The hum you hear in the distance is a sign that the concept of mobility has changed for the better. Although challenges remain to be overcome in the electrification process, some opportunities deserve a fight. This is especially evident in cities where congestion, emissions, and safety are major concerns today. The status quo will only worsen mobility issues as the population and GDP grow, driving increased vehicle ownership and miles driven. In response, the mobility industry is unleashing a dazzling array of innovations designed for urban roads, such as mobility-as-a-service, advanced traffic management and parking systems, freight-sharing solutions, and new transportation concepts on two or three wheels.
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Three main factors are responsible for the current opportunity to fundamentally transform our way of moving: consumer behavior, regulation, and technology.
Regulation. Regulation. Globally, regulators are setting more stringent emission targets. The European Union introduced its “Fit for 55”, which aims to align climate and energy policies, as well as land use, transportation, and taxation, in order to reduce net emissions of greenhouse gases by at least 55 percent by 2030. The Biden administration also set a target for electric vehicles (EVs) to reach 50 percent by 2030. Most governments offer EV subsidies in addition to mandates.
By promoting alternative modes of transportation, such as bicycles, cities are reducing the use of private vehicles and congestion. Paris has announced that it will invest $300 million in updating its bicycle network and converting 50 km of car lanes to bicycle lanes. In many urban areas, access regulations are being implemented for cars. Over 150 European cities have created access regulations to deal with low emission and pollution emergencies.
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Consumer behavior. As more people adopt alternative, sustainable modes of transportation, consumer behavior is changing. Inner-city trips on shared bicycles and electric scooters have increased by 60 percent over the past year. The latest McKinsey survey of consumers suggests that average bicycle usage (shared or private) could increase by more than 10% in the post-pandemic world. Consumers are also becoming more receptive to the idea of shared mobility. Over 20 percent of Germans who were surveyed said they use ride-pooling services (6 percent do it at least once a week), which helps reduce vehicle miles and emissions.
Technology. The automotive industry is accelerating innovation in technology as it develops new concepts for electric, connected autonomous, and shared mobility. Over the past decade, the industry has received more than $400 billion worth of investments. About $100 billion of those came since the start of 2020. This money is going to companies and start-ups that are working on electrifying transportation, connecting vehicles, and autonomous driving technologies (See ” The future of mobility: A reality check, April 2021). These technological innovations will reduce EV costs and make electric sharing mobility a viable alternative to owning a vehicle.
The pace and scope of the change will vary, but electrification will be a major factor in the future of mobility. Launching new EVs on the market will help to ensure the rapid, widespread adoption and use of electric mobility. To make this transformation a success, everyone in the mobility ecosystem has to be involved, including EV manufacturers, suppliers, financiers, dealers, and energy providers.
Exhibit 1.
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The transformation of powertrains for passenger vehicles is underway.
In the second half of 2020, EV penetration and sales accelerated in major markets despite an economic crisis brought about by the COVID-19 epidemic. This development was led by Europe, where EV adoption surpassed 8 percent thanks to policies such as stricter emission targets for OEMs and generous consumer subsidies.
Discussions in 2021 have focused on the date when sales of internal combustion engine (ICE) vehicles will cease. In the United States and Europe, new regulatory targets aim to have a minimum of 50 percent EVs by 2030. Several countries also announced accelerated timelines that would ban ICEs in 2030 or even 2035. Some OEMs announced their intention to stop investing in new ICE models and platforms, and others have set a date for the end of ICE vehicle production. More than 45 percent are considering purchasing an electric vehicle.
The continued acceleration of electrification puts significant pressure on OEMs and their supply chains, as well as the wider EV ecosystem, in order to achieve these targets. This is especially evident when it comes to the necessary charging infrastructure.
By 2035, the biggest automotive market will be electric.
Regulatory pressures and consumer interest in EVs differ greatly from region to region. In Europe, the market is heavily regulated and subsidized. However, in China, there are still strong consumer incentives despite the reduced incentives. The United States has seen a slow growth in EV sales due to both a lack of regulatory pressure and consumer demand. However, the trend will change with the new administration.
We expect global EV 1 adoption will reach 45 percent, under the current regulatory targets. Even this transformational EV growth forecast is still far below the level required to achieve net-zero emissions. By 2030, EVs will need to represent 75 percent of global passenger car sales. This is a significant increase over the current pace and course of the industry.
Europe, as a market driven by regulations and with a positive consumer demand trend, will electrify fastest. It is also expected to be the global leader in electrification based on EV market shares. Several countries have announced that they will stop selling ICEs by 2030. This is in addition to the European Commission’s target of 60 percent EVs by 2030. Seven OEM brands in the European Union have pledged to sell 100 percent electric vehicles by 2030. In the most probable accelerated scenario, consumer adoption will surpass regulatory targets, and Europe will achieve around 75 percent of EV market shares by 2030. The European Union has set a target of zero emissions for all new cars by 2030.
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China will continue to grow rapidly in the electrification sector and be the world’s largest EV market. The strong consumer demand is the reason for this, despite low EV subsidies and no end date set for ICE sales. Dual-credit policies have led to an increase in EV shares among OEMs. In the accelerated scenario, our adoption modeling predicts that Chinese EV sales will exceed 70 percent in 2030.
The Biden administration in the United States announced a target of 50 percent electrification by 2030, as well as strong investments in charging infrastructure and stricter fleet emission targets. The main reason for the EV adoption will be California and other states following its CARB ZEV regulations. US OEMs have supported electrification targets and declared an ICE ban by 2035. This means that the United States will be following Europe and China with a slight delay in EV adoption.
Exhibit 2.
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The e-mobility revolution will affect more than just the automobile industry.
The entire EV ecosystem and value chain will be affected by the European Union achieving an accelerated scenario with around 75 percent of EVs sold by 2030. To reach net zero, the industry will need to decarbonize vehicles throughout their entire life cycle.
Existing automotive suppliers will need to switch production from ICE components to EV components. Europe will need to build 24 new giga-factories for battery production to meet local demand. By 2030, there will be more than 70 million EVs on roads. The industry must install and maintain a large number of public chargers. To meet the EV charging needs, renewable electricity production must increase by 5 percent. The emissions produced by BEVs must also decrease, as they are currently 80 percent more polluting than ICE cars (Exhibit 3).
