17 November 2020
We are entering an exciting and challenging time for the automotive industry. For the first time electric vehicles (EVs) are starting to displace the 1 billion or so internal combustion engine vehicles (ICEs) in the world. In 2019 approximately 6 million EVs were sold, out of 90 million light vehicles and this number is expected to grow to over 30 million a year by 2030.1
“It will likely take many years before EVs really come to completely dominate our roads, but there’s no doubt that it will eventually happen,” said Damian Thong, Macquarie Group's Head of Japan Research at the Macquarie Momentum China 2020 conference.
Electrification of transport will be an important factor in curbing global carbon dioxide emissions. Many countries are already on the way to widespread EV adoption, however to fully realise the electrification of transportation, a large investment in charging infrastructure will be needed across the globe. High-levels of EV penetration require many more charging stations and technologies that enable fast charging technology to be built. As the charging infrastructure grows, there is an increasing need to invest in additional power grid capacity and capabilities, providing opportunities to vendors, service providers and financial investors.
The transition to renewable energy sources, and large concentrated energy draws, is likely to drive the need for increased energy storage while new digital grid technologies will provide more tools to monitor and manage supply and demand. This will open the door to new types of power generation and distribution technologies as well as new business models that include virtual power plants and microgrids.
“As more EVs come on to our roads, this causes a fundamental change in our infrastructure, especially when coupled with the adoption of greater vehicle autonomy,” Damian continued. “Energy demand at the household level may rise in developed economies, with the growth in home charging, but these trends will provide new opportunities for utilities companies as well as new equipment providers and suppliers.”
China plays an important role in the transformation of the transportation industry. The country has already made large investments in renewable power generation and management technologies and also offers subsidies related to “new energy vehicles” (NEVs), which include plug-in electric vehicles, battery-only electric vehicles (BEV), plug-in hybrid electric vehicles (PHEV) and fuel cell electric vehicles (FCEV).
In the last 10 years, China's NEV market has grown rapidly from next-to-nothing to selling a million NEVs in 2018, and although it went through an adjustment period between 2019 and 2020, the long-term growth of China's NEV industry looks promising.2
In November 2020, China’s State Council released a five-year development plan for the NEV sector that included a goal for NEV sales to reach 20 per cent of all car sales by 2025. The plan called for increased NEV research, improvements in core technologies such as batteries and artificial intelligence and to “promote high-quality and sustainable development for the NEV sector”. The government will also make all public sector vehicles NEVs with the aim of making NEV sales mainstream by 2035.
China already has a series of policies in place to help achieve this target and many of these are shifting from being fiscal incentive-oriented, to focusing on improving convenience, with many already being tested in developed cities and regions.
Looking ahead, there are future paths on the technology roadmap of electric vehicles that are worth attention. Closely related to the evolution of electric vehicles, the next generation of power batteries is now in the spotlight too. Yulong Zhu, Chief Engineer of the Prospective Technologies Department, Shanghai E-Propulsion Auto Technology (SAIC Motor) explained that the main issue lies in energy density, capital costs and cell technology iteration. From a long-term perspective, high nickel and high energy density cells will be the future of power battery development which will also impact further industrialisation.
“It is expected the safety of the next generation of battery systems will be the focus,” Yulong Zhu continued. “Safety is a pain point we should be tackling from all angles including software, hardware, and design and we may still need one or two years to see how things evolve.”
In addition to this, it is the lack of charging facilities that holds consumers back from accepting pure electric vehicles. They would expect to be able to easily recharge their vehicles at home and have access to a charging network outside as well. To solve this problem, having charging stations in existing parking lots and neighbourhoods is important, while it’s also crucial to build more rapid chargers and even battery swapping networks around the community.
“The time is now for NEVs and the shift could be faster than anybody predicted,” Damian concluded.