Electric Vehicle Outlook 2023: On the Road to Net Zero

team of specialists from around the world. They can look at scenarios for how these trends are going to impact the automotive, energy, infrastructure, and battery materials markets. So we want to know what's changed since twenty twenty two and set it against net zero targets and also talk about which areas of the electric vehicle fleet are succeeding and

which might be lagging. In today's episode, I get to speak with benef's head of Advanced Transport, Colin Mcharricer, and together we go through consumer demand for electric vehicles across different global regions, along with the current mid and long term sales forecasts. We also discussed the chin challenge is facing medium to heavy commercial fleets and the evolution of battery chemistries and the new battery tech that is now

starting to reach the commercial market. Now, of course this is just a snapshot into what is an extensive report, but we've pulled out a few nuggets for you and hopefully you enjoy. And if you do like it and you want to hear more podcasts from us, make sure to subscribe to receive updates on future episodes. And also if you want to share it with others, the best way to do that is to give us a rating

on Apple Podcasts or Spotify. Now my conversation with Colin about the twenty twenty three Electric Vehicle Outlook from vna Hi, Colin, thank you for joining us again today.

between then and now. Can you just give a very quick overview of what this is and perhaps isn't.

are a big part of the mobility mix. There's municipal buses as well. And what you find as you dig into these is that not only is each country different, but each segment is on its own sort of different trajectory. So when we do this exercise, what we're trying to figure out is what's happening, and again not just with electric vehicles, with combustion vehicles and with other aspects of the road transport mix around the world and across all

these different segments. So we sort of start with what does the world look like today, and that is saying literally how much do people move around in each country and how much do goods move around? So in people you're talking about something like a passenger kilometer, or in freight you're talking a freight ton kilometer, and then we look at how those might change over time. So that's where the things around, Okay, the adoption of electric vehicles

comes in. That's where things like shared mobility. That's where things like autonomous driving, changes in consumer behavior, demographic changes, urbanization changes, and all of these things come together to

form our outlook for what happens for road transport. And then once we've got that outlook together about where we think each segment and country is going, we then map that onto on all these other areas, and those are things like electricity demand, battery metals and materials, CO two emissions, oil demand, infrastructure needs, and of course vehicle sales as well.

look like in some leading areas. So California is of course leading the US, but as also a leader globally, the Nordics is probably the furthest along this transition of any group of countries or states. I'm sitting in Oslo and Norway right now. Over eighty percent of vehicle sales are fully electric. Markets like Sweden, Finland others are not

too far behind. So what we I wanted to do was play out some of the emissions and energy market impacts and fleet turnover impacts in countries and regions where electricic flood option is going quite quickly, So that was the logic behind adding those. Last year we added a lot of detail on Southeast Asia because we were seeing

really interesting things happening there. Next year we'll probably add another big emerging economy, so somewhere potentially like Brazil or Mexico, where again the mix some mobilities different and the timelines are different for all of the things that we're seeing happen around the world.

the technology is continuing to get better. It actually got more expensive last year due to spike and raw material prices, So we go into that a lot and look at what's happening there. But I would say the starting point is still really in terms of what's going to change when we talk about electric vehicles anyway, is certainly the

battery side. So one of the things we did this year, for example, is say, look, battery prices went out slightly last year, what do we think happens and what's some scenario analysis for when you get to in the passenger vehicle segment price parity with combustion vehicles based on different battery experienced curves or learning rates that we saw them

go up for the first time last year. So again looking at the underlying technology, battery chemistry mix, and price outlook, it still forms the basis for us being able to say with some confidence that things are going to continue to accelerate quickly on ev adoption. And so again you said it, Yeah, I don't want to pick a favorite child, but I would say that's probably the most foundational part of the work that we're doing. Now. We also do

this net zero scenario. So the base scenario in the report is this economic transition scenario, which says, look, this is led by techno economic forces and that's the primary thing that drives changes in the vehicle markets around the world. And we assume that no new policies are in place, and again that's where the battery cost stuff really becomes critical.

