European EV Charging: The three key issues facing the market

European EV Charging: The three key issues facing the market

Mar 30, 2020

The roll out of an adequate EV charging infrastructure will play a crucial role in aiding EV adoption, and is a very significant undertaking of itself. Our recently launched European EV Charging Outlook provides in-depth analysis of the key issues and players in the market, as well as our view on how we think the market will and should develop.

This article draws on analysis from the report and outlines three key questions that the report addresses:

  • How many chargers are needed?
  • What technologies will dominate?
  • What will it cost?

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How many chargers are needed?

The chart below shows the current state of charging infrastructure in Europe expressed in terms of the number of EVs – Battery Electric (BEV) and Plug-in Hybrid (PHEV) – per public charging point. In 2019, there was roughly one charging point per eight EVs across the EU & EFTA, against a European Commission target of one charger per ten EVs.

One thing that it is important to notice about the current situation, as it provides guidance for how the market is likely to develop over time, is that the markets with a higher proportion of EVs on the road tend to have fewer charging point per EV. This is most clearly illustrated by Norway. This is reflective of the fact that charging infrastructure growth in most markets tends to lag behind EV market growth, and this is a trend we expect to continue as the market grows. As such we expect that as the market develops it’s unlikely that the EC’s target of 10 EVs per charger will be met, given the cost involved and the state of development of the market at present, we do not necessarily see this as a major issue however.

In our view, the majority of charging will continue to take place privately at homes and workplaces, with public charging limited to on-highway charging for longer journeys and opportunistic charging, such as at retail outlets that offer it as a service for customers. It is also important to remember that in Europe the ratio of plug-in hybrid vehicles to battery electrics is still relatively high, at around 35% of the market in 2019, compared to the global average of 25%. Our expectation is that PHEV charging will be even more weighted towards private charging than for BEVs. Further, looking at OEM model line-ups over the coming years, this ratio is likely to move slightly in favour of PHEVs as European OEMs get up to speed with electrification, before moving in the direction of BEVs more comprehensively later in the decade.

What technologies will come to dominate?

The reality is that a blanket target for EVs per charging point is a vague and not especially useful way to think about the charging infrastructure requirement given the range of charging technologies on the market, and those that will be available in the near future. We provide a summary table of the different charging technologies below. 

In general, the discussion about future technologies focuses on ever faster charging rates, however this is also contingent on the rate at which vehicles can actually charge, and often fails to account for the huge disparity in costs that each technology carries with it. For example, the cost for a medium 22kW AC charger is around USD3,500, a 50kW DC charger around USD30,000, and a 150+KW DC upwards of USD250,000. The reality is that the roll-out of charging infrastructure will be in part determined by vehicle capabilities and financial imperatives for those fronting the cost for the investment.

Using the same bottom-up methodology as for our battery forecasts, we expect that the majority of the 26 million EVs that will be on Europe’s roads in 2030 will have Type 2 CCS charging capabilities, and therefore have the ability to fast charge up to 50-100kW, with a minority of high-end vehicles capable of 350kW. Other charging methods are likely to be phased out at vehicle level, with the exception of the Telsa Supercharger. The chart below breakouts of our expectation of market share of the EV fleet (parc) by charging capability.

What will it cost?

The cost for the roll-out depends therefore on what you expect the level of coverage will be in terms of EVs to chargers, and what technologies will be rolled-out. In the chart below we show our forecast market share for public EV chargers over the period to 2030. This forecast is based on development in technology at the vehicle level and an assessment of what charging networks will do in terms of charging technology choices. We have also modelled the development of the BEV & PHEV fleet in Europe building on the work from our EV & Battery Quarterly Outlook. We also forecast the level of coverage in terms of EVs to charger based on our own assessment of what is viable, and through contact with charging networks and analysing their investment plans. Based on this, we forecast a cumulative cost for the roll out of EV charging in Europe of approaching USD100bn by 2030, at the charging station level, excluding upgrades to the grid and private charging.

Given this scale of investment it seems inevitable that there will be significant levels of consolidation in the charging business in the coming years, given the large number of small operators active in the market at present, as well as the entry of OEMs in a major way in order to ensure that the charging infrastructure is there to support electrification efforts needed to meet tighter emissions targets.

