China continues to lead globe on electric vehicle sector development

16 July 2018 Authored by Consultancy.asia

Reducing the impact of transportation on the environment is an increasingly key aspect of wider shifts in thinking about sustainability in global order. New analysis shows that adoption of electric cars across major regions has picked up pace, with growth of 57% between 2016 and 2017. Further growth is expected, particularly in China and Europe as the technology matures.

Climate change is no longer in question. The Paris Agreement set clear targets that must be met to stave off the worst effects of our impact on climate, with an upper bound of 2.0 and a strongly preferred target of 1.5 Celcius. Getting there will require considerable shifts in how we and the next generation live. The move will require the leveraging of a number of technologies that are clean in terms of their operation on the environment, while focus on efficiency and productivity in the use of energy too is on the cards.

One segment that must transform is transportation. Internal combustion engines are no longer sufficient to stay within the climate budget left within the 2.0C target. Electric vehicles, leveraging green energy, have a host of benefits over traditional vehicles – including low emission and pollution profiles. And while there are environmental costs associated with the production, these, coupled with a decarbonisation of the electricity sector – are more palatable than the alternative.Global rise in electric car salesGiven the necessity of the shift to electric vehicles or other alternative carbon-free engine types, thinking has shifted to the mammoth task of developing such vehicles, and getting consumers and businesses to invest. Shifts are already taking place, with major Western manufacturers developing vehicles in various classes, resulting in 340 different models in the BEV and PEV range set to be available in the next three years. A new report from McKinsey & Company considers trends in the shift to sustainable vehicles.

The number of electric vehicles has grown steadily, up from almost none in 2010 to 1.2 million in 2017 – representing around 1.3% of the total new light-vehicle sales globally. The growth has been meteoric over a number of years, although on a relatively low-base. Growth appears to be accelerating as more and more OEMs develop propositions in the space, with a 57% increase between 2016 and 2017.China worldwide leader for electric car sectorChina remains a key driver in the space, with growth between 2016 and 2017 topping 72%. The region is keenly aware of the cost of pollution – and with its long-term planning has begun to push the development and rollout of electric vehicles across its market. Growth is driven by a combination of strict regulations on ICE vehicles and subsidies – while new energy vehicles also sport their own license plates that provides users with benefits.

China is one of the key adopters in terms of currently on the road vehicles, at close to 2.2% of total new sales. Norway is the runaway leader in terms of adoption as it stands, at almost 50% of new vehicle sales, although the adoption reflects subsidisation by the Norwegian government. Switzerland, Sweden and the Netherlands round off the top five in terms of adoption.Electric car market value and country development indexesIn terms of development of the industry, China leads the way, followed closely by Japan and Germany. Meanwhile, the US is not too far behind; yet the UK founders at the bottom of the pack. China, as a global leader, has invested heavily on developing and holding components and production within its boundaries.

China has also been the fastest in terms of its rollout on both the IEV Index and the MEV Index, more than double that of Germany in the same period, while Japan has lost ground as it lost some of the component production capacity. Germany has improved somewhat in both indexes as companies in the region see increasing demand for electric vehicles.Development curve of electric car market by countryThe study also considered where countries currently find themselves on the disruptive trend radar with respect to their adoption of EVs. Norway has passed into inevitability, as critical mass has been reached, while Sweden and China show the clear emergence of a validated model. Other countries are also noted as exhibiting faint signals with lots of noise regarding their shift away from internal combustion engine (ICE) vehicles.

Other studies highlight that the near-term will see battery costs decline steeply, while a host of regulatory conditions will see ICE vehicles become unpalatable to societies. The necessity of meeting the climate accord will see the end of ICE vehicles, with considerable benefits to society, particularly from reduced pollutants in high-density areas.

The authors conclude; “Electric vehicles have made meaningful progress in several regions and countries as they passed the milestone of one million sales in 2017. With demand rising and manufacturers ramping up production capacities, the market will continue to grow. Looking forward, the confluence of government action, greater attention by original equipment manufacturers, rising customer acceptance, and ingenious suppliers could accelerate the segment’s profitability until the early to mid-2020s.”

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