Market overview

New challenges

2020 was a key milestone which represented an end of an old era and a dawn of new era at the same time. On one hand the CO2 emission limits for passenger vehicles and light commercial vehicles became far stricter within the European Union and from this year those manufacturers who exceed the CO2 limit will have to pay significant penalty to the EU budget. On the other hand, the worldwide pandemic of Covid-19 affected several aspects of the global economy, induced and catalysed changes and one of the most affected area was the car industry.

While due to the pandemic one could observe changes like we never saw before, on the other hand, within the car industry the search for the holy grail is going on for several years and as a result, we came across several innovative initiatives, since irrespective of the Covid-19 disease, the manufacturers all have to work on to achieve the goal of net-zero carbon emission set in the Paris Treaty.

Though all industries are challenged to make efforts to reduce greenhouse gas emissions, probably the innovations of the car industry and the fact that those innovations become mainstream can contribute to reach the common goal. One of these innovations is the technology of the electric vehicles (EVs).

Obstacles for the manufacturers

However, there is a long road ahead of us until the EVs become widespread. On the manufacturers’ side the following aspects represent the greatest challenges:

• The availability of batteries in the right quantity as there are only a few battery manufacturers who has appropriate raw material supply and manufacturing technology and most of those are in the Far East therefore the exposure of the European manufacturers is high both in terms of competition and supply chain complexity
• The benefits of EVs can be maximized if the vehicle is based on a platform solely designed for EVs, remodelling an ICE (internal combustion engine) platform to accommodate an electric engine results in limitations and unwanted compromises (e.g., VW e-Golf, Mini Electric, etc.). The development of a new EV platform is extremely expensive, which a manufacturer can only afford if the previous platform has already returned its R&D investment
• The EVs would create and ideal opportunity for rightsizing (i.e., to adjust to a vehicle in terms of size and type that is appropriate for the user), however, the change of European taste results in the increasing popularity of SUVs which by their size and weight are less appropriate to accommodate an electric drivetrain (due to their shape their drag coefficient is high and therefore require bigger batteries which increase the weight of the cars and thus battery range remains miserable)
• In order to meet the new CO2 regulations introduced by the EU in 2020, the manufacturers are trying to comply with a rather complex and imperfect set of rules and to avoid the economic disaster in the shape of CO2 penalties which results in inferior and suboptimal products like the plug-in hybrid vehicles
• The Covid-19 pandemic shook the global supply chains of the manufacturers causing production difficulties and complete halt in most of the factories and as a result, the manufacturers have to reassess the risks of their supply chains (e.g., security of supply vs. lower sourcing prices)

Key points of translation for EV vehicles

As a result of all these factors, the price of pure EVs remained still fairly high, the manufacturers prefer to manufacture plug-in hybrid vehicles as a result of CO2 regulations and the scarce supply of batteries and at the same time, the price of traditional ICE vehicles is spiralling upwards.

Both private and company car users keep waiting and monitor the developments of the market rather than jump to action.

There are five critical points which determine the users’ attitude towards and the widespread use of EVs:

• The primary precondition of the switch to EVs is the affordable purchase price
• Second most important deciding factor is the charging time which according to surveys takes at least half an hour even on fast chargers and it is three time more compared to the ICE vehicles refueling time therefore a more advanced battery technology is necessary which allows faster charging
• The range of the EVs is the next crucial factor and the median expectation is around 470 km. This shows that the users still did not adopt the concept of rightsizing as it is fairly uncommon that someone drives such distance in one day
• Fourth most important condition is the available charging infrastructure as the majority of the people are on the opinion that the use of EVs will skyrocket when the charging will be a service easy of attainment. It can be accomplished two ways: either by the increase of the number of charging points but it requires the capacity increase of the entire electricity grid which is extremely expensive or by a more advanced battery technology which enables faster charging (as mentioned before). In case of company cars there is an additional dimension that users expect a charging solution that is free of charge for them (e.g., charging point in the office parking area or reimbursed public charging point usage).
• The fifth and last factor is the availability of appropriate EV alternative compared to ICE vehicles (e.g., station wagons) which is the second most important factor in case of company purchases.