 

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EV & Battery Quarterly Outlook – Q1 2020 Highlights Presentation

EV & Battery Quarterly Outlook – Q1 2020 Highlights

Feb 25, 2020

The presentation covers the following: 

– Our high level EV sales forecast for 2020
– Key changes in legislation, subsidies and incentives 
– OEM strategy updates 

The presentation can be viewed by registering here

If you have any questions or comments on the presentation, or issues watching it then please get in touch. 

 

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Rho Motion’s 3 things to watch out for in the EV Market in the year ahead

Rho Motion’s 3 things to watch out for in the EV Market in the year ahead

Jan 13, 2020

 A new year is always a time for reflection on what has been, and what is yet to be, so here in our own modest way we highlight three EV market trends that we think you should be looking out for in 2020.  This article draws on analysis from Rho Motion’s EV & Battery Quarterly Outlook, the Q1 2020 iteration of which is released later this month. 

CO2 targets begin to bite in Europe

This year sees the phasing in of new European CO2 emissions targets that will be fully implemented in 2021. The new target sets an OEM passenger car fleet average target of 95 grams CO2 per km, with a potential fine of €95 per gram of CO2 over the limit, multiplied by the OEM’s European vehicle sales in a given year.

The target is fairly robust, especially when you consider OEM fleet average emissions in recent years. The first chart serves to illustrate this point, it shows CO2 fleet average emissions for a sample of major OEMs in 2017 & 2018, versus the 95 g/km target.  As can be seen, even at this relatively late stage OEMs are no way near meeting targets with their existing model line-ups. Indeed, fleet average emissions rose in 2018 compared to 2017, owing to lower proportion of diesels sold, and larger vehicle sizes among model line ups.

In our EV & Battery Quarterly Outlook we have made some calculations to also estimate the liability for fines of a sample of OEMs based on their 2018 emissions performance versus the 2021 target. For OEMs with significant sales volumes in Europe these fines could run to multiple billions of Euros. This goes some way to explaining the rate of growth in sales of plug-in hybrid and battery electric vehicles (PHEV & BEVs) in the region last year. For the EU & EFTA for the year-to-November, the latest month available, PHEV & BEV sales rose 31% on the previous year, which was a very strong performance compared to the rest of the global market.

OEMs are left will little option but to continue to introduce PHEV & BEVs into their model line ups, as they are in fact doing, and as such we expect the European market to remain a bright spot for the PHEV & BEV market in the year ahead. One thing to bear in mind, however, is the relatively large share of PHEV in the sales mix, 34% for 11m YTD sales in 2019, versus 22% in China. When looking at the model offerings over the coming year and beyond, we expect that PHEVs will remain an important part of the model mix.   

NCM811 starts to come of age

Since it started appearing in our EV Battery Chemistry Monthly Assessment, which aggregates our model-by-model analysis of EV sales, in the second quarter of 2019, NCM811 has started to gain market share owing to strong sales and large battery packs of the models in which it is currently deployed. In a weak market this effect was even more pronounced, see second chart.

2020 is really when we expect to see the start of proper commercial adoption of the technology based on the announcements of multiple large battery cell manufacturers, meaning the technology will be introduced in multiple new models entering the market. BYD has said that it will have NCM811 cells ready by the second half of 2020, similarly, SK Innovation announced it would start production of NCM811 cells in late 2019. Envision AESC has also stated that it is working toward a 2020 timeline for release of NCM811.

 As we’ve always pointed out, what this really means is a continued gradual increase in market share over the course of the year, and then on into the following years, as newly released models make up a relatively small share of total EV sales. Also bear in mind that many major OEMs, particularly in the West, are in no great hurry to adopt the chemistry before all safety concerns regarding thermal stability of the cells, and performance issues around cycling ability, have been resolved. Nevertheless, this is the year when we see the technology start to come of age. 

Will China bounce back in 2020?

By virtually any measure, and against virtually all predictions, China’s EV market performed poorly in 2019, with very low or no growth likely to be the full year result when we see the sale figures for December later this month. By common consent this was due to the greater than expected impact of the reduction of subsidises, leading to a dramatic drop-off in sales in the second half of the year, see third chart. The EV market also felt the impact of the overall weakness in the total passenger car and light duty vehicle market, with sales likely be down in the region of 9% year-on-year for the full year as well.  

