...
...

Acceleration and Barriers in BEV market uptake | Impact on Supply Chain Industries

Posted | Updated by Insights team:
Dr. Evangelo Damigos; PhD | Head of Digital Futures Research Desk
  • Competitive Differentiation
  • Emerging Technologies
  • Electric Vehicles
  • Automotive


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.

Download Deloitte Report

Framed Content - Publisher | Sponsor:
...
APU Insights
...Industry: Automotive
SKU code : 48BADD85-2ABF-A4CA-0182-751A35B2B252
Delivery Format:
Electronic PDF ...
Immediate Delivery
...Access Rights | Content Availability:
  • The Big Picture - Intelligence Center
  • The Big Picture - Platform

...

Objectives and Study Scope

This study has assimilated knowledge and insight from business and subject-matter experts, and from a broad spectrum of market initiatives. Building on this research, the objectives of this market research report is to provide actionable intelligence on opportunities alongside the market size of various segments, as well as fact-based information on key factors influencing the market- growth drivers, industry-specific challenges and other critical issues in terms of detailed analysis and impact.

The report in its entirety provides a comprehensive overview of the current global condition, as well as notable opportunities and challenges. The analysis reflects market size, latest trends, growth drivers, threats, opportunities, as well as key market segments. The study addresses market dynamics in several geographic segments along with market analysis for the current market environment and future scenario over the forecast period. The report also segments the market into various categories based on the product, end user, application, type, and region.
The report also studies various growth drivers and restraints impacting the  market, plus a comprehensive market and vendor landscape in addition to a SWOT analysis of the key players.  This analysis also examines the competitive landscape within each market. Market factors are assessed by examining barriers to entry and market opportunities. Strategies adopted by key players including recent developments, new product launches, merger and acquisitions, and other insightful updates are provided.

Research Process & Methodology

...

We leverage extensive primary research, our contact database, knowledge of companies and industry relationships, patent and academic journal searches, and Institutes and University associate links to frame a strong visibility in the markets and technologies we cover.

We draw on available data sources and methods to profile developments. We use computerised data mining methods and analytical techniques, including cluster and regression modelling, to identify patterns from publicly available online information on enterprise web sites.
Historical, qualitative and quantitative information is obtained principally from confidential and proprietary sources, professional network, annual reports, investor relationship presentations, and expert interviews, about key factors, such as recent trends in industry performance and identify factors underlying those trends - drivers, restraints, opportunities, and challenges influencing the growth of the market, for both, the supply and demand sides.
In addition to our own desk research, various secondary sources, such as Hoovers, Dun & Bradstreet, Bloomberg BusinessWeek, Statista, are referred to identify key players in the industry, supply chain and market size, percentage shares, splits, and breakdowns into segments and subsegments with respect to individual growth trends, prospects, and contribution to the total market.

Research Portfolio Sources:

  • BBC Monitoring

  • BMI Research: Company Reports, Industry Reports, Special Reports, Industry Forecast Scenario

  • CIMB: Company Reports, Daily Market News, Economic Reports, Industry Reports, Strategy Reports, and Yearbooks

  • Dun & Bradstreet: Country Reports, Country Riskline Reports, Economic Indicators 5yr Forecast, and Industry Reports

  • EMIS: EMIS Insight and EMIS Dealwatch

  • Enerdata: Energy Data Set, Energy Market Report, Energy Prices, LNG Trade Data and World Refineries Data

  • Euromoney: China Law and Practice, Emerging Markets, International Tax Review, Latin Finance, Managing Intellectual Property, Petroleum Economist, Project Finance, and Euromoney Magazine

  • Euromonitor International: Industry Capsules, Local Company Profiles, Sector Capsules

  • Fitch Ratings: Criteria Reports, Outlook Report, Presale Report, Press Releases, Special Reports, Transition Default Study Report

  • FocusEconomics: Consensus Forecast Country Reports

  • Ken Research: Industry Reports, Regional Industry Reports and Global Industry Reports

  • MarketLine: Company Profiles and Industry Profiles

  • OECD: Economic Outlook, Economic Surveys, Energy Prices and Taxes, Main Economic Indicators, Main Science and Technology Indicators, National Accounts, Quarterly International Trade Statistics

  • Oxford Economics: Global Industry Forecasts, Country Economic Forecasts, Industry Forecast Data, and Monthly Industry Briefings

