Electric vehicles outlook positive but challenges remain

Electric dreams

20 April 2010 00:00  [Source: ICB]

Auto manufacturers are charged with producing electric vehicles to cut emissions

DATING BACK over a century, the concept of the electric vehicle (EV) is nothing new. Until now, however, the technology has struggled to keep pace with the internal combustion engine, so its uptake has been small.

Rex Features/Gareth JJ Burgess

Except for a few notable applications, such as the humble milk delivery trucks seen on UK roads, it has been unusual to see an EV. However, with both escalating environmental pressures and fuel costs, governments, manufacturers and consumers are now forced to contemplate a battery-based future.

"There's great market uncertainty on the uptake of electric vehicles," says Rick Hanks, Smart Meters lead at global consultancy Accenture. "Optimistic forecasts suggest that 62% of all new vehicles will be electric by 2050, but other forecasts go as low as 4%.

"The UK government is targeting a rise from 0.01% penetration today to 8% by 2025, which we feel is unlikely to be reached, given the high cost premium of these vehicles, low OEM [original equipment manufacturer] production rates, and the need to install sufficient charging points to support the vehicles," he says.

There are plenty of hurdles to be cleared before the uptake of electric vehicles accelerates. The cost of batteries, for example, presents significant challenges, he adds.

"We don't expect battery costs to fall as fast as industry forecasts. While the government has committed to pushing electric vehicles and will offer incentives of between £2,000 ($3,047, €2,275) and £5,000 to encourage would-be buyers to buy electric cars, given that the average electric vehicle will cost a good £10,000 more than conventional cars, it is still a significant commitment for consumers," says Hanks. "It will therefore be crucial to find creative financial mechanisms to circumvent the high cost premium and render EVs more accessible to consumers."

Then there is the need for a complete overhaul of today's transport networks and infrastructure. Battery charging points will be required on highways and minor roads, in cities and in more remote areas. A single charge generally equates to a range of around 100 miles for the current generation of EVs, so recharge points will have to become a familiar sight along our roads. Bearing in mind that each charge takes at least 30 minutes, this will also require a change of mentality for drivers who can refill at the conventional gas station in a fraction of the time.

INFRASTRUCTURE NEEDS
Should the EV concept really take off, the strain on the electricity network would also be immense. Power supplies would have to be adapted to serve the huge upsurge in demand, says Hanks.

A smart grid - an electricity supply network that uses digital technology to help keep energy costs low and reliability high - would help to balance demand and supply to reduce peak load stresses and optimize the grid, he adds.

"Smart grids will be critical for the mass adoption of electric vehicles. A slow charging car consumes as much power as 10 plasma TV screens. But fast charging a car in 15 minutes would be the equivalent of boiling up to 96 kettles continuously and would place unsustainable stress on today's grid."

Research in the US suggests that the difference between charging cars at peak versus off-peak times, would require 160 new large power plants to be built, adds Hanks. "Smart grids can help to mitigate this as they can best control the flow of energy to the network and can help utilities to optimize the system to cope with the increasing number of requirements placed upon it."

Plug-in hybrid electric vehicles - which are dual fuel and therefore provide additional flexibility - will prove an important interim solution until the infrastructure limitations and cost premium associated with EVs are rectified, notes Hanks.

Read Doris de Guzman's Green Chemicals blog

 

ON THE RIGHT TRACK
The UK, so often criticized for its transportation networks and environmental policies, will soon play host to the development of the world's first affordable, mass-produced zero-emission car.

From 2013, Japanese manufacturer Nissan Motor is planning to produce the first in its range of electric vehicles (EVs) at its plant in Sunderland, in the North of England. Initially, it will produce around 50,000 units of the Nissan LEAF each year. Production of the vehicle will begin in Japan later this year, and then in the US from 2012.

The move forms part of a £420m ($626m, €467m) investment, with the government pledging a grant of £20.7m and up to €220m coming from the European Investment Bank.

"The world is at the dawn of a new era in automotive transport. Nissan LEAF, which will go on sale later this year, is a five-seater hatchback that offers the same space, practicality and performance of a similar car in its class - minus the tailpipe emissions," says Andy Palmer, a senior vice president at Nissan. The announcement follows an agreement last December between Nissan and the One North East regional development agency that will see a network of charging points introduced in the region and numerous incentives to get consumers buying the highly efficient cars, such as a period of free charging and the use of dedicated EV lanes.