For 2020 there are a number of reasons to be cautiously optimistic. Firstly, the government has stated this month that there won’t be another roll-back of subsidies in July of this year, which has been welcomed by market participants. The subsidy still covers the majority of vehicles in the market, but the remaining subsidy is an order of magnitude lower than the one offered prior to July 2019, so maintaining it will only have a moderate impact. From a policy perspective, what may have more impact is the New Energy Vehicle (NEV) mandate. The policy specifies NEV credit targets for two years, and was meant to completely replace subsidies with a credit-trading system. These mandates require that an automaker has bought or earned NEV credits equal to 10% of its fossil fuel vehicle sales in 2019 and 12% in 2020; this should support market growth this year.

Ultimately in the absence of significant direct government intervention, what will propel the market forward is availability of competitive vehicle models, both in terms of price and performance. On the evidence of the models released at during 2019, and those scheduled for release in 2020, the market continues to move in the right direction. 

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What does the post-subsidy China EV market look like?

Great Expectations: What does the post-subsidy China EV market look like?

Dec 9, 2019

China has dominated the electric vehicle market for the majority of the period that there has been a market to speak of, the rate of market development there outstrips any other region both in terms of penetration and volumes, and this trend has not abated in 2019. The first chart shows Battery Electric and Plug-in Hybrid Electric Vehicle (BEV & PHEV) penetration by regional market and the total volume of sales for the first 9 months of 2019, and highlights the extent of this dominance, with sales in China alone greater than the rest of the world combined.

Consequently the market in China is monitored closely as any loss of momentum in the market would have implications for the entire EV & battery supply chain, from raw materials to charging infrastructure. As such the recent reduction is the size and scope of the government subsidy which has undoubtedly had an impact on the market since its came into effect in July, was always going to generate headlines in a market that has hitherto only seen growth. In this article we provide our analysis of the medium and long-term impact of this change in the subsidy regime, drawing on research from our EV & Battery Quarterly Outlook, the Q4 2019 iteration of which was released at the end of October.

What happened when the subsidy was reduced, and what has happened since?

Earlier this year the government announced an incremental phase-down and eventual elimination of EV subsidies in order to reduce market dependence on fiscal support. From July 2019, BEV’s with a range of 400 km or more had their subsidies halved from RMB50,000 to RMB25,000, BEV’s with a range less than 250 km will receive no subsidy.

The second chart shows passenger car and light duty vehicle (PC & LDV) BEV & PHEV sales in China on a monthly basis for the period 2017-2019 ytd. Tracking for 2019, it can be seen that there was a marked increase in June sales ahead of the subsidy change. There was then a subsequent 50% month-on-month fall in the market in July, sales rose in August, but fell back again in September and October.

Probably the most interesting thing to note about the sales figures since the subsidy has been curtailed, is that in each subsequent month they were lower than their respective months in 2018. In a market that has known nothing but exponential growth for several years this is quite a turnaround, but is it part of an ongoing trend? And if the market can be moved by the lack of subsides, does it signal a shift in technological focus to fuel cell vehicles where subsidies are, for now, being preserved?

Our view is that this is unlikely on both counts. The first reason for this relates to short-term vehicle market dynamics. On a year-to-date basis for the 10 months to October, sales of BEV & PHEVs remain up 15% on the same period in 2018 for PC & LDVs, so the relative slowdown since July should be viewed in the perspective of a very strong first half of the year, and there was clearly a strong pre-buy effect in June, which was always likely to hit sales in subsequent months.  It is true that growth in 2019 is much lower than most expectations at the beginning of the year; and that given a very strong last quarter in 2018, that sales in China in 2019 will likely be in line with, or lower, than those seen last year, however this slowdown can also be viewed in the light of a weak overall vehicle market, from which EVs are not immune. 

The second reason why do not see this as part of major shift in the market is one of longer-term government and OEM strategy. In all markets EV adoption is essentially driven by the interaction between government intervention, in the form of either emissions legislation or subsidies and incentives, and OEMs response in terms of their model line-ups and choice of battery pack size and chemistry.