  • Progressive Digital Media: Industry Snapshots, News, Company Profiles, Energy Business Review

  • Project Syndicate: News Commentary

  • Technavio: Global Market Assessment Reports, Regional Market Assessment Reports, and Market Assessment Country Reports

  • The Economist Intelligence Unit: Country Summaries, Industry Briefings, Industry Reports and Industry Statistics

Global Business Reviews, Research Papers, Commentary & Strategy Reports

  • World Bank

  • World Trade Organization

  • The Financial Times

  • The Wall Street Journal

  • The Wall Street Transcript

  • Bloomberg

  • Standard & Poor’s Industry Surveys

  • Thomson Research

  • Thomson Street Events

  • Reuter 3000 Xtra

  • OneSource Business

  • Hoover’s

  • MGI

  • LSE

  • MIT

  • ERA

  • BBVA

  • IDC

  • IdExec

  • Moody’s

  • Factiva

  • Forrester Research

  • Computer Economics

  • Voice and Data

  • SIA / SSIR

  • Kiplinger Forecasts

  • Dialog PRO

  • LexisNexis

  • ISI Emerging Markets

  • McKinsey

  • Deloitte

  • Oliver Wyman

  • Faulkner Information Services

  • Accenture

  • Ipsos

  • Mintel

  • Statista

  • Bureau van Dijk’s Amadeus

  • EY

  • PwC

  • Berg Insight

  • ABI research

  • Pyramid Research

  • Gartner Group

  • Juniper Research

  • MarketsandMarkets

  • GSA

  • Frost and Sullivan Analysis

  • McKinsey Global Institute

  • European Mobile and Mobility Alliance

  • Open Europe

M&A and Risk Management | Regulation

  • Thomson Mergers & Acquisitions

  • MergerStat

  • Profound

  • DDAR

  • ISS Corporate Governance

  • BoardEx

  • Board Analyst

  • Securities Mosaic

  • Varonis

  • International Tax and Business Guides

  • CoreCompensation

  • CCH Research Network

...
Forecast methodology

The future outlook “forecast” is based on a set of statistical methods such as regression analysis, industry specific drivers as well as analyst evaluations, as well as analysis of the trends that influence economic outcomes and business decision making.
The Global Economic Model is covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure. We aim update our market forecast to include the latest market developments and trends.

Forecasts, Data modelling and indicator normalisation

Review of independent forecasts for the main macroeconomic variables by the following organizations provide a holistic overview of the range of alternative opinions:

  • Cambridge Econometrics (CE)

  • The Centre for Economic and Business Research (CEBR)

  • Experian Economics (EE)

  • Oxford Economics (OE)

As a result, the reported forecasts derive from different forecasters and may not represent the view of any one forecaster over the whole of the forecast period. These projections provide an indication of what is, in our view most likely to happen, not what it will definitely happen.

Short- and medium-term forecasts are based on a “demand-side” forecasting framework, under the assumption that supply adjusts to meet demand either directly through changes in output or through the depletion of inventories.
Long-term projections rely on a supply-side framework, in which output is determined by the availability of labour and capital equipment and the growth in productivity.
Long-term growth prospects, are impacted by factors including the workforce capabilities, the openness of the economy to trade, the legal framework, fiscal policy, the degree of government regulation.

Direct contribution to GDP
The method for calculating the direct contribution of an industry to GDP, is to measure its ‘gross value added’ (GVA); that is, to calculate the difference between the industry’s total pre­tax revenue and its total bought­in costs (costs excluding wages and salaries).

Forecasts of GDP growth: GDP = CN+IN+GS+NEX

GDP growth estimates take into account:

  • Consumption, expressed as a function of income, wealth, prices and interest rates;

  • Investment as a function of the return on capital and changes in capacity utilization; Government spending as a function of intervention initiatives and state of the economy;

  • Net exports as a function of global economic conditions.

CLICK BELOW TO LEARN MORE
...

Market Quantification
All relevant markets are quantified utilizing revenue figures for the forecast period. The Compound Annual Growth Rate (CAGR) within each segment is used to measure growth and to extrapolate data when figures are not publicly available.

Revenues

Our market segments reflect major categories and subcategories of the global market, followed by an analysis of statistical data covering national spending and international trade relations and patterns. Market values reflect revenues paid by the final customer / end user to vendors and service providers either directly or through distribution channels, excluding VAT. Local currencies are converted to USD using the yearly average exchange rates of local currencies to the USD for the respective year as provided by the IMF World Economic Outlook Database.

