These are fast-moving disruptive times for the auto industry worldwide. In the mainstream media, electric vehicles are receiving most attention but there is much more to be discovered behind the headlines. It's a complex picture which THE GENERALIST will try and make sense of.
One of the best places to start perhaps is the KPMG Annual Global Automotive Executive Survey, now in its 20th year. KPMG member firms operate in 147 countries and in many fields including accountancy, sustainable investment, financial consultancy. Their top-line mission: to build 'a future where everyone feels included and diversity is embraced'. So how do people working inside the industry feel about the future?. Here's some edited highlights from a section of the report entitled 'The Future of Combustion'.
There will not just be the one and only powertrain technology
Based on country and area of application, multiple drivetrain technologies will co-exist alongside each other – execs globally believe that by 2040 there will be a fairly even split:
Battery Eelectric Vehicles [BEVs] (30%), Hybrids (25%), Fuel Cell Electric Vehicles [FCEV] (23%) and Internal Combustion Engines [ICEs] (23%).
Globally Hybrids (71%) and BEVs (71%) are the clear investment focus of execs. Regionally, Hybrids are remaining the number one investment focus of execs from North America, South America and India & ASEAN. Chinese and Western European execs clearly focus on BEVs.
Consumers still prefer hybrids and ICEs over fully electric vehicles. Clear favourite for their next car is a hybrid. Consumers from more rural areas clearly prefer ICEs over all other technologies'
KPMG: 'This distinctly shows that most consumers have significant doubts about the market maturity of complete new alternative technologies'
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DIESEL COMEBACK?
'We have
concluded that diesel was technologically never dead, just socially
unacceptable....we will see a continuous supply of diesel fuel. Its production
is linked directly to the production of gasoline; both originate in the
processing of crude oil.
The majority of consumers no longer considers diesel to be a viable option. Globally more than two-thirds of consumers oppose diesel. In China, the leading market of battery electric technology, the disapproval rate was 82%.
'Continuing failure to comply with ecological standards would
continue to lower the social acceptance of diesel'.
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FUTURE MIX
The future will be a mix of different drivetrain technologies
The automotive industry is in the middle of a product-driven disruptive period. Driven by industrial policies, as well as society’s increasing ecological awareness, alternative electric powertrains are pushing their way into (mature) automotive markets, currently still with limited success.
Challenges for e-mobility, such as infrastructure, cost and charging, remain high.
It’s completely understandable that we will have a mix of different drivetrain technologies. [They] will co-exist and complement each other, varying in their respective areas of application, car size, also factoring in industrial policies and dependency on raw materials.BEVs, FCEVs, full electric hybrids or engines powered by alternative fuels only account for a marginal fraction on today’s roads. Global executives believe that we will see a strong increase in the [their] share...over the next decade. However, in their opinion ICEs will still account for the largest share of cars by 2030 (31%).
In summary, we believe that the times when the OEM's [Original Equipment Manufacturer] technology strategy exclusively determined the offer in the market are over. Nowadays, regulators, industrial policies, infrastructure and raw material access are driving the agenda.
KPMG: 'Infrastructure obviously plays a key role in the future success of alternative drivetrain technologies. Today’s gas station infrastructure is very pure, while the “refueling / recharging” infrastructure of tomorrow will be diverse.'
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AUSTRALIA
Dutchman ends 'world's longest electric car trip' in Australia
April 7th 2019
Ditchman Wiebe Wakker took just over three years crossing 33 countries in his 95,000 km journey by electric car - a retrofitted station wagon nicknamed "The Blue Bandit" - from the Netherlands to Australia to prove the viability of such vehicles in tackling climate change.
Source: phys.org
Following the UK’s announcement that it will ban the sale of petrol and diesel cars from 2035, Macquarie University Professor Graham Town nominates the year Australians will make the switch to all-electric vehicles.
'Although we’ve been a bit slow off the mark, Australia could ban the sale of new internal combustion engine (ICE) cars from 2030.'That would align us with other countries planning to prohibit petrol and diesel cars in the near future, namely Norway in 2025; Demark, India and Germany in 2030, Britain in 2035; and China and France in 2040.'
So far there has been no national policy to address the adoption of electric vehicles. However the Federal Government is expected to release a national strategy later this year.Many Scandinavian governments have supported the uptake of electric vehicles by waiving sales tax on fully electric vehicles and this has resulted in much higher uptake rates.
In Norway, the government is rolling out free charging infrastructure, so the majority of all new vehicles sold are now electric.
Additionally, these and many other countries are electrifying their bus transport systems, with targets to replace petrol and diesel buses by fully electric buses 10 or more years ahead of their targets for light vehicles.
There are currently less than 20,000 fully electric vehicles on the road in Australia, out of a total of about 20 million registered vehicles.
Analysts predict that the purchase price of an electric will be on par with ICEs by about 2025. Given the much cheaper running costs and environmental benefits, most people in the market for a new car are likely to switch then, if not before.
