Electric vehicles could hold half of automotive market share by 2030

16 March 2018 Authored by Consultancy.uk

As countries seek to meet Paris Agreement targets, electric vehicles offer major benefits, not merely on reduced emissions, but also reducing localised air pollution in high-density areas. New analysis shows that the EV market is set to pick up pace, hitting 50% market share by 2030, as battery technologies become cheaper, and an inflection point is reached around 2025.

Shifting the transportation industry towards sustainability remains a key part of the wider shift of the economy to meet global climate targets. The automotive industry remains a major source of pollution – emitting around 15% of total global emissions. The industry is also the cause of considerable impacts on human health, with air quality impacted by both major types of Internal Combusion Engine (ICE) emissions.

As bans on sales of new combustion engine vehicles in Germany, France and the UK, among others, are mooted, the move to vehicle types that have lower emissions is seemingly inevitable – with more stringent regulatory requirements on emission standards coupled with improved cost profiles for technologies likely to increase the shift. A new report from The Boston Consulting Group considers a variety of projections related to industry changes. The study assumes a base model of oil at $60 a barrel on average over the period to 2030, at battery prices of around $90 per kw/h by 2030 – as well as no subsidy offerings from governments.

CO2 targets

Rules around the energy efficiency of vehicles in major global jurisdictions is set to become increasingly stringent over the coming decades. The drive towards more efficient engines, whose output is also less damaging to human and animal health, is set to surpass the technical ability of manufactures to develop engines. This is particularly in the EU, where the wall, as it were, will be reached in around 2021 – with stiff fines for failure. The US too is set to tighten standards, with 97 g/km projected for 2025.

While ICE vehicles are facing drops in sales, electric vehicle technology, particularly battery cell costs per kw/h, are set to see continued decline. The rate of decline remains debated, however, various projections see the decline to around $100 per kw/h before around 2025, from between $150-180 in the current environment.

Cell costs per kw/h projection

The steady decline in cost, coupled with various incentives from governments, is likely to see consumers, as well as companies, increasingly shift focus towards EV types over the coming decade. The shift will increase pace between 2025-30, when the inflection point is reached – with consumer demand, rather than policy, further driving the change. In the EU, for instance, battery EVs are set to account for around 22% of total market sales by 2030, while all xEV types will represent more than 50% of vehicles sold.

The US too will see a substantial shift, with just under 50% of all new vehicles some type of EV by 2030. Although the total cost of ownership of BEVs in the US over a ten-year period is set to be substantially lower than ICE types within the 2020s. China is set to see rapid electrification of its fleet, with around 17% of the fleet projected to be BEV by 2030.

Sales volumes US and EU

Commenting on the changes, Xavier Mosquet, a BCG Senior Partner and lead author of the study, said, “OEMs and their suppliers should keep their eye on two broad trajectories. The rise in market share of electrified vehicles from about 3% today to 50% around 2030, and the increase in share for battery-powered vehicles from almost nothing to about 14% of the global market in 2030. There will be variations in the pace of change, depending on regulatory actions, consumer adoption of autonomous vehicles and car sharing, and the economics of different fuel sources. Companies will need to develop a suite of strategic and product options to manage a transition that is both inevitable in its destination and uncertain as to its route.”

Sensitivities

The firm notes that various factors could see a more rapid shift towards electrification – with various sensitivities to the firm’s base case adding considerable numbers on various sides of the equation. For instance, higher oil-prices, at $90 a barrel, will see ICE vehicles lose market share ((3.4%)) further to xEVs, while lower battery costs could see an additional drop to ICE ((1.5%)) while boosting BEV sales (2.2%). Government incentives have a considerable impact, improving BEV sales by 4.8%.

Sensitivities

Mosquet added, “The timing of the market’s transition to a new type of powertrain has long been the subject of debate. The prospects for electric vehicles are now clarifying, and the transition period from an ICE-dominated marketplace to a market in which electrified vehicles grow share and BEVs start to compete with hybrids and ICEs is about to commence.”

News

More news on