But we also run a net zero scenario, which is more of a backcasting exercise that says, if we want to get to a net zero capable fleet by twenty fifty, what has to happen. That's less reliant on the battery price part, because you're sort of saying, well, if you believe we can get on track, here's where it would have to go, and here's the policy recommendations to keep it on track. Obviously, that's a bit of a different exercise than sort of what's the trajectory we're on today.

pretty close. Three wheelers is pretty much on track, two wheelers and buses are pretty close, and then you get into light duty vans and commercial vehicles and passenger vehicles, and there's a lot of variation by country, but again you're starting to get some countries that are looking like they're going to be able to phase out combustion vehicle sales at least very close to by the early to

mid twenty thirties. And that's roughly what you need to stay on track for a carbon neutral capable fleet by twenty fifty. Now, it's worth noting that twenty fifty carbon neutral capable fleet you also have to have a lot of stuff going on in the power system to decarbonize the power system to enable that fleet to actually operate in a zero emissions way. And so that's a separate

part of bnef's work, the New Energy Outlook. But what we're doing here is looking at can the fleet of vehicles on the road operate without producing CO two emissions.

million sold a little higher than that. Actually, we're trending a little bit above that, and by twenty twenty six, we're forecasting about twenty seven million sales, and just to translate that into percentage terms, that's about thirty percent, so just under a third of the global vehicle market we're saying as plug in vehicles by twenty twenty six, and that's really not very far away, and that's that's coming at us quite quickly. What's important again there is that

there's quite a lot of regional variations. So countries like China are probably going to be above fifty percent by then, regions like Europe above forty percent, and then there's kind of everybody else, and there's quite a big spread between the some of the other markets. So the near term picture is one of continued pretty rapid acceleration, but then a lot of variety between the different countries. And we think the fleet of passenger vehicles we're talking about here

crosses one hundred million evs by twenty twenty six. Now, one of the things that kind of falls out of

that is that combustion vehicle sales have already peaked. So they actually peaked in twenty seventeen, they declined in twenty eighteen and twenty nineteen, then really dropped in twenty twenty because of COVID, recovered a bit in twenty twenty one and recovering again in twenty twenty two, but all of that recovery is essentially on the electric side, and we don't really see them ever getting back to those twenty

seventeen highs. You just look at what's going on in China, where the most recent month sales are, you're already at a third of sales. In Europe, you're running around twenty percent. It's just really hard to offset that anywhere else in the world to get up to the levels of combustion

vehicle sales we saw in twenty seventeen. So that's kind of a near term implication is that they're already combustion vehicle sales are already twenty percent off their peak of twenty seventeen, and they're probably going to be more like forty percent off their peak by the time you get to twenty twenty six, and they're now in terminal decline. When we look at it further out, a couple of things happen. One this gap between the countries, it sticks around for a while, but then it starts to even

out a little bit. It starts to get smaller as things take off in the countries that have been slower to start with. So a good example of that is somewhere like Australia. It's been quite slow so far in evy adoption, but it's now picking up quite quickly. And we've seen this in a few cases, the countries that go slower at the beginning oft and then pick up faster. And some of that is just built up demand. There's also an economic effect going on when we look at

emerging economies. So the way we model this is around the price competitiveness of evs in different segments and in different countries, and one of the things you find is that emerging economies are quite price sensitive, right There's not a lot of spare money people have to spend on vehicles. I mean there is at the premium end, but in the bulk of the vehicle market in emerging economy there's

not a huge amount of extra money available. That price sensitivity works against EV adoption before the point of price parity, but then it accelerates it afterwards. Once EV's become the cheaper option, then things start to go quite quickly, whereas before they were the cheapest option, things go quite slowly.

So that's why you get these different curves where it's kind of slow and then really accelerating in the countries that are going slowly now and in the emerging economies and it's actually fast, and then starting to tail off in some of the wealthier countries that are in China that are going quicker right now. And the reason for that tailoff is actually just you start to saturate the market.

Around the twenty thirty five period, we have markets like Europe and China really starting to slow down because you start to get to sort of seventy eighty even ninety percent of sales being electric, and that just means that we think the last sort of ten percent is going to be a bit hard to address, and so the S curve flows down there. On a global basis, again, talking about the passenger vehicle segment. Evs get to about seventy five percent of sales in twenty forty globally, and

that's pure electrics. At that point we see plug in hybrids kind of disappearing. By then there are scenarios where that goes faster. Of course, the net zero scenario it's much faster. It has to be one hundred percent or almost one hundred percent by twenty thirty five of new vehicle sales to standtrack for the net zero scenario. But that's our economic transition scenario, which says no new policies. It's about seventy five percent by twenty forty.

