THE NEXT DECADE: ELECTRIFICATION

In 2019, electric vehicle sales broke new records. The consultancy company McKinsey estimates that around 2.2 million plug-in passenger vehicles have been sold worldwide, resulting in a 2.5% market share (1 in 40 new cars). It also predicts that between 2020 and 2025, about 400 new electric models will arrive on the market. In turn, the Boston Consulting Group presents the current frenzy when it reports that the 29 main manufacturers plan to invest more than $300 billion in producing electric vehicles in the next 10 years and that sales of vehicles with some type of electrification will make up a third of sales in 2025 and will surpass the mythical 50% mark in 2030.

Thus, it seems that the decade will come to an end with the century-old hegemony of the internal combustion engine being called into question. While diesel and gasoline promise to continue to play a role, the next decade will be predictably marked by the acceleration of the transition and large-scale adoption of electric vehicles.

Let us focus on the factors that support this perspective.

The automotive industry will continue to tackle a growing set of restrictions and incentives from the governments of countries and cities. For example, in Europe, an ambitious plan is underway whose objective is to achieve carbon neutrality in 2050 (i.e. to cancel the balance between emissions and removals from the atmosphere, for example by the forest). Very demanding targets for reducing CO2 emissions impose huge fines to manufacturers that do not comply with the stipulated limits, negatively impacting the TCO (Total Cost of Ownership) of internal combustion vehicles. On the contrary, we see that currently 24 of the 28 member states of the European Union have some type of tax incentive in order to stimulate the sale of electric vehicles by reducing their TCO. At the local level, cities promise to continue to play a fundamental, if not decisive, role in the transition. Several cities already have or will have some form of ban, ranging from simple low-emissions zones to a total ban on the circulation of internal combustion vehicles.

The automotive industry, despite the enormous challenge of preparing for the future, while ensuring its current sustainability, is well placed to make its contribution to the phased and global weaning from fossil fuels.

Electric vehicles today represent a huge challenge for manufacturers in terms of profitability. Their development and production cost is enormous and the margins are small, if not negative. However, despite the growing pains, we see new models of cooperation between manufacturers, and forms of product development designed from the ground up for electrification, which together with advances in technology and economies of scale will tend to lower the cost of the product (especially batteries), generating sustainable profitability in the near future.

Charging infrastructure is vital for the mass adoption of electric vehicles. Here, it is expected that the rapid growth of sales and investments from public entities, manufacturers, and other suppliers in the large-scale installation of chargers will progressively guarantee sustainable business models, promoting a healthy balance between supply and demand.

As the price goes down, the autonomy increases, and charging infrastructure becomes ubiquitous, it is expected that more consumers will see the electric vehicle as a reliable and comfortable option for their mobility needs, leading to mass adoption of this technology.

Designing a scenario where we reach the end of the next decade with the sales mix consisting of more or less equal parts between pure internal combustion (diesel and gasoline), hybrids, and electric vehicles, may in fact not be very bold. The automotive industry, despite the enormous challenge of preparing for the future, while ensuring its current sustainability, is well placed to make its contribution to the phased and global weaning from fossil fuels. The question that arises next is whether this is enough. Probably not. Especially in cities, more efficient public transport solutions and other lighter and interconnected complementary forms of mobility are essential to ensure the protection of public health on a local scale and an effective fight against climate change on a global scale.

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All opinions expressed are my own and not to be associated with my employer or any other organization I am associated with.