Where next for the EV market?

7 mins read

High purchasing costs, range anxiety, reliability issues, and availability are putting off buyers. Neil Tyler looks at recent developments in the manufacture of EVs.

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Last year was a strong one for electric vehicle (EV) sales but now most forecasters are expecting the market to slow due, in part, to growing price sensitivity among buyers. As a result, several leading manufacturers have cut prices with Ford President and CEO Jim Farley warning that, “There’s a lot of over-capacity in the middle of the market.”

The global market share and growth of EVs over the next few years has been revised down with analysts at UBS expecting sales growth in Europe and the US to slow to 10-15% this year from 25-50% in 2023. They blame a combination of high consumer uncertainty, shrinking subsidies in some countries, higher discounts for vehicles with internal combustion engines (ICE), and the limited range of more affordable models.

“EV adoption is slowing now that early adopters are onboard and incentives to buy new vehicles and invest in infrastructure have expired,” said Paul Holland, Managing Director for Fleetcor, a global provider of specialised payment products and services. “We saw a similar pattern happen in Norway where, after an initial period of enthusiasm, the government failed to maintain momentum with ongoing or enhanced incentives and new EV sales slowed.”

Norway saw EV registrations drop from 174,845 in 2022 to 125,407 in 2023 after over a decade of rapid expansion, likewise the Netherlands has shown a similar pattern.

“KPMG reported that while EVs were significantly cheaper to run than fossil-fuel vehicles, they cost so much more to buy that consumers are turned off. If we reintroduced more incentives then we could see EV use speed up again,” explained Holland.

Many traditional manufacturers such as Volkswagen and Toyota while launching new EV models simply haven’t kept up with EV-only manufacturers like Tesla, BYD, Nio, and XPeng who have managed to retain first-mover advantage in terms of technology innovation.

Most big players have reduced their forecasts for EV sales and have scaled back production plans, by contrast China’s automakers are expanding production and overseas sales.

In China, EVs account for almost a quarter of passenger vehicle sales. In the UK, just 14.7% of new cars registered in January 2024 were electric while in the EU only 10.9% were electric.

Under the Chinese government’s Made in China 2025 industrial strategy, the two largest EV manufacturers have been given the target of generating 10% of their sales abroad by 2025 and this has forced traditional manufacturers to respond by working more closely together.

Honda and Nissan are joining forces on EV technology in a bid to catch up with their Chinese competitors who can access cheaper raw materials and labour. By focusing on components and software, they’re aiming to cut costs by combining resources.

Makoto Uchida, Nissan’s chief executive, said, “Emerging players are very aggressive and are making inroads at incredible speed. We simply cannot win the competition as long as we stick to a traditional approach.”

Commenting on the planned co-operation David Bailey, a professor of business economics at the Birmingham business school, suggested that it was an attempt by two Japanese laggards to catch up.

“This highlights the threat from China to western car companies, including those in Japan, and the advantages that China has in being able to produce cars at a 25% to 30% lower price. The Chinese government has backed EV exports in a big way, and you see more Chinese cars on the road as a result.”

In response to Chinese competition, Nissan said that it is planning to cut the costs of manufacturing electric vehicles by nearly a third by 2030 and will launch 30 new models in the next three years, with 16 of these slated to be electric vehicles. This would mean that EVs will account for 40% of all sales by the 2026, rising to 60% by the end of the decade.

Nissan said that it wants to reduce the costs of producing EVs by using new battery innovations, next-generation modular manufacturing and group sourcing of parts. It’s also going to adopt the Nissan Intelligent Factory concept, which was launched at its Tochigi Plant, and which relies on robots reducing production time by a fifth.

Nissan is also looking to develop EVs in ‘families’, with a ‘main vehicle’ being created from which different variations based on that design can be developed. It’s hoped that this will reduce costs on these variations by as much as 50%, and lower development lead times by four months.

Technological innovation

Government policies, technological advances, and the automotive industry’s commitment to sustainability have been powerful forces helping to accelerate mass market EV adoption, according to Patrick Morgan, Corporate Vice President, Analog Devices.

“Yet despite that, EVs are still not affordable for many, while for others their perceived value is still unclear,” according to Morgan. “Government economic policies can support the EV agenda to a point, but disruptive innovation in electrification technology across transportation and the energy grid, as well as business services must lead the way in breaking down the remaining barriers to EV adoption.

“A significant factor to improve affordability is to use smarter, more efficient battery packs and powertrains. But these systems must be safe, secure, and robust to deliver high performance for the user and be guaranteed across the vehicle’s lifetime.”

