Improving efficiency sees electric vehicle market continue to grow

18 April 2018 Authored by Consultancy.uk

Shifting the global vehicle fleet to partial or completely electric transportation is increasingly seen as a way to reduce pollution. Electrification of the market is subsequently picking up pace on the back of market dynamics, as battery costs decrease and range surpasses expectations.

According to the terms set out in the Paris Climate Accord, the world needs to shift to more sustainable forms of energy use if the worst effects of climate change are to be mitigated. This shift is required across all industries, with transport as a key segment, generating around 23% of all energy emissions.

While the electric grid is still heavily dependent on non-renewables, electric vehicles are increasingly being seen as offering a more efficient and sustainable operating model for road transport. The technology continues to be developed across an increasingly large number of OEM manufacturers. A new report from Roland Berger, titled ‘Global Automotive Supplier Study’, looks at the trend radar for large scale changes in the industry, including a shift from ICE to EVs.

Global light vehicles EV sales volume 2016

A powertrain is the mechanism that transmits the drive from the engine of a vehicle to its axle, and while producers of powertrains are likely to see margins pressurised by intensified competition, the cost of (multiple) innovations and the rise of electric vehicles, the study finds that the electric and hybrid electric and plug-in hybrid electric vehicle markets are still set to see growth.

In total around 2.4 million electric vehicles were sold in 2016, although the mixes of types sold differ considerably by country. In China the largest portion of the around 370,000 EVs sold were battery EVs, totalling 65% of the total. The Plug-in Hybrid Electric Vehicle (PHEV) market represented around 27% of vehicles sold.

Driver for powertrain electrification

Different regions are noted to be affected by different drivers for the shift towards EV power trains. The US, for instance, is likely to see a shift towards EV on the basis of advantages in the total cost of ownership of such vehicles, with lower running costs over their lifetime. The tightening of regulations across major states, as well as changes in commodity prices, are further factors that could influence increased uptake.

Changing market

In the EU, tightening emission targets, Internal Combustion Engine (ICE) sales bans, city bans on heavily polluting vehicles and other incentives, are likely to factor in people’s decisions to shift to EV – although their TCO may also be a decisive factor. In China, meanwhile, the government set targets around pollution, particularly in major cities, and subsidies are likely to affect peoples’ choice – although, again, TCO is likely to influence peoples’ decision to shift to EVs in the mid-term.

Technology shift

The shift in powertrain technology is set to have a disruptive effect on suppliers. However, the exact impact remains unknow, with a recent McKinsey & Company report noting that standardisation is yet to take place in the industry.

A shift in technology is projected, however, with the shift likely to reflect the market specific conditions – whether higher commodity prices, lower battery costs, incentives, and regulations. The winners are set to be companies that develop e-motors, charging components, batteries and battery cooling, as well as inverters/power electronics. The losers are, according to the firm’s analysis, companies that continue to focus on traditional ICE components – with below average growth rates for the categories.

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