From EVs to Smart Cities – a snapshot
The Green Edge pulls the latest zero emission vehicle information from trade journals, specialist and technical press and media, company websites, and our wider network.
The world of mobility is changing. Driven largely by the ever-increasing uptake of the electric vehicle (EV), the UK government has developed a gamut of plans and strategies to support and manage the transition to zero emission cars. As usual, papers containing a least a smattering of skills-related content are dotted all over the place, but we do note a few key papers, including Transitioning to zero emissions cars and vans: 2035 delivery plans (2021), Transport infrastructure skills strategy: building sustainable skills (2016) and Transport Infrastructure Skills Strategy: Four years of progress (2020).
While these sources describe some of the specific actions being taken across many parts of what, in these days, is generally termed ‘mobility’, we note that the total picture is one of fluidity. Many changes are taking place across most aspects of mobility, with special focus on the car. As usual, The Green Edge has been doing its research and in this post we summarise what we see as some of the key changes. In a separate post, we pick out a few of the skills implications of these changes.
Sharing the means of mobility is now well established in most urban centres. Cars, vans, bikes, scooters and, of course, rides are all part of the sharing landscape. There are around 1000 companies in the UK involved in this area of mobility (including hiring), and they have a huge influence on the purchase and deployment of EVs. There is clear crossover between temporary/pooled ownership and sharing as channels of mobility.
Established rental companies are purchasing large numbers of EVs. Hertz, for example, is adding 65,000 Polestar and 100,000 Tesla EVs into its worldwide fleet of 500,000 vehicles. By 2025 in the UK there will be around 400,000 EVs for rent.
Global sales of new EV cars have been rising very fast: 2.2mn were sold in 2019; 3.0mn in 2020; and 6.6mn in 2021. At country levels, current EV sales are around or above 10% of total in many of the main European markets. In the UK, new EV sales are around 11.6%, in Germany it’s 13.6% and in France, 9.8%. Norway - with all that oil and gas - is the major current outlier at 64.5%.
It's worth noting that the International Energy Agency estimates global EV sales must reach 47mn a year by 2030 to meet the current net zero/sustainable targets. That’s an increase of 40mn in 9 years.
Both new and second-hand cars are being increasingly sold direct through online platforms. With the general restricted supply of new cars (mostly due to micro-chip shortages) the second-hand market has been booming. We see a host of players here, such as Cazoo, Auto1, Aramis, Pendragon and Lookers.
We see a host of new and crossover entrants into EV production. Undoubtedly, an enabler to quick entrance into the market is the reduction in the engineering cycle due to the advent of technologies like digital twinning, alongside factors such as the reduction in components and the inherently more modular nature of EVs themselves. For example, an EV powertrain only contains 20 or so key components, compared to around 2,000 for an internal combustion engine (ICE) vehicle.
The list of new vehicle makers is growing and includes companies like Lucid (who only produced 125 vehicles by 31 Dec 2021) and Rivian (produced 2,425 vehicles by 8 March 2022). Arrival, which hasn’t produced a vehicle yet but already has a contract for 10,000 vans with UPS and is prototyping a new ride-hailing car in collaboration with Uber, is pioneering a micro-factory model for car production. Other new players include Canoo, Nikola, Lordstown, Fisker and Nio, alongside the well-known-by-now brands Tesla and Polestar. We also see new EV companies using legacy producers to manufacture their cars.
We see some big companies in other sectors adding or crossing over to automotive manufacturing. Foxconn is probably the most publicised example, from being an assembly business to becoming an EV producer. Companies like this can make extensive use of their ability to form and manage complex networks of suppliers.
Traditional producers going through transition
While new entrants to car production have largely built new facilities, traditional producers have been very active managing major transition programmes for their sites. For example, VW has converted its Zwickau and Emden plants to EV production, and has retrained thousands of staff over a four-year period. At Zwickau, 9,000 staff undertook Industry 4.0 programmes, while 3,000 also engaged in eMobility training. Emden was very similar and, learning from Zwickau, is now producing both ICE and EV cars. We also note that BMW has made the commitment that no current auto worker will be made redundant as a result of transition to EV manufacturing.