We're starting to see that log jam ease a little bit, and that's we're starting to see a lot more models, particularly launching in the big markets, so China, North America, Europe, and actually so far China is leading this, but it's interesting to note that trucking might be one of the areas where the US is really going to jump forward on. It's been a bit behind those other two regions on

passenger cars. But I actually think there's some really interesting stuff happening on heavy and medium trucks in the US and a lot of very interested, large corporate buyers who are going to push that forward, and some interesting starting points places like ports using these big vehicles for dray Edge, and you're seeing some really fascinating activity happening there in California. But so there's that model availability question, which is sort

of being easy now you're seeing more things launch. Then there's the price part of it. These vehicles are still significantly more expensive, but we see that coming down the same way we see it coming down on the passenger vehicle side. In general. We've seen the prices of batteries going into trucks lag a couple of years what you see in passenger cars, and that's just because passenger cars are a bigger segment, the buyers have more power, and

there's just lower prices negotiated there. But again that's starting to close a little bit too. The last thing that is really still there is charging heavy trucks at the highway is tough. It's a lot of power. It's a huge demand on the grid in many cases in places where there isn't a very thick grid connection, if you will, and that's a challenge. Now, it's not a challenge for everybody.

There is a fair amount of depot charging that can go on and predictable routes and relatively slow charging overnight because most of those vehicles stop overnight, but that really heavy duty, long haul trucking, there is a big charging infrastructure need there now. The good thing is we're also seeing a lot of money starting to flow towards that and a lot more truck focused charging stations start to

be built. But it's kind of early days, and so the EV share of the medium and heavy commercial vehicle fleet last year was only zero point one percent, so we're at the very very beginning of that. So for passenger vehicles it's about two percent of the fleet last year, for some of the other ones it's much higher. Commercial and heavy vehicles about zero point one percent of the fleet.

But we saw again just kind of when you're looking at these segments where it's early, you're trying to scan the horizon of it and see what's happening, and you start to see some interesting success stories. So China is doing a lot on this. You're in Towards the end of last year, there were a few months where medium and heavy zero missions vehicles so that includes some fuel cell vehicles hit around five percent of medium and heavy

truck sales in China. On the light commercial vehicle front South Korea, about twenty five percent of light commercial vehicle sales in South Korea are already electric, so you're starting to see more of that stuff happen, but it is early days. And I think that charging infrastructure part is both a real opportunity and a real challenge.

able to make that route. And I guess if I really had to boil it down, what's the range and what's the recharge time for a let's say heavy duty semi style vehicle or a lory as they would call the mayor in the UK.

be dependent on the charging infrastructure on route. And so what we did find is that if you say, look at Europe, the average time or the amount of time that a driver is required to stop for every four hours of driving sufficient to recharge to add significant enough range to continue on the trip. So I actually don't think the downtime is going to be the limitter. Here.

You're starting to see the truck ranges creep up. A lot of them are still in regional and urban duty cycles right now, so they do maybe two three hundred, four hundred kilometers. Even we're probably going to see the next ones that reach five hundred kilometers in large scale

production in the next little while. Tesla Semi of course claiming they're going to be able to do much more than that, but we haven't actually seen that in fully loaded delivering that capability, which is important to note, but I don't think it's going to be the dwell time. I think there is more activity around megawatt scale charging, so being able to deliver a full megawatt of power to the truck. Once you do that, you can cut the charging time down into what I think will fit

into a normal rest period that a driver needs to take. Anyway, based on the calculations we've done, the bigger challenge is going to be getting all that power down to where you need it, and so there you might see a quite interesting set of solutions come in. You're seeing in

China they're experimenting with some battery swapping. You're probably going to see a lot of battery storage at the sites so that you're charging those batteries at a slower rate and then charging battery to battery to cut some of the grid strain that you're seeing there. And then you're probably also going to see a bit of a land grab for where you have places where there is sufficient charging or power capacity coming down to the site that are going to be suitable as larger scale truck stops.

now entering the commerci realization phase. And so what we did is we identified three of them, and there are more, but I think three of the most interesting ones are one sodium ion batteries on next generation anautes and solid state batteries. And our battery team is all over this and they've been publishing a lot on tracking these developments over the years and how they've gotten to this point.