ADI Recharge is part of the company’s electrification portfolio and is helping to create and deliver greater value to the EV owner.

“ADI Recharge enables better EV operations and lifetime value of the battery, ultimately helping to improve the total cost of EV ownership. We’re currently working with OEMs, Tier 1s, battery manufacturers, energy utility companies, and other stakeholders to build an information ecosystem from EV battery data that has never been possible,” explained Morgan. “Advanced technology solutions are needed on both sides of the charging cable. Batteries will continue to proliferate and grow in different types of chemistries, and new insights are required to enable a circular lifecycle for batteries.”

Push back

According to Dunstan Power, CEO of Versinetic the EV smart charging consultancy, “When you look at the EV market batteries are not only getting smaller and cheaper, but battery densities are improving dramatically and lasting much longer. The latest generation of batteries will certainly outlast the vehicles they go in to. A while ago there was a consensus that the battery pack would need to be replaced over the lifetime of the vehicle, with all the problems that would have in terms of battery recycling and the wider environment. Now that is not necessarily going to be the case.”

The push back against EVs that’s been seen over the past eighteen months has been, in part, created by a fossil fuel industry that’s wedded to the status quo and by automotive companies who remain overly dependent on petrol vehicles, according to Power.

“These companies can’t manufacture them profitably. They’re also facing a massive threat from Chinese manufacturers. Most European companies are delivering luxury cars and there’s a lack of cheap EVs with limited features. In India and China EVs tend to be more basic models.”

Power suggests that while there remains a lot of focus on range anxiety in truth most vehicles don’t need massive batteries, rather there is a need for smaller cars with more efficient batteries.

“There’s a huge amount of nonsense around the industry and most of it can be easily discredited. Whether that’s battery fires or tyre pollution because of heavier EVs on the roads,” according to Power.

Germany and now France and the UK have seen a slowdown in sales of EVs, which has certainly not been helped by the energy crisis caused by Russia’s invasion of Ukraine.

“In the UK we’ve seen the government push back the phasing out of petrol vehicles from 2030 to 2035. And this is all about the automotive industry buying time, but the tide is only going in one direction. Fossil fuels will need to be replaced.”

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Lack of infrastructure

One of the biggest obstacles to the broader adoption of EVs is the failure to build sufficient public battery charging infrastructure.

There are currently many initiatives to develop extensive charging networks to serve urban areas, motorways, and rural regions, but the concept of battery-swapping stations has emerged to fill the gap while the infrastructure is put in place.

Battery-swapping technology allows drivers to remove battery modules from their vehicles to replace them with fully charged packs in minutes rather than having to wait for the battery to charge.

To that end, BMW and Mercedes-Benz formed a joint venture in China to install at least 1,000 stations in their China Super Charging Network, with the first planned to start operating this year.

In Europe, Nio plans to move into the UK in 2025 by which time it should have sufficient battery swapping capacity in place, while Stellantis has established a partnership with US-based Ample to use its modular battery-swapping technology in Stellantis EVs. The initial program is scheduled to start in 2024 in Madrid, Spain.

In addition to battery swapping, bi-directional battery charging is also set to expand in 2024, extending the ways EV owners can use their vehicles.

Manufacturing concerns

With EVs there have been concerns about the environmental impact of the manufacturing process, as well as the cost of shipping finished vehicles over long distances. But that’s certainly not unique to EVs.

The French government, for example, has introduced new cash incentives for EV buyers that take into consideration the vehicle’s use of raw materials, production and components.

The key issue in terms of electric vehicles appears to be the economics of production, rather than anything to do with the technology.

China now accounts for 66% of the world’s production of EV batteries due to the fact that it can source the materials it needs locally. For many countries that is not the case and has seen a race to source and control raw ingredients as well as refine and build the batteries, while retaining battery IP, all of which are necessary for successfully manufacturing EVs.

That means that countries looking to go all-electric will be in an increasingly vulnerable position if they don’t have access to those resources or capabilities.

Another issue for EV owners is the amount of electronics required to enable efficient operation, whether that’s sensors or software updates, leading to EVs becoming costlier and should they fail taking longer to repair.

The growing connectivity of vehicles has evident benefits for users and software, with over the air updates, can be used to provide new services and improved levels of comfort over the lifetime of the vehicle. But these ‘connected’ packages are an additional cost to drivers who have been use to paying for all the vehicle’s features in one price – this could also prove to be a costly commitment as the average car in the US is on the road for 12 years.

The next few years will see significant movement in the EV market as manufacturers adapt to changing economic conditions, more competitive landscapes, and technological developments.

The future is certainly electric but is perhaps more challenging than most in the industry expected.