The EV supply chain
Information exchange and intellectual property
Increasing overlap between car component manufacturers and the whole EV system requires greater interchange of information along the supply chain. This has naturally led to increased scrutiny of suppliers at each tier.
Software is an increasing area of concern. Some suppliers have actually bought automotive software businesses to boost their internal capability - for example, Continental with Elektrobit (in 2015) and Argus (in 2017).
Legacy supply chains
One of the major advantages for new entrant EV producers is they are establishing future-fit supply chains totally focused on EVs. Existing car producers, on the other hand, need to manage a transition for both themselves and their supply chains.
There is also a shift in the balance between the electronics / software industry and the auto industry. At the present time, both sectors have total global revenues of around $2.2tn, with electronics / software employing 18mn people and auto employing 14mn.
EV battery manufacturing costs have come down from $1,000 per kWh (in 2010/11) to $130 (in 2021). But more recently materials costs for batteries have jumped. The raw materials for a 60kWh battery, sufficient for large family SUV, have risen from $1,395 to $7,400 - close to the total price of the battery a little while ago. Despite the rise in material costs, though, the general view seems to be that battery pack costs will drop to $100 per kWh before 2024.
But a major challenge to the continued growth in the use of lithium batteries is the supply of lithium. Companies like Lake Resources, an Australian business, are saying there isn’t enough lithium production to meet demand. This is an important one to watch.
We’re also seeing a series of deals being done between car producers and local or regional battery makers to ensure supply. For example, in general Honda uses GM’s Ultium battery, but in China it will work with CATL and in Japan, Envision AESC.
Nio, a Chinese EV producer, is betting heavily on battery swapping. This idea is particular relevant to densely-populated urban areas where off-road charging is not easily possible. It also has the potential to reduce upfront purchase costs. A swap-ready vehicle needs its chassis to be designed like a skateboard, keeping the drive train as low as possible in the car: this also increases ride stability.
Nio is not alone. Geely is already building 100 swapping stations in China - with a target of 5,000 by 2025 - and Beijing New Energy Vehicles is installing over 100 stations for taxis. China has greatest level of battery swapping technology development, with 50+ companies currently involved.
One challenge to battery swapping is the power requirements of each station - 650 MW, equivalent to the output of a small power station - to support fast charging of 13 battery sets.
For large vehicles and trucks, batteries might not be the best option. Here, hydrogen is being pursued. For example, Daimler Truck produced 172 hydrogen fuel cell trucks in 2021 (admittedly a small proportion of its 455,000 delivered) and in 2021 announced a joint venture with Volvo called Cellcentric. Cellcentric’s ambition is to create a hydrogen fuel cell that can move 40 tonnes up hill.
A big advantage of a hydrogen fuel cell is that it is less exposed to rare new materials. But a large-scale move for trucks towards hydrogen means Europe will require 300 high performance refuelling points by 2025 and 1,000 by 2030. The crossover between diesel and hydrogen is likely to take 15 years unless emissions taxes are introduced.
Worldwide, hydrogen has attracted a series of major investors, such as BOC, Ballard Power Systems, Cummins, Fuel Cell Energy, Bloom Energy, Plug Power, as well as auto manufacturers like Audi, BMW and VW. The UK is seeing the development of the Aberdeen Hydrogen Hub and new companies like Ryze Hydrogen (a JCB backed business). The first multi-fuel, open access, low and zero carbon fuel refuelling station is operating at the Tyseley Refuelling Hub close to the Birmingham Innovation Centre, while UK H2 Mobility is building a series of stations across the UK.