Most states are in the process of rolling out fast-charging infrastructure along main highways to accommodate longer trips and tourism by electric vehicles. For example the Queensland Government is implementing an ‘electric super highway’ charger roll-out plan to enable tourists to do fly-drive holidays using electric vehicles.
Latest News: The Electric Vehicle Council says 6,718 full electric and hybrid plug-in vehicles were sold in Australia in 2019, up from 2,216 the year before. The Guardian/6th Feb 2020
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NORWAY
The fleet of plug-in electric vehicles in Norway is the largest per capita in the world. In March 2014, Norway became the first country where one in every 100 passenger cars on the road was a plug-in electric; the market penetration passed 5% in December 2016, and attained 10% in October 2018. The Norwegian plug-in car segment market share has been the highest in the world for several years, achieving 29.1% in 2016, 39.2% in 2017, 49.1% in 2018 and 55.9% in 2019.
'As a result of the successful policies implemented to promote EV adoption, the stock of electric vehicles in Norway has increased rapidly, resulting in several unintended consequences, and raising several complaints and criticism. These include: high public subsidies as compared to the value of the reduced carbon footprint of electric vehicles; the possibility of traffic congestion in some of Oslo's bus lanes due to the increasing number of electric cars; the loss of revenue for some ferry operators due to the large number of electric cars exempted from payment; and the shortage of parking spaces for owners of conventional cars due to preference to electric cars (although this was actually the intended policy).'
Source; An extensive Wikipedia entry Plug-in electric vehicles in Norway
Refuelling industry looks to Norway for answers on how to evolve
Archie Hall (Financial Times/ Feb 15 2020)
In Bergen, Norway’s second city, close to one in five cars in are now fully electric — the most of any city, anywhere. Bloomberg New Energy Finance estimates that 57 per cent of global car sales in 2040 will be electric. Norway crossed that threshold in March.
Norway’s government wants to end sales of fossil fuel-powered cars by 2025 and has waived its heavy taxes on new car purchases for electric vehicles.Many multinationals that run petrol stations are visiting the city to try and see whether the electric car mean the end of the road for roadside refuellers?
'After buying Norway’s largest petrol station network in 2012, Canadian refuelling giant Alimentation Couche-Tard designated Norway its “laboratory” to study that precise question.
British consultancy Insight Research also offers fuel retailers what it calls Norwegian “retail safaris” where they can pay to tour petrol station sites across Oslo.
A Boston Consulting Group study published last year found that at least a quarter of petrol stations worldwide risk closure by 2035 without significant changes to their business models. Under BCG’s most aggressive scenario, 80 per cent could shut.
In Norway, while charging outlets are increasingly available at petrol stations, the majority of electric vehicle owners use them only monthly, according to the Norwegian Electric Vehicle Association. Day-to-day, most charge at home or at work.
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CHINA
"We are witnessing a transition from internal combustion engine vehicles to zero-emission vehicles" The transition will take time, says Wang. He calculates that even if close to 100 per cent of Chinese car sales are EVs by 2031, they will still only number around 30 per cent of all cars on roads.
-- Yunshi Wang, director of the China Center for Energy and Transportation at the University of California, Davis.
China buys more EVs than any other nation. In 2018, 125 million electric cars - 984,000 of which were solely battery-powered - were sold in the country, accounting for more than half of all EVs sold globally.
A significant proportion of them were made by BYD Auto, a firm headquartered in Xi'an, China. In 2018, BYD sold nearly 248,000 zero-emissions vehicles globally, outpacing Tesla's sales of roughly 245,000. The company began in 1995 as a manufacturer of batteries for mobile phones and digital cameras, and has since expanded to produce battery-powered cars, buses and trucks. In July 2018, it launched a fleet of 37 fully electric double decker buses as part of London's public transport system.
The shift has been driven by a Chinese government goal of reaching 5 million "new-energy" vehicles - including battery electrics, hybrid cars and fuel-cell cars - on China's roads by 2020, when yearly sales of these cars should hit 2 million.'
Even though the Chinese EV market is already the biggest in the world, EVs still only make up an estimated 4 per cent of total car sales there.
The world leader is Norway, where last year 46 per cent of cars sold were EVs.
- Energy security is also a concern. About 70 per cent of China's crude oil is imported. "China wants to rely mostly on electricity, which it can produce domestically," says Wang.
- The Chinese government has been subsidising electric car designs for a decade and has given financial backing to many EV manufacturers. It has also invested in infrastructure for charging the vehicles.
- By the end of 2018, China had an estimated 342,000 public charging points - and new residential buildings are required to have somewhere to plug in. In comparison, there are about 67,000 public chargers in the US.