An advanced lithium-ion battery plant, also announced last year and based in Sunderland, is set to start up in April. The facility will be capable of producing some 60,000 units a year from 2012. The site will produce batteries for both Nissan and its French alliance partner, Renault. They are the only players committed to mass marketing pure EVs on a global scale and together will have a capacity of 500,000 units a year.

The Nissan LEAF is powered by an 80kW electric motor and takes less than half an hour to reach 80% of its charge. With a top speed of 140km/h (90mph), it has a range of 160km. The UK, so often criticized for its transportation networks and environmental policies, will soon play host to the development of the world's first affordable, mass-produced zero-emission car.

From 2013, Japanese manufacturer Nissan Motor is planning to produce the first in its range of electric vehicles (EVs) at its plant in Sunderland, in the North of England. Initially, it will produce around 50,000 units of the Nissan LEAF each year. Production of the vehicle will begin in Japan later this year, and then in the US from 2012.

The move forms part of a £420m ($626m, €467m) investment, with the government pledging a grant of £20.7m and up to €220m coming from the European Investment Bank.

"The world is at the dawn of a new era in automotive transport. Nissan LEAF, which will go on sale later this year, is a five-seater hatchback that offers the same space, practicality and performance of a similar car in its class - minus the tailpipe emissions," says Andy Palmer, a senior vice president at Nissan. The announcement follows an agreement last December between Nissan and the One North East regional development agency that will see a network of charging points introduced in the region and numerous incentives to get consumers buying the highly efficient cars, such as a period of free charging and the use of dedicated EV lanes.

An advanced lithium-ion battery plant, also announced last year and based in Sunderland, is set to start up in April. The facility will be capable of producing some 60,000 units a year from 2012. The site will produce batteries for both Nissan and its French alliance partner, Renault. They are the only players committed to mass marketing pure EVs on a global scale and together will have a capacity of 500,000 units a year.

The Nissan LEAF is powered by an 80kW electric motor and takes less than half an hour to reach 80% of its charge. With a top speed of 140km/h (90mph), it has a range of 160km.

BUMPY ROAD AHEAD FOR BATTERY MAKERS
For all the potential of the electric vehicle (EV), market pressures and intense competition mean that only six to eight global battery manufacturers will survive in the next five to seven years.

According to Thorsten Ploss, partner at German-headquartered Roland Berger Strategy Consultants, the nascent industry faces severe consolidation in the coming decade.

Nevertheless, the proportion of EVs in the automotive sector is expected to grow rapidly in the next few years, particularly as cost improvements raise volumes and increase economies of scale.

Demand for lithium-ion batteries is expected to rocket through to 2020, with major advances in technology achieved because of significant investment in research and development (R&D), adds Ploss.

There are, however, numerous issues to overcome. A lot of investment is needed in battery production - some €350m ($467m) is required for a 100,000 EV equivalent plant - and it is also necessary to increase R&D to develop more effective batteries. This evolutionary process for developing new cells and chemistry can prove extremely expensive, and each stage could easily cost €50m-100m, he says.

"Another problem is that there is a lot of hype and everybody is jumping on this at the moment. There is a lot of capacity coming into the market and the demand is not there yet," says Ploss.

"We're facing overcapacity and that means that margins go down. It's a dilemma because on one hand, players want to catch the demand that will be there so they have to spend - but with the lack of demand now, they create overcapacity." Announced investments will result in significant overcapacity from 2014 to 2017.

Japan, South Korea and the US appear likely to suffer the most, says Wolfgang Bernhardt, a partner at Roland Berger.

The consultancy's forecasts suggest that in 2015, capacities in Japan and South Korea will exceed 1.2m, whereas sales demand will amount to only 30,000 EV equivalents. Similarly, the US supply/demand balance will be 859,000 and 100,000, respectively - stimulated by hefty subsidies.

Elsewhere, however, there is a slightly different picture. Consumption in the EU is expected to be double the available capacity (320,000 versus 160,000). Additional capacities of around 100,000 EV equivalent units have been planned in the region but have not yet been officially announced. In China, there is expected to be a slight shortfall of only around 5,000.

 

By: Andy Brice
+44 20 8652 3214

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