While hydrogen will be predominantly used for heating, a significant proportion will be used for mobility (about 75mn tonnes will be used by trucks, trains, and buses versus 475mn for other uses). We may even see some crossover in the aerospace industry, where we see Airbus converting its A380 test bed for hydrogen engine development, although Boeing remains cautious. Other developments include CFM International, a JV between Safran of France and GE of the USA, whose sustainability statements include hydrogen as a consideration.
Extending the ICE
While hydrogen might be reserved for the truck market, the increased use of synthetic fuels could extend the use of the internal combustion engine. Major players like Bosch still see the need to continue investing in the combustion engine over the next 20-30 years.
In four-way comparisons of fuel costs in the truck industry, the cost gaps per km are all converging between synthetic fuels, EV, hydrogen, and ICE fuels. As the relative cost gaps reduce the switch to alternatives can start to take place. Hybrids - both self-charging and plug-in - also feature, and companies like Honda still see hybrids playing a very significant role over the next decade. Part of the reason for the role of the hybrid vehicle is to allow for a managed transition to full EV car mobility while supply chains are being realigned.
A key part of the supply chain for lithium, cobalt and nickel is the recycling of lithium batteries. By the middle of 2023, the UK will have a 10,000 per year battery recycling facility in Northfleet, operated by Glencore. In the USA, Ascend Elements (formerly Battery Resourcers) is setting-up a 30,000 tonne battery recycling facility in Covington, co-located alongside the gigafactories it will supply with recycled materials.
The job of maintaining an EV has shifted from being largely electro-mechanical towards being almost close to that of a software technician. This skill challenge was well captured in a recent Financial Times editorial. Building an army of skilled EV technicians is critical for the UK, with 6,000 - 7,000 technicians needing to be trained each year up to 2030, according to Halfords. By 2030, there are projected to be around 7 million EVs on the roads.
Investment in charging infrastructure continues apace in the UK. BP has committed to invest a further £1bn in its Pulse Business, which already operates 8,000 charging points. To hit the number of charging points needed in the UK, between 40 and 50 need to be installed every day up to 2035. Around 30-40% of households will have to rely on a public network of EV charge points - this contrasts with the current position where 90% of charging is done at home.
Running alongside the need for lots of recharging points are a number of related issues, including pricing, reliability, length of stops and the large range of apps. It’s unclear at the moment how work-based charging will feature, along with general car parks and those linked to specific retailers. According to Zap-Map, the UK currently has 19,150 charging locations and 30,400 public recharging points. In addition, there are estimated to be 400,000 others at work and at home. Much of the growth in public charging points is driven by demand for rapid and ultra-rapid points, rather than the merely fast ones.
Autonomous EVs are being piloted extensively now, and form part of the move towards hyper-connected cars within a smart city setting. The move towards driverless cars is drawing down huge investment (currently running at $100bn according to McKinsey).
We find it telling that the profile of investment in future EV cars is split:
Chart: BMI. Data: McKinsey.
Of particular note is the number of companies focusing on autonomous vehicles. In addition to the traditional carmakers, we see a host of young companies including AutoX, Cruise, Didi, Argo AI, WeRide, Deeproute, Pony.ai, Zoox, Nuro, and Waymo. By far the most experienced, in terms of test miles driven, is Waymo.
One other interesting point about autonomous vehicles: their hyper-connectivity raises questions over privacy and surveillance, potential bias and discrimination, and the role of human judgement in driving (or supervising) an EV.
Battery-based helicopters have attracted major investment from companies like Velocopter (Germany), Wisk (backed by Boeing) and a host of others, including Joby Aviation, Archer Aviation, Lilium, and Vertical Aerospace. Airbus has set up an Urban Air Mobility Unit. The use of batteries in urban helicopters can only further push the technology to higher levels of performance. Part of the driver here is to maximise premium-priced mobility and to avoid congestion.
And finally, a whole topic in itself but merely noted here, the integrated development of smart urban environments incorporating mobility will have a profound impact on how we all use transport systems. The Green Edge is particular watching the development of Woven City in Japan.
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