Source: 'China drives Into the Future' by Donna Lu [ New Scientist/13 July 2019]
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Huge government subsidies were introduced in China in 2010 to kick start the EV revolution. Those subsidies are due to run out at the end of 2020, although there has been recent specualtion that a rethink may be possible, Sales of electric vehicles declined for the last six months of 2019 and the latest news is that coronavirus outbreak has caused a most severe downturn in sales of EVs in China which is dragging down the global market. According to Bloomberg News: The virus has brought the broader auto industry to a virtual standstill'.
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| SHANGHAI MOTOR SHOW |
UK
[Investors Chronicle /Feb 12, 2020]
By Alex Janiaud, Nilushi Karunaratne amd Tom Dines
The UK government has brought forward its intention to end the sale of new combustion engine-powered cars and vans to 2035, fuelling concerns about the future of the automotive industry and the UK’s readiness for the advent of electric vehicles.... the government prepares to withdraw its plug-in car grant in March, which has supported electric car sales growth and provided customers with as much as £3,500 to purchase low-emission vehicles.Out of the 149,279 cars sold in the UK in January 2020, only 4,054 were battery electric vehicles, according to the Society of Motor Manufacturers and Traders (SMMT) – although this was up from 1,334 in 2019. Plug-in hybrid electric vehicles accounted for 4,788 of car sales, again having increased from 2,268 cars last year.Diesel and petrol car sales fell 36 per cent and 9.5 per cent, respectively, year on year in January, as part of a broader downward trend in automotive sales, in a sign that the UK’s electric car boom may have relied in part on the government’s grant.“For the UK market to stand any chance of meeting the extremely challenging 2035 goal, an extensive package of government support is vital,” the SMMT said. It advocated extending grants to all ‘ultra low emission vehicles’, citing negative consequences in other European markets from prematurely removing support “before the market is ready”.*
Infrastructure/Charging Points:
A report commissioned by
Scottish Power suggests the UK will need 2.6m public charging points by 2050 to
meet its net zero target. Slow progress is being made.
According to charging point
locator Zap Map, there are more than 30,000 charging connectors spread across
almost 11,000 locations. Recent growth has been driven by the installation of
faster charging points.
National Grid (NG.) has called
on public funding for “ultra-rapid” charge points, capitalising on the
proximity between the UK’s main transport corridors and high-voltage
transmission network. It has identified 54 motorway
service stations that could put 99 per cent of electric vehicle drivers within
50 miles of a charging location.
BP (BP.) acquired Chargemaster
in 2018 and had more than 7,000 charging points in the UK at the end of last
year. For Tufan Erginbilgic, outgoing chief executive of BP’s downstream
business, the ultimate aim is to “closely replicate the current fuelling
experience”.
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Aside from having enough
charging points, a critical question is whether the electricity network
can cope with increased demand.
National Grid’s ‘Future Energy
Scenarios’ report forecasts that annual electricity demand from road transport
could increase from around 1 terrawatt hour (TWh) in 2020 to up to 96 TWh by
2050.
Major schemes to introduce new
grid capacity typically take five years of planning and delivery, and thinktank
Energy Systems Catapult believes there is a “real risk the uptake of
EVs is potentially much faster than the investment cycles within which network
operators operate”.
National Grid is confident
additional demand can be met through ‘smart charging’ which manages
energy consumption. Charging can be deferred from peak times to periods when
there is spare capacity and consumers are incentivised with cheaper off-peak
power. Regulator Ofgem calculates that flexible charging would
enable at least 60 per cent more electric vehicles to be charged, reducing the
need for expensive upgrades to network infrastructure.
If the UK is serious about
ramping up its electric vehicle infrastructure, it might look to emulate
the Netherlands, where Total SA (TTA) was awarded
Europe’s largest electric vehicle charging contract to install and operate up
to 20,000 new public charging points.
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As the auto sector shifts away from petrol and diesel engines, the manufacturers and infrastructure companies are – understandably – expected to face the bulk of the work in facilitating the shift towards electric vehicles... the sector is facing sharp declines in the number of new car registrations here and now.
The consumption patterns of electric vehicle owners are different from those of traditional drivers, with demand for oil products disappearing and less demand for parts replacements.The heavier average weight of electric vehicles, along with higher rates of acceleration, are expected to drive increased demand for tyres.The service intervals [on an EV] can be around every 25,000 miles, compared with 10,000 miles currently, and batteries have fewer parts than internal combustion engines, meaning fewer things can go wrong.“It’s going to be significantly longer service intervals, less complexity for things to go wrong. So, there will be a gap to your [aftersales],” he said.
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However, this does not mean that electric vehicles will be the government’s favoured automobile option in the long term. Mike Allen of Zeus Capital notes that, at the start of the century, diesel was seen as the environmentally friendly option endorsed by the government, but now faces bans.“I can fully see a situation where people [who] own electric cars suddenly have to pay more for their electricity to charge up their cars because of the pressures on the national grid, and the government saying you should drive a hydrogen car,” he said.
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