Electric vehicles Setting a course for 2030

Introduction

Before the COVID-19 pandemic shook up the automotive industry – along with every other industry – electric vehicles were moving steadily into the spotlight. The combined annual sales of battery electric vehicles and plug-inhybrid electric vehicles tipped over the two-million- vehicle mark for the first time in 2019. This much-anticipated milestone may have become overshadowed by economic uncertainty and changed consumer priorities, butthere is value in taking stock of the electric vehicle market even now.

Global progress and forecast

THE EV MARKET’S collective accomplishments over the past two years off er hope, despite the short-term impact of COVID-19: a pattern of continued growth, which is expected to be sustained throughout the 2020s. As BEV and PHEV sales surpassed two million vehicles in 2019 (see fi gure 1), EVs staked their claim on a 2.5 per cent share of all new car sales last year. Looking back at BEVs in 2019, they accounted for 74 per cent of global EV sales: an increase of six percentage points since 2018. This rise was partly stimulated by new, stricter European emissions standards that persuaded manufacturers to favour the production and sale of zero-emission vehicles. Another factor is the advanced state of the BEV market in China, compared to the rest of the world.

EVs: annual passenger-car and light-duty vehicle sales in major regions

But generally speaking, the course seems clear for growth over the next decade, despite the
potential lasting impact of COVID-19 on total car sales over the next three years. To under-stand how things might continue, we need to understand what’s been taking place across the various regional markets over the past year.

EVs in regional markets
EUROPE
Europe’s EV sector saw significantly more growth than other regions in 2019. The Nordics and the Netherlands continued to lead the way; Norway achieved 56 per cent market share, and two of the top ten best-selling cars in Holland were BEVs.3 The United Kingdom and some other countries reported triple-digit growth for the year. Favour-able government policies and a change in consumer attitudes were the catalysts, driven primarily by growing concerns about climate change. Climate change rose to the top of many European governments’ agendas. The United Kingdom committed to a target of net zero emissions by 2050, and proposed a ban on the sale of all polluting vehicles by 2035.4 Germany plans to cut greenhouse gas emissions by 40 per cent by the end of 2020, by 55 per cent by the end of 2030 and up to 95 per cent by the end of 2050, compared to 1990 levels.

2030 sales forecast
With one eye fi rmly on progress so far, Deloitte has analysed the most recent indicators to develop an up-to-date prediction of the EV market for the next ten years. We know that BEVs already outperform PHEVs globally, and predict that by 2030, BEVs will likely account for 81 per cent (25.3 million) of all new EVs sold. By contrast, PHEV sales are expected to reach 5.8 million by 2030. A recovery from COVID-19 will see ICE vehicles return to growth, up to 2025 (81.7 million), then experience a decline in market penetration thereafter.

Outlook for annual global passenger-car and light-duty vehicle sales, to 2030
Outlook for EV market share by major region

EV GROWTH BEYOND 2030
Beyond 2030, we expect the rate of growth in EV sales to slow. Some markets will be unable to
support the transition to EVs in the same way that wealthier nations will over the next decade.
Consider that, beyond 2030, one of the key factors in sustaining growth will be the implementation of suitable charging infrastructure. This requires multi-billion-dollar capital investments – achievable in some markets through a combination of public and private investment, but unlikely to be achieved uniformly around the world. In countries that cannot invest in charging infrastructure, we expect the market for ICE vehicles to remain for some time.

Four factors driving growth
Despite the pressure exerted on the market by the COVID-19 pandemic, the long-term outlook
for EVs is strong. The significant shift in expected volume of BEVs and PHEVs by 2030 is based
on four factors: consumer sentiment, policy and regulation, OEM strategy and the role of
corporate companies. All four of these factors saw major changes in direction over the last year, prior to the emergence of COVID-19, and have since been shaped further by the pandemic.

Consumer priorities for EV adoption, 2018 and 2020

From 2018 to 2020, there were some noticeable changes in consumer attitudes toward EVs.
Concerns over the cost/price premium have diminished in every country apart from China (+ two percentage points), which has seen cuts in EV subsidies. Driving range has remained the number one concern in Germany, and became number one in France, but there are now fewer consumers citing it as a concern in those two markets. Elsewhere, the lack of charging infrastructure has become the top priority for consumers, reflecting the possibility that they are starting to see EVs as a realistic option and are considering the practicalities of ownership.

Timeline of strategic OEM targets for EVs

New landscape, new approach

IN OUR PREVIOUS report, we identified unprece-dented levels of competition that threatened
incumbent OEMs as the shift to EVs began taking hape.32 That threat has reduced somewhat over the past year as those OEMs doubled down on their investment in the sector, and as the reality of com-peting in the automotive industry hit home for new market entrants. In China, for instance, 486 registered EV manufacturers have raised over $18 billion in funding since 2011, but their collective manufacturing capacity is unsustainable – considering all reasonable sales forecasts.34 As a result, we expect to see consoli-dation of the market; some new entrants will fail, and the number of partnerships and joint ventures between Chinese manufacturers and Western OEMs will rise. Outside China, many established OEMs are actually investing in start-ups to take advantage of the capabilities they’ve built.

Automotive consumer segmentation framework
The nine consumer segments of the United Kingdom automotive market
Consumer segment descriptions of the United Kingdom automotive market

Key behavioural differences This kind of segmentation provides a detailed understanding of modern automotive consumers’ needs, wants and behaviours. Before defining the nuances of each United Kingdom segment by creating Customer Portraits , let’s consider the obvious differences in key behaviours and attitudes. Prioritise to drive purchases Having developed these nuanced Customer Portraits, OEMs and other stakeholders can drill down into the observations to draw conclusions about who is likely to buy what. This will highlight segments to prioritise and where marketing and proposition development budgets can be deployed most effectively.

Share of United Kingdom consumer segments who would consider an EV purchase

Checklist for the journey ahead
Ultimately, it’s up to all stakeholders in the auto-motive industry to consider how they best serve their prioritised segments. Consumer interest has been sparked, and the onus now lies with new-entry OEMs, captive finance companies, dealerships and, especially, established OEMs to feed the fire.

To maximise the opportunities presented by the growing demand for EVs, business leaders in all regions should examine the priorities they have defined according to the segmentation exercise and ask themselves the key questions shown below. The answers may help soften the blow COVID-19 is making on the market and/or aid in the recovery. They’ll also highlight how well-positioned the busi-ness is to help accelerate growth in the EV market and reap the benefits when EVs take centre stage.

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