The electric vehicle (EV) industry has faced some early growing pains. Further expansion of the industry depends on its ability to over come the hurdles it faces.
Many countries have seen growth in the EV industry. China currently takes the lead with more than half of global EV sales in 2018, an 85% increase from the previous year. The Nordic countries are ahead in Europe, with EVs making up 40% of the market share in Norway. Steady growth has been seen in the UK over the past few years, yet EVs currently only make up 2% of the market share. Globally, the outlook looks positive. Pledges to cut CO2 emissions are driving forward this rapidly growing industry, and front runners such as Tesla are pushing the accelerator. Yet, the industry has experienced some growing pains. We have seen issues with supply chains and bottom line results have been affected. The EV industry has potential for significant expansion, yet we must first overcome the hurdles it faces.
Overcoming the roadblocks
The profitability of the EV industry has been highlighted as a concern. We are currently seeing greater investment, without the bottom-line results expected. In 2018 there were negative margins for the majority of EVs sold. In the short to mid term, there are options available to boost profitability. For example expansions in partnerships are needed, particularly with competing OEMs on development and manufacturing. EVs may also require bold decisions when it comes to vehicle redesigns, with some potential content trade-offs.
Also, right now we are seeing little variety in the price point and range of EVs on the market. The majority are high-end premium vehicles. A greater number of small, affordable ranges are needed and in the US, there is a growing demand for SUV style vehicles. To achieve this, there is a need to drive down OEM costs, such as batteries and other power electronics.
A lack of synchronisation in the value chain is also contributing. The recent issue of a shortage in battery cell production in Europe is an example of this. There needs to be greater planning in investments in the mining of raw materials, increased localised battery cell production and improved OEM volume planning. Integration between industries and governments, as well as a more streamlined value chain, may also help to ease the problem. The strategies need to be supported by all players in the system. This is extremely important and will help reach clean-air targets over the next 20 years.
Air quality is one of the driving forces behind the uptake of EVs. With zero-emissions at the tail pipe, and greater use of renewable energy sources, EVs are at the forefront of the environmental revolution. To further the industry, there needs to be investment in EV commercial vehicles, such as e-buses, as well as electric construction equipment.
A global outlook
We have seen many great achievements in the EV industry. Investment in EV platforms and technical innovation in areas including batteries, have contributed to this. The industry has experienced some growing pains and in order to achieve its full potential, we need bold moves, new designs and better collaborations. This will further accelerate growth of the EV industry, with reductions in carbon footprints and countries achieving their clean air targets.
Source: McKinsey & Company – Expanding electric-vehicle adoption despite early growing pains