Global EV Transportation Report

The case for EV is set out by the policy roadmaps across markets. It is driven primarily by the transition to a lower emission transportation framework and the related technological and investment growth in supporting elements of battery and charging infrastructure. The transitory phase in powertrain is getting stronger in most of the leading automotive markets – electric vehicles sales outperformed the overall market level.

Passenger electric vehicles’ segment attracts the maximum attention in policy framework. Such vehicles are likely to account for a rising share of new vehicle sales, reaching over a third of new vehicle sales by 2035. In this regard, many of the electric vehicle markets worldwide are approaching a tipping point – a level where the electric vehicle adoption can be at parity with that of conventional powertrains and are no longer a premium offering.

The rapid growth in charging infrastructure is just a foregone conclusion. It is the timeliness of getting the required capacity that is of paramount importance for all the leading electric vehicle markets. As the BNEF projections indicate, Home Charging segment will have the fastest growth in capacity, followed by Work and publicly accessible slow chargers. Compared across the transportation modes, the passenger electric vehicles hold the maximum share of the demand for charging facilities.

The annual spending on charging infrastructure is poised for a sharp acceleration. The trend shows the momentum picking up in recent years. BNEF estimates for the investment in 2022 suggest it doubled over previous year’s level. By the end of 2023, the investment growth could be even higher. Further ahead, as the projections indicate, the next $100 billion of spending after 2023, could be within three years. Such an outlook is shaped by the varied segments and drivers of the investments underway, whether at a policy-level or private enterprises.

Much of the rise in projected spend derives from the fast and catch-up mode of growth in markets, such as those of the US and China. European region comparatively has a mature base, and thus a relatively low incremental growth requirement in the outlook period. Policy funding measures such as the US Inflation Reduction Act’s $7.5 billion for charging stations are major boosters for the investment flow in this space. The ramp up in private spending is discernible from the recent major announcements from automakers such as Mercedes planning 10,000 ultra-fast chargers or the hydrocarbon majors (Shell and BP) aiming a massive build out of fast-charging to match it with the widespread motor fuel distribution chain.

Though home chargers constitute over three-quarters of the physical capacity, the predominant share of investment will be in public charging infrastructure. This is because of the higher cost of such equipment. Also important is that with capacity expansion underway in most of the regions, the charging equipment supply chains are likely to benefit from economies of scale. The cost of capital would thus be proportionately lower in the projected period.

The rapidly evolving business of electric vehicle charging offers a major potential in revenue and profitability, helped in large part by a significant and inelastic demand. Bain’s projections in this context reflect the step up in investments together with the rise in market players such as the electric utilities, standalone charging service providers, technology providers and original equipment manufacturers, among others. Further, the role of smart charging and energy management systems is expected to play a bigger role, as complex networks necessitate advanced tools. For instance, about a third of the charging business by 2030 could be based on the bidirectional or vehicle-to-grid technology in major power transmission and distribution networks.

There is a range of business offerings in the electric vehicle charging value chain. The capacity provision will change based on the demand segment before a market player. For instance, the long-distance transit charging segment requires high capital expenditure segment and its profitability is contingent on supply of fast-charging (150kW and above) convenience. BP (through the brand BP Pulse) indicated the same in 2022, with many of its fast-charging stations approaching margins closer to those of petrol stations.

The next stage of the shift in charging services will be through the transition to software, in terms of smart energy services for consumers. These technologies are vital due to the changing energy mix of grid power supply (due to rising share of intermittent solar and wind power) and utilities’ need for system balance without compromising reliability. Energy management services for work and home locations would be key.

The price of Lithium is in a phase of moderation. This comes after a spike till the end of 2022. Many of the underlying factors of 2022, such as demand against lagging supply and inflationary pressure still hold true. Yet, the price correction was triggered since early 2023 from the weakening Chinese demand (a fallout of the rationalization in subsidies). Some of the major battery suppliers, such as CATL have followed it up with discounts in their offerings – a rarity earlier considering the demand pressure and pricing power. Other automakers anticipate a relatively weaker demand than the phase of 2022.

Anticipated expansion in Lithium supply added to the downward pressure on Lithium Carbonate prices. Some of the major capacities are expected to come onstream by end of 2023, though there are doubts if all of them can be operational. Most battery manufacturers and automakers have already locked-in their sourcing requirements during 2021-2022, with the result that they are likely to be insulated from price volatility in the upstream part.

Regulatory incentives or norms constitute the other market driver – for instance the US Inflation Reduction Act provides tax credits in this regard. European regulatory norms require automotive manufacturers to take back the owners’ end-of-life batteries.

Global EV penetration is led by China, Europe and the US. The emerging markets in other regions, while promising, do not yet carry a substantial weightage in the global transport electrification ecosystem. The shaping of the global electric vehicle market continues to be led by just the three countries/regions. It is partly a reflection of the policy and regulatory framework adopted in this regard.

Direct purchase subsidies, while demonstrably successful in promoting electric vehicle adoption, are also a strain on the public finances. For countries with rapid and credible progress in electrification, there is a rethink on subsidy support. Chinese and Norwegian market experience highlights this. Both rationalized their subsidies in the timeline announced beforehand and a short-term dip in sales is part of the equation. In December 2021, UK similarly announced a reduction in the purchase grants offered for passenger battery electric vehicles and vans. The decision in this case was justified as a means to free up the budget for larger decarbonization objectives.