But I think the important thing to note is that one innovation in the battery industry is not slowing down at all. If anything, it's speeding up as the industry grows, which is what we've expected, but it's still sometimes hard to predict exactly what shape that takes. On sodium ion batteries, this is a technology that is in theory been around

for quite a while, but there was challenges. You've got this balancing act anytime with a new battery around things like cycle life and capacity and density and all these sorts of things, and some of those it looks like some of the leading battery manufacturers have significantly improved on the technology enough to be confident that they can put

it into passenger cars. So you've seen the very first set of announcements from some smaller players and some big ones on building significant amounts of sodium ion battery capacity and commercializing that into vehicles late this year or more likely in the next few years, but that's a big

that's a potential game changer. Now, the energy density isn't as good as traditional lithium ion batteries, but they're very stable and the materials for them are very cheap, and we've done some work looking at how low those prices could go, and we think there's a route to getting fifty dollars a kilo what hour sodium I own batteries, which would be a game changer for very affordable electric vehicles. Now, that won't happen overnight. What we've seen is that things

take time to scale up in the battery industry. But that is a chemistry and a technological advancement that we think can play a significant role in alleviating some of the pinch points we've seen on the battery supply chain for some of the materials, So things like lithium or cobalt or nickel that spiked last year and I have since come down quite significantly, So it's not to say they all remain high, but there will be future spikes of all of these things and having a diversified portfolio

of battery options that you can go to if that happens for a prolonged period of time, is very, very good for the industry. So we think sodium ion is going to start at the lower end of the vehicle market, similar to the way lithium iron phosphate batteries did a few years ago, but we think it has potential to change the dynamics significantly sort of in twenty thirty and beyond in terms of total amount of lithium demand needed for vehicles.

much lower cost for a specific use case. Perhaps urban pinging around seems like it's more of a potential than it was in the past.

have affordable options there. And I think you are going to see more diversification of the technology going into different vehicles, and even now you're starting to see that. So you're starting to see say a Volkswagen or a Ford saying actually, our entry level vehicles and even Tesla, Tesla push pioneering this approach among Western automakers. Our entry level vehicles are

going to use a lithium iron phosphate battery. Our higher end ones are going to use an NMC or an NCAA battery with higher density and higher associated cost as well. I think it won't end there. I think you will have some who say, no, we're just focusing on urban vehicles and those are going to be using a sodium ion battery and it's going to be ultra cheap and ultra affordable, but still very safe. And I think that is a significant difference from where we were a few years ago and is a big.

upon that. But when it comes to making that complete vehicle that rolls off the line, whether it's for commercial or direct individual use to get around town, are those supply chains also dramatically changing?

will continue to happen. Automotive supply chains are long, so they reach a long way up. There's even in an ev where there's less parts there's still a lot of parts, there's a lot of material, a lot of physical material that goes into making a car, and so they are also subject to trade challenges. Right, generally they've been able to operate without too many restrictions and a lot of countries have benefited from relatively free trade on automotive but

that period may be ending a little bit. We start to see more and more tensions around this topic. Other policies that are aimed at really explicitly supporting domestic manufacturing. So the Inflation Reduction Act in the US China have of course been supporting domestic manufacturing of vehicles and batteries for quite a long time. Europe now responding to Inflation

Reduction Act. So this play by play of where are the job's going to be and where are the vehicle's going to be made and where the battery is going to make it's going to continue. We're not at anything resembling a steady state on that yet. One thing I will say though, is that in the long term, you do want to generally make vehicles near the market where they're being consumed or used, I should say, and similar

for batteries. Now right now you're seeing some interesting dynamics where a lot of companies are making evs in China and shipping them to Europe. I think that holds at some reasonable volume and for a little while, but I think in the long term it is more desirable to have the vehicles made relatively near where they're being consumed. Now, there's always going to be exceptions to that, but if you look at the orientation of vehicle markets over the

last twenty years, that is still the case. So, Yes, there are lots of Japanese vehicles sold in the US, but most of them are made in US plants. Yes, there are some vehicles shipped from Germany to China or the US, but there's also a lot of those made domestically in those countries as well. So it's going to continue to be a dance. There is going to be

a fair bit of localization. I think it is going to continue to be a bit of a political hot potato around how you incentivize domestic jobs and domestic manufacturing. I think this year it caught us by surprise a bit, the Inflation Reduction Act, and I think it caught a lot of people by surprise, even within the industry, just how big a push that was going to be on shore the US vehicle and battery manufacturing supply chain, and

that is happening. It's happening really quickly. There are tens of billions of dollars announced since Iro's announced in North American battery and component manufacturing, and so I sometimes hear this view that like, oh, this has done, China won this race. I think we're still in the early going of this. I said only the end of the last year, only two percent of all the vehicles on the road

we're electric. There's a lot of rooms still for countries to carve out new industrial policy clusters and build new base of jobs and innovation. So I think we're going to continue to see a fair bit of maneuvering there. I hope it doesn't end up too fragmented, because I think that will slow down the transition at a time when we want to be speeding it up. But I think that's a very real possibility.

