Cover StoryEnergyIssue 01 - 2023MAGAZINE
GBO_ Electric Vehicle

Refueling EVs becomes ‘expensive affair’

David Reina, Senior Lecturer in Marketing at SDA Bocconi School of Management says, electric vehicles are not environment friendly as advertised

According to the Royal Automobile Club (RAC), the cost of charging an electric car at pay-as-you-go public charge stations has increased by 42% in recent months. The RAC reported that the average cost per kilowatt hour (kWh) for using the chargers has risen by 18.75p, to 63.29p. According to recent statistics, a driver who only uses quick or ultra-rapid public chargers pays about 18p per mile for electricity, compared to about 19p for gasoline and 21p for diesel. The increase has been attributed to the rising gas and electricity wholesale prices.

During a press conference, Royal Automobile Club spokesman Simon Williams said, “It remains the case that charging away from home costs less than refuelling a petrol or diesel car, but these figures show that the gap is narrowing as a result of the enormous increases in the cost of electricity. These figures very clearly show that it’s drivers who use public rapid and ultra-rapid chargers the most who are being hit the hardest.”

An AA survey of 12,500 drivers showed that rising domestic energy prices are putting many people off from switching to electric cars. Some 63% of respondents said the increase in home electric bills is contributing to them sticking with petrol or diesel models, while 10% stated it was the main reason.

Prof David Reina, Senior Lecturer in Marketing at SDA Bocconi School of Management, Milan, and SDA Bocconi Asia Center has an altogether different take on the EV market. He told Global Business Outlook that there are two remarkable things that need to be considered. According to him, above 90% of those who bought a fully electric car in the past would buy another one. And second that more than 400 BEVs models will be launched in the next five years which means there will be possible demand for EVs in the future. According to Reina, it is not just Tesla that can come up as a winner in the EV market, the other players also have a chance. He says people will switch from traditional cars to EVs as the cost of ownership is significantly lower and maintenance and repair costs of EVs are much cheaper.

On whether the United Kingdom government should come up with a possible solution for EV, Reina said, “In any case, as for the United Kingdom scenario it would be wise to implement policies to make the EV option more affordable for larger segments of the population. The policies should be combined with a parallel plan concerning renewable sources of energy and diffused energy storage. Otherwise, a bottleneck for the growth of electric cars would be created even if the big subsidies are given to people”.

EV industry recession-proof?

McKinsey report stated in order to envision what may lie ahead for the EV market it is important to understand how the EV sector was changing before to COVID outbreak. The report stated EVs have grown in popularity among drivers over the last few years. Early adopters have fostered 60% growth year-over-year for the past decade. This switch to EVs is being made because of their quiet engines, favourable environmental effects, and cheaper fuel. Considering that total auto sales have been down over the past two years, this rise is no small accomplishment. Additionally, a Boston Consulting Group (BCG) analysis from earlier this year even forecasted that by 2030, sales of cars using internal combustion engines (ICEs) would surpass those of EVs. This switch to EVs is being made because of their quiet engines, favourable environmental effects, and cheaper fuel. Considering that total auto sales have been down over the past two years, this rise is no small accomplishment. Additionally, a BCG analysis from earlier this year even forecasted that by 2030, sales of cars using internal combustion engines (ICEs) would surpass those of EVs. It’s clear electric cars were on the rise up until the COVID outbreak, but how is the current situation when experts around the world predict a recession to hit in 2023?

According to David Reina, there will be no negative impact on EVs despite the looming recession. “Electric cars will basically cannibalize two market segments: premium price and low price. And the former is resilient to economic crises, while the latter is going to shift from cars owned by customers to cars shared by them,” David Reina said. But on the other hand, according to Nissan Motor Corporation CEO Makoto Uchida, the recession will be going to have extreme economic volatility.