In the first instance, despite the reduction in the subsidy, the government continues to support EV adoption through more stringent emissions legislation and other incentives. At a national level on the legislation side, the introduction of China 6 (Euro 6 equivalent) legislation puts pressure on OEMs to resolve issues around an inefficient gasoline fleet in terms of fuel consumption and NOx emissions. These measures will only become more stringent over time, and pressure on OEMs to reduce fleet average emissions will become more intense, especially with the introduction of more rigorous WLTP test cycles.

In addition incentives remain in place, the Ministry of Finance announced that New Energy Vehicles (NEVs) purchased from 1 January 2018 to 31 December 2020 shall remain exempt from vehicle purchase tax. At a local level, significant restrictions on the purchase of new ICE vehicles in major cities such as Beijing and Shanghai, continue to push EV adoption.

The government has policy targets for OEMs as well. The NEV mandate specifies credit targets for two years, replacing subsidies with a credit-trading system, which among other targets, specifies that a carmaker must have bought or earned NEV credits equal to 10% of its ICE sales in 2019 and 12% in 2020.

All of which means that both local and international OEMs looking to operate in China will continue to develop zero emissions vehicles as part of their overall strategy in the coming years. As it stands, Chinese OEMs are well ahead of their peers in other markets in this regard, as illustrated in the third chart, which plots EV sales volumes and penetration by OEM for the first 9 months of 2019. Chinese OEMs as a whole are pushing ahead more quickly towards electrification than automakers anywhere else in the world, and this shows no sign of this slowing down.

Looking at some of the larger Chinese OEMs in turn. At BYD, BEV & PHEV sales already account for well over half of its vehicles sales for the first half of this year, and as a major battery manufacturer its strategic interest is a further push towards electrification over the coming years, across its all of its vehicle classes, including buses and coaches where it is by far the world’s leading manufacturer. BAIC is looking towards 100% EV penetration by 2025, when it will end production of ICEs, Chery is aiming to produce 200,000 vehicles per year by 2020, and Geely plans to electrify 90% of its range by 2020, targeting 30 electric and hybrid models. It is also looking to develop a fuel cell vehicle by 2025.

SAIC Motor, China’s largest carmaker and the local partner for Volkswagen and General Motors, has a strategy focussed on NEVs and intelligent connected cars as well as overseas expansion. SAIC Volkswagen is moving forward with new EV plant Shanghai, and is scheduled to start operation in October 2020, with an annual production capacity of 300,000 vehicles. SAIC announced it plans to install 50,000 public charging points with an investment of $3 billion by 2020.

So how will a change in the subsidy regime affect OEM strategy?

To deal with the issue of whether OEMs will now pivot towards fuel cell vehicles (FCV) owing to a continued subsidy structure for those vehicles, we make the following points. Firstly, the only reason the subsidy for FCV remains in place is because uptake, and therefore fiscal outlay, has been minimal, and it may still be removed shortly anyway. Second, it would seem imprudent for the OEMs and the government to move away from a lithium-ion battery and EV industry where they have a strategic advantage, and where significant investments have already been made, to one where neither of those things is true.

Given that subsidies have to date been range based, their removal is more likely to have an impact on both the type of vehicles coming onto the market and their battery chemistry. As there is no longer an overriding incentive to produce longer range vehicles to qualify for subsidies, we expect that there will be a move towards an increased proliferation of lower range urban focused vehicles, which will be targeted at a market where durability and cost are key, which suggests that an uptick in LFP market share in the battery mix is likely over the coming years.

As such, the curtailment of subsidies both this year, and into the future, is more a sign of EV market maturity and health over the longer-term, and a transition to an industry to one that will need to sustain itself through scale, efficiency and ongoing innovation, in this regard China is likely setting a template for other markets to follow.

 

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The Electric Vehicle market in 2019 and beyond

The Electric Vehicle market in 2019 and beyond

Aug 12, 2019

This month we wrote an article for the Benchmark Mineral Intelligence Magazine, outlining our thoughts on the EV market so far in 2019, and the opportunities and risks that lay ahead. The original article is here, https://www.benchmarkminerals.com/membership/ev-market-in-2019-and-beyond/. To discuss get in touch on info@rhomotion.com or +44 (0) 

Since the start of the year we’ve been on the road speaking at various events about the outlook for Electric Vehicle (EV) adoption, and what this means for the lithium-ion battery industry. We’ve also had the opportunity to listen to the thoughts of numerous industry participants along the entire EV supply chain, enabling us to draw a rounded perspective on the opportunities and challenges faced by the market.

