We live in an age of disruption, where what seemed normal some time ago has encountered changes, be it the way you commute, work, or live. For example, even before COVID had made its mark in our lives, the automotive industry experienced significant disruption in powertrain technology, making way for a more acceptable contender, e-mobility.
While the year 2019 set a benchmark in EV sales, with over two million electric vehicles sold worldwide, accounting for about 2.5% of all the light vehicles sold globally, the COVID-19 pandemic in the year 2020 disrupted the supply chains and led to industries shutting down. Furthermore, a shortage of factory workers significantly affected automobile production. The economic crisis resulting from the pandemic led to fewer people buying cars, which plummeted automobile sales globally.
Despite the disruption put forward by the pandemic, electric vehicle sales have been increasing during the pandemic, thanks to the favorable conditions for faster adoption and manufacturing of electric vehicles. Let's discuss the factors accelerating the adoption of electric vehicles.
Favorable Government Policies supporting a Sustainable Future
To bring CO2 emissions under check, governments have started providing specific incentives like tax exemptions on the purchase of electric vehicles. Furthermore, many governments have also increased incentives for encouraging people to purchase EVs. These incentives can also act as a stimulus to mitigate the economic impact of the pandemic. For example, US President Joe Biden's $2.3 trillion infrastructure plan consists of $174 billion to promote electric vehicles and support expanding the country's charging infrastructure.
In India, the Union Transport Minister, Nitin Gadkari, has announced the setup of EV charging stations across 69000 petrol stations across the country. Additionally, he has promoted EVs by cutting down on taxes and delinking battery costs on 2-3 wheelers. Furthermore, the plan is to have 500,000 charging stations installed by 2030. Increased charging infrastructure reduces range anxiety among consumers traveling long distances, further accelerating the adoption of electric vehicles.
Vehicle Dealerships Go Digital
Lockdowns imposed in various countries have led to the temporary shutting down of automotive dealerships. But, multiple manufacturers have started selling online, thanks to the advent of digital car dealerships. As a result, many people in 2020 were open to the concept of buying cars online, thereby paving the way for the more significant sales of electric vehicles even during the pandemic.
Digital platforms can help in identifying the right customers at the right time and delivering tailored information to them. The path from an online ad space to the manufacturer's website to confirming appointments with a local dealer can be completed in a matter of minutes. Additionally, information gathered on customer preferences will allow the sales team to provide the best service experience possible.
However, most EV manufacturers like Rivian consider selling through dealerships incompatible with their business models. Many other EV manufacturers claim that direct selling can help them have greater control over the consumer experience of purchasing an EV. Additionally, EV companies do not trust dealerships to have the desired knowledge and motivation to sell electric vehicles. According to a study, most salespeople are not informed enough about the technology and the incentives EVs can offer consumers.
Delivering the last mile with EV
The pandemic has forced shops, vendors, and restaurants to temporarily shut down to curb the spread of the virus leading to people purchasing the daily essentials online. In addition to that, more and more people are buying from e-commerce sites and ordering food online through delivery apps.
As a result, the demand for last-mile delivery has increased significantly. These food delivery start-ups and e-commerce giants are looking at cheaper alternatives to cut costs associated with logistics. Coupled with the economics of EVs, electric two-wheelers are seeing an increased demand even in smaller towns and villages.
BigBasket, one of India's most prominent e-commerce players, plans to ramp up its fleet of electric vehicles for last-mile delivery from the current 800 to 4000-5000 in the coming two years. As a result, they aim to achieve a 30-40% reduction in overall operating costs.
Similarly, Amazon is collaborating with EV manufacturer Rivian to develop its first set of 100,000 last-mile delivery vans to keep up with its pledge of becoming carbon neutral by 2040. Furthermore, Amazon India has partnered with Mahindra Electric to increase its fleet of electric vehicles. It is also partnering with Hero Electric and start-ups like EVage to expand its fleet of amazon electric delivery vehicles for last-mile delivery. As a result, Amazon plans to have a fleet of 10,000 EVs for last-mile deliveries in India by 2025.
Evolving Customer Sentiments towards Electric Mobility
Due to the lockdown enforced across various countries and imposed travel restrictions, pollution levels worldwide are at a record low, and people have been waking up to clearer. A study shows that global CO2 emissions decreased by 17%, while NO2 emissions dropped by 20-40% across the US, Europe, and China. As a result, people have started realizing the importance of climate change goals. In addition, people see the widespread adoption of electric vehicles as a potential way to achieve these goals.
Recent developments in EV battery technologies aim to reduce range anxiety among consumers. However, lithium-ion batteries that drive today's electric cars have issues regarding driving range, charging time, and frequent heating.
In recent times, manufacturers have adopted a new approach to their R&D for overcoming the shortfalls of Lithium-ion batteries. Methods such as increasing Silicon in the traditional Lithium-ion battery have resulted in greater energy density. As a result, these Lithium-Silicon batteries have the potential to hold more energy, last longer, and deliver enhanced performance.
Some start-ups like QuantumScape are working on a battery that can operate without the anode and the electrolyte. Instead, it uses a unique solid ceramic separator that makes the battery more compact, energy-dense, and safer than before.
Future of Electric Vehicles: Challenges ahead
Despite the Electric vehicle prospects, their mainstream adoption faces several challenges. Inadequate electric supply, lack of standardization of charging infrastructure, and better great price points are some of the factors creating barriers to EV adoption. Similarly, electric vehicle driving range anxiety among people in countries with inadequate charging infrastructure and lack of choice hold back consumers from purchasing electric vehicles. However, EV adoption may be low at the moment, but it is accelerating at a much faster rate than ever.
OEMs are investing more in EV manufacturing. Recently, Ford has announced an investment of $30 billion into its electric vehicle segment by 2025 as part of its EV and battery development strategy. The company expects to have 40% of its global volume of vehicles be EV by 2030. Similarly, General Motors is investing $2 billion in its Spring Hill plant in Tennessee to build its future electric cars. The Cadillac LYRIQ luxury car will be the first to be manufactured in this plant.
Recent developments in EV technologies are changing the consumers' perceptions about electric vehicles and are encouraging more people to opt for an EV as their preferred choice for mobility. The OEMs, in turn, are investing in resources and infrastructure to keep up with the upcoming race for electric vehicles. In addition, increased efforts by governments worldwide coupled with the growing concerns over climate change indicate a bright future for electric mobility ahead.
About Tata Elxsi
Tata Elxsi is a leading provider of design and technology services for product engineering and solutions across industries. We have built a comprehensive services and solutions portfolio for vehicle electrification that adds value at every stage of the customer’s product development lifecycle. Have a look at our service framework that addresses multiple product and service use cases across the rapidly evolving ecosystem of electrification. Reach out to us to collaborate on building an electric future.
Authored by: Harikrishnan AM and Udayan Patankar.
Note: The opinions that may be presented in the article are that of the author/authors.