He said in the month of September 2022 Businesses and revenue plummeted, which resulted in widespread salary cutbacks, furloughs, and layoffs. It’s fair to presume that during a recession many will be less inclined to adapt to new technology, delaying non-essential investments until the situation stabilizes. Additionally, consumers are likely to opt for more economical choices when possible, avoiding premium consumer goods. Moreover, with the massive increase in oil prices, gas-powered vehicles are not economical to operate, which makes it harder to argue that EVs will help drivers save money on fuel. But on the other side, “EV prices have been steadily decreasing, but they may not be falling as quickly as once predicted. However, despite all the concerns about the future of electric cars, EVs have shown significant resilience in the past few months, even in the face of the recession,” Uchida said.

Electric Vehicles market takes a dive

Europe: According to figures from the Italian Foreign Car Maker Association, sales of battery-electric vehicles fell by 58.1%, while registrations for gas and diesel-powered cars dropped by 97.5%. According to data from the Federal Motor Transport Authority, hybrid and fully electric vehicle registrations increased by 208% and 56%, respectively, in September 2022 in Germany, while total vehicle registrations declined by 38%. According to data from EV-Volumes, this trend is also seen in practically every other nation in the world. This resiliency has led to a large increase in the market share of EVs.

Additionally, EVs are not only proving to be more durable in the midst of a declining auto industry, but they are also showing some recovery signs. For instance, major automakers are reporting the same amount of showroom traffic in September of 2022 as they had in the same month in 2021. Even the completely electric and hybrid car models sold more in September, according to Chinese automaker BYD.

China: China being the biggest market for EVs in the world declared that electric vehicles would be given top priority in 2023 stimulus measures, extending EV subsidies and tax benefits for two more years. In order to counteract the economic slowdown brought on by COVID-19 and economic slowdown, the nation has also committed to investing in EV charging infrastructure. China will invest up to USD 1.5 billion to install 200,000 EV chargers by the end of 2023, 20,000 of which would be public ones, according to CleanTechnica.

USA: Democrats in the USA have put up the Green New Deal, a programme for economic recovery that intends to “power all modes of transportation and produce all of the nation’s electricity from renewable sources by 2030.” Even though the agreement has received harsh criticism from Republicans, Joe Biden has stepped up the fight for the nation’s sustainability goals. California and 14 other states, which make up more than one-third of the US auto market have come up with their own carbon emission standards. This act illustrates that there is a significant portion of the USA that is eager for higher sustainability standards, which would bolster EV growth.

Electric Vehicles zero carbon emission reality?

According to David Reina, EVs are not as environmentally friendly as advertised. He said, “Instead of looking at electric mobility as a means to reach the carbon emission goal, which is basically impossible, we should pay much more attention to the fact that electric cars and trucks would significantly lower the overall CO2 emitted by the industry.”

“Difference in performance, for a combustion engine is wasting 80% of the energy generated by radiating heat in the environment, whereas an electric engine is wasting 20% of energy. Differences in recyclability for electric cars are much simpler than traditional cars. In practice, they are almost 100% recyclable. Furthermore, used EV batteries can be refurbished and turned into energy storage. A phenomenal business and a good thing for the planet, as energy storage demand is a consequence of greater use of sun and wind, which are intermittent and enable nations to increase power generation without increasing CO2 emissions. Therefore, the car industry is going to become both a formidable source of raw materials and a fundamental enabler of growth in renewable sources of energy,” David Reina added.

Industry prioritizing investment in more sustainable solutions

Now that a recession is on the horizon, some people are not only keeping to their word but are really choosing EVs over fuel-powered vehicles in terms of manufacturing, sales, and investment. For instance, Volkswagen is prioritizing the production of electric vehicles, opening its Zwickau facility, which produces the ID.3. Renault is ceasing to sell ICE vehicles in China in favour of an all-electric lineup. A joint venture in Asia introduced a new low-cost electric automobile brand. On the other hand, more than just automakers are placing bets on environmentally friendly EV technology. China’s two biggest power utilities recently invested a combined €3.63 billion in the construction of over 450.000 charging stations. All these examples demonstrate how the industry is shifting investment and clearly driving the market towards more sustainable solutions.

