The transportation industry has been revolutionised since the introduction of electric vehicles (EV), not just for their positive environmental impact, but also with their marketing tactics, revenue generation and distribution.
We are seeing an increasing number of electric cars on the road, with the likes of Tesla leading this breakthrough in transitioning into renewable energy within transport. However, this transition could be further accelerated once a number of hurdles have been resolved, particularly around practicality and costs.
The adoption of EVs
First, let us look at why there has been a growing demand for electric vehicles. The adoption of EVs is significantly driven within Europe and China with the US shortly behind. The UK has announced the production of petrol and diesel cars will seize by 2030, encouraging the production of electric vehicles. Similar regulations have been adopted across the world. China hopes to reach carbon neutrality by 2060 which includes the increase in production of EVs as well as States in the US such as California also expected to sell only EVs from 2035.
Interestingly, the leading EV manufacturers are not the household names typically associated with traditional combustion engines. Besides Tesla, numerous manufacturers are appearing particularly in California and China. Many combustion engine car manufacturers have tried to break into the EV market but have failed although companies such as Volkswagen plan to continue their efforts by spending €35 billion on their EV business over the next five years.
These vehicle disruptors differ from their petrol counterparts in more ways than just energy usage. They typically don’t have dealerships and have predominantly relied on word-of-mouth for advertising and marketing. Not owning a dealership can save up to 10% on costs. Instead, their businesses depend on technology and innovation as EVs are no longer seen as short-term ownership with frequent trade-ins, but rather a long-term investment that utilises software updates.
It is expected that an EV battery will last one million miles of usages, significantly more than a combustion engine. One issue this does cause for EV manufacturers is how to maintain revenue. If there isn’t a demand for upgrading cars frequently, an alternative is to ensure the software can be upgraded on a subscription basis. As technology and software will be the key revenue maker with the EV market, we are seeing large technology names such as Apple begin to explore this market.
To buy an EV in the first place, however, is no cheap transaction. The retail price of each component of an EV totals €20,900, notably higher than a combustion engine car at €14,169. The most expensive component of an EV is the battery, which can account for 30-40% of the total cost. The price of the battery is falling however, with expectations parity – the battery price will equal combustion engine price – will be met by 2023.
For this to be achieved, the cost of battery energy will need to reach $100/kwh, down from $156/kwh in 2019. While this might seem like a large jump over four years, to add some perspective, it cost nearly $1,200/kwh in 2010 and therefore the momentum is achievable. Once cost parity is met, EVs will become much more affordable.
Whilst the challenge of making them affordable is being resolved, there still remains the practicality of them. Unlike a petrol-fuelled car, an EV driver is unable to recharge in a few seconds and get back on their trip, therefore, being able to recharge is a necessity to enable EVs to become practical. The European Union plans to have one million charging stations available by 2024.
Oil companies including BP and Shell have pledged to assist in rolling out the charging stations. Shell plans to provide 500,000 stations by 2025 following its acquisition of ubitricity, UK’s largest electric vehicle charging network. The adoption of EVs in the US is also likely to grow as President Joe Biden plans to build 500,000 stations by 2030 along with 35 million EVs on the road as he plans to improve the environmental impact of the country.
Considering these targets, EV sales will equal combustion engine car sales by 2035 at roughly 45 million each. EV’s sales figures are forecasted to continue rising to nearly 90 million by 2050 with combustion engine car sales falling to 20 million.
Hybrids have provided an adequate steppingstone from petrol-fuelled cars to the EVs we are seeing nowadays. In the future, we will treat our cars just like how we treat our mobile phones, paying a monthly subscription for software access and charging it on a daily basis rather than filling up when we are running on empty. We are still a long way off from hover cars but EVs will acquire a significant market share in the next five to ten years.
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