In this article we will summarise our main thinking on the factors driving the EV market both at present and into the future, utilising the research from our EV and Battery Quarterly Outlook, the Q3 2019 iteration of which is published this month.

As an update of where we are now, in the year to June 2019 passenger car and light duty vehicle Battery Electric Vehicle (BEV) and Plug-in Hybrid Electric Vehicle (PHEV) sales were up 40% on the same period in 2018, at just over 1m units, with a little over half of the sales in China (see chart 1). In 2018, full year sales stood at roughly 2 million units, again half of which were in China.

One big unknown, however, is the impact of the reduction of Chinese subsidies on the market there when they hit in the second half of this year. Chinese sales for the year to June are up 60% on the same period in 2018, and while the reduction in the subsidy will undoubtedly impact on vehicle sales in the short-run, we expect that this will be mitigated somewhat by lower VAT rates.

It is important to note also that the EV market is heavily concentrated in a few key countries, with the top five markets for BEV & PHEV accounting for over 80% of total sales, suggesting that adoption still has a long way to go in most markets.

Looking forward it is reasonable to expect that subsidies will be reduced further as the market gains scale, and it becomes fiscally untenable for governments to support an ever increasing levels of sales. However we do expect that incentives will persist in the form of tax rebates, and as a corollary of penalties for owning and operating ICE vehicles. Emissions legislation, particularly at a local level, is set to tighten further in an effort to ameliorate the immediate impact on public health from NOx and particulate matter emissions. In addition, upcoming OEM fleet average COtargets in most major markets are not possible to meet without some form of electrification of  model offerings.

As such there are a number of other developments that will start to play a larger role in the market in the coming years. Foremost among these are the investments being made by major auto-manufacturers for the introduction or expansion of electrification in their model offerings. The world’s largest automaker, the Volkswagen group, has been leading the field in its efforts to move towards electrification. Its strategy is focussed on the development of BEVs with the release of its Modular Electric Drive Construction Kit, from which it plans to produce 50 pure BEV models, beginning with the ID-Neo in 2020. GM has also looked towards the BEV route, with its BEV3 platform from which it plans to launch 20 BEV models.

At present the global split of BEV versus PHEV stands 76% (see chart 2), and has been rising over time. Enthusiasm for a wholesale shift to BEV is not universally shared, however. Ford, for example, is planning 40 electrified vehicles by 2022, of which only 16 will be full BEV, while BMW has designed a vehicle platform to accommodate both BEV and PHEV. Honda has stated that while its entire model line up with be electrified by 2025, most of these will be hybrids. This hybridisation strategy is being pursued in order to mitigate issues around battery cell and raw material supply, as well as consumer acceptance and charging infrastructure roll out.

 

In our view the longer term strategy will remain a transition to BEV, and ultimately we expect that full-electrification will offer a lower cost option to the both the OEM and the consumer. This also in part because battery costs are likely to continue to come down on a per kWh basis, as cell manufacturing scale grows, and production efficiency improves. As a result, according to our estimates we expect purchase price parity by 2024/25 for new BEV models, although this calculation accounts for losses at OEMs while they build scale in production of these vehicles, with profitability coming later as volumes grow. Equivalent purchase prices for EVs compared to ICEs will be the major driver of EV adoption, and we expect that this will prove a critical turning point in the evolution of the market.

Significant risks for EV adoption remain however, and these principally relate to the battery supply chain itself. The availability of key raw materials, and the chemical processing capacity to convert them into useful products, is a key area of concern. There will need to be sustained capital investment in the upstream areas of the supply chain, in order that the much larger investments being made in battery and vehicle manufacturing are not hindered by a paucity of raw material. This could hold-up the development of commercial scale manufacturing of vehicles, as well as inhibiting the reductions in costs that will be needed to make EVs competitive in the vehicle market.

 

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