With global tightening emission regulations driving up the cost for OEMs to produce ICE and questioning their long-term viability, as well as no signs of easing in terms of regulatory focus, manufacturers will introspect on the future viability of the traditional vehicles.
07 Sep 2017 | 5842 Views | By Nilesh Wadhwa
Electric Vehicles (EVs) may have plenty of hurdles to clear – cost, technology and consumer acceptance, but tougher regulation along with faster technology advancement may help EVs to reach 90 percent of global sales by the year 2050, says a report by Morgan Stanley.
The current pace of technology ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
Electric Vehicles (EVs) may have plenty of hurdles to clear – cost, technology and consumer acceptance, but tougher regulation along with faster technology advancement may help EVs to reach 90 percent of global sales by the year 2050, says a report by Morgan Stanley.
The current pace of technology advancement can bring EV component costs to a similar levels to that of Internal Combustion Engine Vehicles (ICE), by the year 2025. With global tightening emission regulations driving up the cost for OEMs to produce ICE and questioning their long-term viability, as well as no signs of easing in terms of regulatory focus, manufacturers will introspect on the future viability of the traditional vehicles.
The research says “Our base case is that EVs will reach 80 percent of global sales by the year 2050, but EVs could reach 90 percent of sales with tougher regulation and faster technology development. If regulatory pressure is removed, penetration could be capped at around 10 percent of sales. Our base case leads to a global fleet of BEVs of over one billion by 2050 year.”
With the assumption of global penetration of EVs reaching its peak, the biggest question/challenge would be ‘Who would provide the charging infrastructure?’ As per the research estimates between 1 million to 3 million public charging points would be required in Western Europe alone by 2030 and 10 times more by 2050. Utility companies could exploit their capabilities but they could face tough competition from capital goods companies (who provide electrification equipment), OEMs and new entrants who are looking to venture in the new business set.
With margin pressures being passed down to the supply chain, OEM suppliers for the powertrain, transmission and fuel systems will face loss of content – much of the electrical and electronic systems to be supplied by new entrants. The OEMs could possibly look at technology chain and outsourcing as an opportunity.
The transition from ICE vehicles to EVs will lead to mitigation of cost from mechanical to electrical systems and electronics up to 50 percent, this transition could possibly challenge OEMs competitive position, branding and pricing. As per Morgan Stanley’s illustrative modelling of this transition suggests the price and volume pressures will be pushed down for ICE profitability from the year 2021 as EVs will cannibalise sales and pricing power, with potential losses from the year 2028.
Battery makers will see a switch from autocatalyst manufacturers to producers of cathode material used in EVs, with the latter benefitting up to a 12-fold increase in battery capacity by the year 2025. With the cost further coming down – once battery-recycling that is currently challenged – starts taking shape. Morgan Stanley believes that there is a market opportunity of around $6-9.5 billion (Rs 37,902 crore – Rs 60,011 crore) for manufacturers of semiconductors by the year 2030.
(Image Courtesy - Morgan Stanley)