What will the highways of the world look like in five or 10 years’ time and what will this mean for the future of the automotive industry, not to mention the thousands of businesses in multiple industry sectors that supply them? For many, the hubbub in the media and among industry observers over electric vehicles drives an image in our imaginations of a world humming quietly to the sound of electric cars whizzing us happily to our destinations. It is a vision of more efficient journeys, clean air and a quieter environment.
But while “E-mobility” is a real tend, with electric vehicles increasingly prevalent, like that other much-hyped futuristic vision of drones dropping our parcels off from the air, the future may be further down the road than the buzz around the EV industry suggests.
In our latest analysis, Oxford Economics’ industry team looked at the trends and the truth about our “e-mobility” future and its implications across industry suppliers. We found that the journey to an electric future on the world’s roads may be longer than some suggest.
There are many reasons for this, but a crucial one is the very significant requirements to build charging infrastructure across towns and cities to fuel electric vehicles – something that poses significant challenges. At the same time, the expansion of electric vehicles is likely also to rely quite heavily on support from governments. And the EV industry also confronts bottlenecks in the supply of commodities for batteries mean that we expect the market penetration of pure electric vehicles will be very gradual.
The results is that hybrid vehicles still partly reliant by traditional internal combustion engines will continue to drive the EV market. This will soften the disruptive impact of EVs. Toyota’s Prius and its kin will remain key to the spread of EVs for now.
Indeed, despite the increased attention of the media and policy makers, electric vehicle sales were just 3.5% of global automotive demand in 2016, and the vast majority of this increase is due to hybrids.
The continuing dominance, for now, of hybrid vehicles will soften the impact of the spread of EVs on sectors such as industrial machinery and machine tools, which are most at risk from the trend given that this will lead in time to lower demand for machined parts for engines and the like. But it is important to remember, too, that these sectors also have many other buyers across the industrial spectrum.
The chemical industry is likely, meanwhile, to benefit from increased demand for materials in EV batteries. And new battery plants such as Tesla’s Gigafactory will increase motor vehicle capital expenditure.
There are big implications, too, for the utilities sector and the firms that will build the kit for the needed charging infrastructure for EVs. EVs will create new revenue streams for utility companies - but without significant forward investment this could create substantial strain on the power grid.
The route to longer-term efficiency, pollution and CO2 emissions targets will involve a broad mix of power-train solutions. But there is little doubt in our mind that the internal combustion engine will remain a core part of the technology mix into the medium term.