and what they're ignoring. Maybe in the category broadly of weird and wonderful tech, so not covered in this report, but in Collins list of things to watch and ignore. I'm wondering about hydrogen vehicles.

been around for quite a long time. The first discussions of them go back decades, and really they have not delivered on any of the promise that has been discussed over the years. And last year sales of them fell from twenty twenty one, so they were down. And not only were they down, we saw a few automakers sort of reduced their commitment, and we also saw more and more of the sales concentrated in the passenger vehicle segment in South Korea, So it's about seventy percent of passenger

fuel cell vehicles were in South Korea. About fifteen thousandth sold last year. It's not very many. It's a very very small market. It's concentrated in a few models, a few automakers, and a very small number of geographies. The few refueling infrastructure part is still a major major challenge. We've seen supply issues at the hydrogen fueling stations that are there a lot of them offline at any given time,

and some of them just plane removed. For example, in the UK, Shell pulled a few out because they weren't being used enough. So it's expensive and it's just not really what consumers seem to want. In the places even that built a fair amount refeeling infrastructure, like California, sales are way way down. Sales have plummeted in Japan, which

has been the biggest backer of the technology. So at some point, as forecasters, we just start to get really uncomfortable saying I don't feel comfortable making a twenty year forecast for something that is so concentrated and falling last year, so we just sort of said, look, we're taking it out. We'll revisit it when field sell vehicles reach zero point one percent of global vehicle sales. So that's not very much. That's not a high bar. Zero point one percent is

pretty low. That would be around eighty thousand vehicles a year. Maybe they get there. Will happily revisit it when they do, but they're not there now, and it's very uncomfortable for people who rely on data to try and make a long term forecast. Trucking. They still play a role in our zero scenario, but they're sort of backfilling where batteries

don't work rather than the main solution. So I think another way to think about hydrogen fuel cell vehicles if you're thinking about energy and emissions from the passenger vehicle segment, if you were to double the size of the passenger fuel cell vehicle fleet, So you take all the number that have been on the road sold over the last twenty years, and you double it every three years, so all the way out to twenty forty. Every three years

you double the size of the fleet. That's a pretty aggressive rate of growth considering how long it's taken to get to where we are. If you do that, then they will be about zero point two percent of the vehicle fleet in twenty forty, so have no meaningful impact on emissions or energy consumption in passenger transport. So again

you sort of look at that. If that's the upper bound snario, that's the optimistic scenario for growth, and it has zero impact on global CEOTO emissions in twenty forty, then you have to sort of say, well, why are we spending so much time talking about this? So I think there's still a potential role to play as backfill in the trucking segment, in heavy duty long haul in parts that are hard to electrify. I think it's significantly smaller than batteries and smaller than a lot of the

proponents suggest. But I really don't see, at least in the data right now, much of an interest from consumers in the passenger vehicle segment.

now in San Francisco, in Beijing, and they're expanding. Yes they're geofenced, and yes, there's all sorts of caveats to it. But you should probably be more optimistic on the technology now than in the past because it exists now and it didn't when the sort of hype cycle was that its peak. You couldn't commercially go and get in a self driving car. You can do that now and they're really racking up the kilometers and the China market is

moving really quickly. So I think all this stuff around stelf driving cars gets caught up in these all or nothing it's going to go take over one hundred percent immediately, or it's all smoking mirrors and nothing's going to happen. I think you're going to see this stuff slowly and steadily expand more geofenced areas. But it is real, and so one of the things we did this year is run two scenarios to say, look, what does happen if

this stuff really takes off? And it does potentially dramatically cut down the size of the global vehicle fleet, and it also can push you towards electrification sooner. And that's because more of the autonomous vehicles that are being used for testing right now are electric, and there's a lot of reasons to think because of economics and regulation that

future ones are going to be electric as well. That means that the kilometers can go electric faster than the fleet can if we take how much people move around and assign it to different drive trains, so it can both lower the size of the vehicle fleet and push it towards electric faster. Of course, there's still the nightmare scenario where there's a big bound in the amount of vehicle use because of the self driving cars. We didn't really dive into that in this time, but in general,

I think it's not something you should ignore. I think it's something you should recognize that we don't know and do sensitivity on scenario analysis accordingly. So I think it's definitely still something to watch, and I actually think you're going to hear quite a bit more about it in twenty twenty four and twenty twenty five, as some of these services start to scale up further.

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