Industry Life Cycle Market Phase

Market phase is determined using factors in the Industry Life Cycle model. The adapted market phase definitions are as follows:

  • Nascent: New market need not yet determined; growth begins increasing toward end of cycle

  • Growth: Growth trajectory picks up; high growth rates

  • Mature: Typically fewer firms than growth phase, as dominant solutions continue to capture the majority of market share and market consolidation occurs, displaying lower growth rates that are typically on par with the general economy

  • Decline: Further market consolidation, rapidly declining growth rates

...

The Global Economic Model
The Global Economic Model brings together macroeconomic and sectoral forecasts for quantifying the key relationships.

The model is a hybrid statistical model that uses macroeconomic variables and inter-industry linkages to forecast sectoral output. The model is used to forecast not just output, but prices, wages, employment and investment. The principal variables driving the industry model are the components of final demand, which directly or indirectly determine the demand facing each industry. However, other macroeconomic assumptions — in particular exchange rates, as well as world commodity prices — also enter into the equation, as well as other industry specific factors that have been or are expected to impact.

  • Vector Auto Regression (VAR) statistical models capturing the linear interdependencies among multiple time series, are best used for short-term forecasting, whereby shocks to demand will generate economic cycles that can be influenced by fiscal and monetary policy.

  • Dynamic-Stochastic Equilibrium (DSE) models replicate the behaviour of the economy by analyzing the interaction of economic variables, whereby output is determined by supply side factors, such as investment, demographics, labour participation and productivity.

  • Dynamic Econometric Error Correction (DEEC) modelling combines VAR and DSE models by estimating the speed at which a dependent variable returns to its equilibrium after a shock, as well as assessing the impact of a company, industry, new technology, regulation, or market change. DEEC modelling is best suited for forecasting.

Forecasts of GDP growth per capita based on these factors can then be combined with demographic projections to give forecasts for overall GDP growth.
Wherever possible, publicly available data from official sources are used for the latest available year. Qualitative indicators are normalised (on the basis of: Normalised x = (x - Min(x)) / (Max(x) - Min(x)) where Min(x) and Max(x) are, the lowest and highest values for any given indicator respectively) and then aggregated across categories to enable an overall comparison. The normalised value is then transformed into a positive number on a scale of 0 to 100. The weighting assigned to each indicator can be changed to reflect different assumptions about their relative importance.

CLICK BELOW TO LEARN MORE
...

The principal explanatory variable in each industry’s output equation is the Total Demand variable, encompassing exogenous macroeconomic assumptions, consumer spending and investment, and intermediate demand for goods and services by sectors of the economy for use as inputs in the production of their own goods and services.

Elasticities
Elasticity measures the response of one economic variable to a change in another economic variable, whether the good or service is demanded as an input into a final product or whether it is the final product, and provides insight into the proportional impact of different economic actions and policy decisions.
Demand elasticities measure the change in the quantity demanded of a particular good or service as a result of changes to other economic variables, such as its own price, the price of competing or complementary goods and services, income levels, taxes.
Demand elasticities can be influenced by several factors. Each of these factors, along with the specific characteristics of the product, will interact to determine its overall responsiveness of demand to changes in prices and incomes.
The individual characteristics of a good or service will have an impact, but there are also a number of general factors that will typically affect the sensitivity of demand, such as the availability of substitutes, whereby the elasticity is typically higher the greater the number of available substitutes, as consumers can easily switch between different products.
The degree of necessity. Luxury products and habit forming ones, typically have a higher elasticity.
Proportion of the budget consumed by the item. Products that consume a large portion of the consumer’s budget tend to have greater elasticity.
Elasticities tend to be greater over the long run because consumers have more time to adjust their behaviour.
Finally, if the product or service is an input into a final product then the price elasticity will depend on the price elasticity of the final product, its cost share in the production costs, and the availability of substitutes for that good or service.

Prices
Prices are also forecast using an input-output framework. Input costs have two components; labour costs are driven by wages, while intermediate costs are computed as an input-output weighted aggregate of input sectors’ prices. Employment is a function of output and real sectoral wages, that are forecast as a function of whole economy growth in wages. Investment is forecast as a function of output and aggregate level business investment.

CLICK BELOW TO LEARN MORE