Consumers shifting towards Electric Vehicles

Even customers expressed their support for electric mobility plans and demanded the development of more environmentally friendly, fuel-efficient, and climate-friendly modes of transportation. This might be attributed to consumers switching to greener modes of transportation as a result of the obviously better skies that followed a few weeks of having fewer fossil-fuel-driven cars on the road. According to Accenture Consumer Research, over 50% of respondents think that following the COVID pandemic and the Russia-Ukraine war they will make more environmentally friendly decisions. COVID-19 has already changed consumer habits. The overall link between stay-at-home activities and better air quality had raised consumer eco-awareness, which is advantageous for both the environment and the EV market.

Future of Electric Vehicles looks bright

Despite the COVID pandemic and Russia-Ukraine war, EV sales are surprisingly climbing for some markets, brands, and automobile models, significantly outpacing Intercontinental Exchange (ICE) sales. The need for more environmentally friendly modes of transportation is also being recognized by governments, companies, and consumers. In many ways, COVID-19, lockdowns, recession, and energy crisis may have served as a wake-up call to society. Now that the opportunity to develop recovery plans to meet the next impending global disaster — global warming — has presented itself, this may have been the case. EVs are an established solution that we can use to accomplish this, therefore demand them will only increase. Therefore, all signs point to the global crisis not ending, but rather accelerating the EV boom in the long term.

Worldwide sales of Electric Vehicles

Over 6.75 million electric vehicles were sold globally in 2022. Sales are anticipated to climb to USD 9.5 million by the end of 2023. Given how well-received electric vehicles have been on the market, more people are now inclined to purchase them. Tax breaks and cash refunds are only two of the financial incentives that several nations offer to promote the purchase of these eco-friendly electric automobiles. In the future, increasing consumer expenditure on electric vehicles will be a result of increased government backing.

In China, sales of electric vehicles nearly tripled to 3.3 million in 2022, making up about half of the global total. Sales increased significantly in both Europe (by 65% to 2.3 million) and the United States (more than doubling to 630 000). Compared to other markets, Chinese electric vehicles are often smaller. The price differential with conventional cars has dramatically narrowed as a result of decreasing production costs. In China, the median cost of an electric vehicle was just 10% higher than that of comparable conventional vehicles, as opposed to 45% to 50% on average in other significant markets.

In contrast, sales of electric vehicles are trailing in the majority of emerging and developing nations, where only a few models are frequently offered at prices that are out of reach for consumers in the mass market. According to International Energy Agency (IEA), around 10% of electric cars sold out worldwide in 2022, and the figure for global truck sales was just 0.3%. So far China is the only country where electric cars have been widely used, thanks to significant government assistance. The future of electric unit sales is expected to reach 16,206.900 cars in 2027. Even more, innovative ways for e-mobility services such as car-sharing, ride-sharing, and ride-hailing will also raise consumer EV awareness.

International Energy Agency Executive Director Fatih Birol said in a press conference, “Few areas of the new global energy economy are as dynamic as electric vehicles. The success of the sector in setting new sales records is extremely encouraging, but there is no room for complacency. Policymakers, industry executives and investors need to be highly vigilant and resourceful in order to reduce the risks of supply disruptions and ensure sustainable supplies of critical minerals. Under its new Ministerial mandate, the IEA is working with governments around the world on how to strategically manage resources of critical minerals that are needed for electric vehicles and other key clean energy technologies.”

Electric Vehicle faces challenges

Experts say there will be significant supply chain issues that could scuttle the optimistic future of electric vehicles. To keep up with the growing demand for electric vehicles, plenty of raw materials are constantly needed. Meanwhile, rising competition is driving up the price of raw materials. Metals including aluminium, steel, copper, lithium carbonate, graphite, and nickel have all seen an increase in price.

Lithium prices, a key mineral for automobile batteries, were roughly seven times higher in 2022 than they were at the beginning of 2021. Nickel and cobalt prices also increased. If these costs remain at their current levels, the cost of battery packs might rise by 15%, reversing several years of declines. The Russian invasion of Ukraine has increased pressure, since Russia supplies 20% of nickel to the world.

As the market for electric vehicles expands, a skilled workforce is also in great demand. More professionals with knowledge of electric car engineering, production, and repair are required. Engineers need to be adaptable in the face of changes in the industry, thus they require comprehensive education.

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