Increasingly stringent emissions norms around the world are forcing OEMs to push harder for the electrification of their range of vehicles. Sales of electric vehicles are indeed on the rise, but they are yet to offset the costs of development and production.
Ultima Media, published a new report and forecast on the state of the automotive industry. The report states that it’s the regulations more than consumers that are driving current investments in electrification by global vehicles. For most of traditional automakers, EVs do not represent a successful business case considering the costs involved.
Daniel Harrison, automotive analyst and author of the report, said, “The high production cost of EVs means that OEMs are often being forced to sell them at cost price or even at a loss. And this will impact the OEMs bottom line for many years to come.”
The biggest hurdle holding back the world from fully embracing electric cars is the lack of a substantial charging ecosystem in place.
Furthermore, powertrain choices are getting wider and more bewildering for consumers, with an added layer of uncertainty over future regulations. In such a situation, prospective buyers shy away from bold purchases like recently launched electric cars. The price and performance proposition of EVs and hybrids isn’t as strong right now as that of conventional IC cars. Hence, carmakers’ willingness to invest in electrification is low until consumers start buying EVs and hybrids in significant volumes.
The next unique challenge is developing electric commercial vehicles. Due to the burgeoning logistics of online shopping, the number of commercial vehicles like small vans and pickups is increasing. While carmakers are mainly focused on developing passenger EVs, the market is ripe for electric CVs as well. Splitting focus between private and commercial vehicle development puts additional pressure on OEMs, yet it is a necessary step to earn enough for investing in future operations.
As with any new technology, predicting which aspect of development will become the gold standard causes deep uncertainty. Charging networks for EVs are subject to this problem. People living in apartment blocks or houses without private parking spaces are the most affected. Should they expect charging to be available at lamp posts or bollards along their way? Or will they only be able to charge their EVs at designated stations erected across cities?
Until the regulators and private service providers commit completely to erecting a new network for electric cars, consumers will continue to prefer conventional and hybrid vehicles.
Who will take the initiative for electric cars?
Other options being explored are the use of supermarket parking lots which are usually empty at night, and induction pads embedded in major roads which charge cars as they drive over them. At this point of time, there are a lot of solutions to charging electric cars. The uncertainty over which method or technology will catch on is holding back private sector investment in charging infrastructure.
Setting up a comprehensive charging network raises another question: Who will contribute towards installing a new charging network? It is widely assumed that the private sector will build, operate and maintain charging outlets. Yet, businesses are hesitant to get involved due to a variety of factors. Profit margins remain small and governments across the world are heavily subsidising the development of charging points.
This is slowly changing, with market leaders in the fossil fuel supply chain are taking over prominent charging network solutions providers to set up new facilities across existing networks. Tesla is actively rolling out its Supercharger network at motorway service stations across various markets it operates in. Yet, the question remains over how much the government should contribute to such endeavours.
Daniel Harrison, automotive analyst and author of the Ultima Media report, said, “The high production cost of EVs means that OEMs are often being forced to sell them at cost price or even at a loss. And this will impact the OEMs bottom line for many years to come.”
Even brands steeped in internal combustion engineering are moving towards electric powertrain. But will infrastructure match demand fast enough to sustain EV sales?
If getting people to buy more EVs is for the public good, should local government authorities pay for charging points in areas where demand is too low to offer healthy profits? Furthermore, how should the investment compare with that in social care considering the already tight budgets of local authorities?
Are EVs truly carbon-neutral?
Even after addressing all the above challenges, the biggest question of all remains: electric vehicles are still not 100 percent carbon-neutral. They may not produce exhaust gases, but there are other problems associated with the technology. Sourcing the minerals used for batteries, dismantling batteries which have deteriorated, and building and delivering vehicles to buyers in different parts of the world would still involve substantial CO2 emissions.
In conclusion, a shift away from motorised vehicles seems like the only way to fundamentally reduce transport’s impact on climate change, however hard it may be to swallow. Yet, it’s not all bleak: the automotive industry thrives on being presented with seemingly insurmountable challenges. The new-age EV dilemma is just another hurdle the industry will have to cross for a sustainable future. It’s more a question of “when” than “if”.