Is electrification still coming as a shock to the automotive sector?Posted Mar 23, 2021
Is electrification still coming as a shock to the automotive sector?
Bankruptcy, wrote Ernest Hemingway, happens two ways. “Gradually, then suddenly.”
It feels much the same with electrification in the automobile industry.
In 1898, a young Ferdinand Porsche developed the Lohner-Porsche – a horseless carriage with hub-mounted electric motors directly driving each wheel, powered by a hybrid mix of batteries and a gasoline generator.
There was a flurry of electric cars after that, but as petroleum became much more affordable in the 1900s electric vehicle production lapsed again, becoming mainly for NEVs (Neighbourhood Electric Vehicles) like milk floats and postal vans.
But since the oil crisis in the 1970s and then the threat of climate change – another thing that had been talked about (but not acted on) for years – a renewed interest in how to make electric cars replace the internal combustion engine has been slowly but gradually increasing. But mainstream car making carried on much as it had before, based on incremental innovation over ten-year design cycles.
Now we’ve reached the “suddenly” phase
Rigorous climate change and clean air regulations have been accelerated and are now becoming a reality.
Clean Air Zones in many cities are already making diesels and even the latest petrol cars unusable. The UK has declared to allow sales of only non-carbon vehicles by 2030, five years earlier than planned (and 10 years earlier than in 2019!). The EU’s latest Transport Strategy [Footnote 1] targets 30 million electric vehicles (EV) on the road by 2030, with no carbon-fuelled vehicles at all by 2050.
The full implications of the dramatic shift needed in such a short time will be hard to predict. Even a year ago, Herbert Diess, Volkswagen’s Chief Executive, commented on the need for change: “The big question is: are we fast enough? If we continue at our current speed, it is going to be very tough.” [Footnote 2]
So what can the industry do to help make the transformation to electrification successful at such a fast pace?
Facing up to the challenges
The problems that will need to be addressed are complex and far-reaching without any easy or obvious solutions. Here are just some examples:
Infrastructure:The EU’s Sustainable and Smart Mobility Strategy estimates that the EU will need 3 million public charging points by 2030. At the moment it has 200,000, and there’s no clear path to making up that gap.
Materials: The assumption is that as more EV batteries are produced, the costs will go down. However, the massive expansion needed is dependent on raw materials like cobalt, nickel, lithium and manganese that are sourced overseas in often problematic locations. Europe is trying to establish more local production, but it’s estimated that rising material costs may make it much harder to lower battery costs for at least the next five years [Footnote 3].
Safety:Li-ion batteries have to store a large amount of energy at a high voltage. If the batteries are damaged, mishandled or overheat – either in the EV or in the supply chain – they can release toxic gases or go into thermal runaway, which can result in them self-igniting and even exploding.
Strict safety regulations mean that EV batteries require a very different transport and packaging process. So when two major original equipment manufacturers (OEMs) had to implement full recalls on 50,000 EV battery packs that had potentially been contaminated, one of the big bottlenecks was the availability of the correct packaging to move the new batteries (with the additional complication that different packaging is needed to transport those that require disposal or recycling).
Sustainability:Li-ion EV batteries have a sizeable impact on the environment. Not only in the sourcing and transport of raw materials (which is estimated to contribute 30% of a battery’s greenhouse emissions), but also in managing them after their expected 10-year average lifespan in an EV.
Recycling is still enormously complex and inefficient, often using high temperatures to burn away all but a small amount of recyclable material, with transport and handling again a big safety issue. Far better is reuse, with older batteries used as storage for solar panels in homes – and the hope is that we can find ways to make the whole battery lifecycle circular and sustainable.
Competition:The barriers to entry for new entrant OEMs are far lower for Battery Electric Vehicles (BEVs) than for fossil-fuelled vehicles – meaning that future competition will continue to come from tech companies or even financial institutions focused on leasing transport.
Value chain disruption:A conventional ICE powertrain contains over 2000 moving parts, while a typical EV has less than 20. Far cheaper to assemble. Far fewer things to go wrong. Almost no parts to repair or replace and little need for expensive maintenance and servicing.
That’s just one aspect of the transition to electric vehicles that will create huge changes for the European automotive industry. So much of the Tier 1 and Tier 2 value chain will have to be reconfigured rapidly, and there will be complex second- and third-order effects – for example, the used car market and government fuel duty.
More cooperation will bring more competitiveness
Decarbonising transport is critical for combatting climate change (road transport accounted for 21% of all European CO2emissions in 2017 [Footnote 4], so there is a lot riding on it happening as fast as possible.
But the increased pace of change is moving the finish line in ways that make it harder for the industry (and individual OEMs) to respond coherently.
Most OEMs have had to create more ambitious electrification strategic goals for Europe. BMW are looking for 25% EV by end of 2021, Nissan is targeting 42% by end of 2022, Fiat Chrysler 60% by then. Honda is aiming for 100% of their mainstream models electrified by 2022, and Jaguar will be all-electric by 2025. Even Porsche is reverting to its origins by promising that all their cars will be 100% EV by 2030. [Footnote 5]
To make European electrification a success and reach all these goals – with the challenges that electrification brings – we need the industry to work closer together. For example, one area that needs real attention is establishing an EV battery supply chain that is more standardised, cost-effective, sustainable, and safer over the whole battery lifecycle.
Rethinking the battery supply chain
Moving more with less has always been the purpose of the supply chain solutions company, CHEP, which is always looking for ways to make supply chains more economically and environmentally sustainable.
The CHEP’s Battery in Focus Forum brings together people with expertise from very different – and sometimes competing – parts of the industry. OEMs, battery suppliers, financial services, material experts, fleet managers, logistics… they all share a passion and a belief that collaboration is the only way for the industry to move to a battery-powered ecosystem quickly, safely and cost-effectively.
It’s a place where leaders in the industry can get together (virtually, of course, at the moment), and be open about the problems and opportunities that affect us all – and to find new solutions through collaboration.
By working together, we can ensure that the future of the automotive industry need not come as so much of a shock.
Footnote 1: Sustainable and Smart Mobility Strategy – putting European transport on track for the future (9/ 12/2020) https://ec.europa.eu/transport/themes/mobilitystrategy_en
Footnote 2: VW CEO says carmaker faces same fate as Nokia without urgent reforms(Jan 16th 2020)https://www.reuters.com/article/us-volkswagen-strategy-diess-idUSKBN1ZF1OB
Footnote 3: [source: batterymaterialsreview.com] (needs access)
Footnote 4: EU “Road transport: Reducing CO2 emissions from vehicles” 3/9/2020
Footnote 5: Deloitte ‘Electric vehicles – setting a course for 2030’ https://www2.deloitte.com/uk/en/insights/focus/future-of-mobility/electric-vehicle-trends-2030.html
Jaguar press release 15/2/2021