and how far manufacturing costs will decline is still unclear - given the simplification of battery packs and the use of low-cost electrode materials.
On the other hand, if there is greater-than-expected progress in the improvement of lithium-ion battery performance and increased reductions in cost, the shift to all-solid-state batteries could be delayed.
There is also the risk that interest in BEVs themselves could fade because of developments in hybrid electric vehicles (HEVs) and standard ICE vehicles — all of which could mean a weakening in development efforts for all-solid-state batteries.
Fuel-cell vehicles are another potential competitor. Although infrastructure issues are a problem, there is considerable potential in terms of a fossil-fuel substitute. KPMG’s Global Automotive Executive survey ranked fuel-cell vehicles as the top key trend through 2025 and BEVs in the 3rd position according to global automotive executives.
The supply side of the EV market
Almost all of the major OEMs have announced their ambitious plans for the EV market. Using a combination of these company announcements, forecasts from industry groups and proprietary analysis, Deloitte has projected global production ambitions to 2030. According to our projections, EV car production, dominated by BEVs, will reach 35 million units in 2030, as shown in Figure below.
Electric vehicle production forecast of major OEMs and new entrants
New entrants also represent a substantial threat to the status quo. Their combined market share will be the largest in the world - with the majority coming from or operating in China. Forecasting capacity remains an important process for manufacturers. To meet capacity demands in 2030, organisations need to invest now in factories, tooling, design, innovation and talent. Getting these projections wrong, even at this early stage, could cost manufacturers significant amounts of money.
To thrive in this rapidly changing market, OEMs will need to adjust their strategies and new entrants will have to overcome substantial barriers. In the next section, we will evaluate the five areas for success that have been identified as being key in the EV era: brand, customer experience, production strategy, talent and business model.
Implications for the industry
Traditional OEMs are preparing to launch a wide variety of EVs into the market to satisfy growing customer demand and meet their regulatory targets. However, they are facing unprecedented competition and disruptions from regionally advantaged OEMs and new entrants such as startups and non-automotive players.
While keeping the customer satisfied remains critical to success, it is not sufficient on its own. To thrive in this market, manufacturers need to be realistic about their capabilities and gaps, and focus on building strategic partnerships or alliances as part of an integrated, innovative and agile approach to the changing automotive market.
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