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Cleantech matters - The electrification of transportation: from vision to reality - EY - Global

A few key observations

  • The train has left the station. Auto manufacturers, utilities, aggregators and parts makers are taking major steps to capitalize on the EV opportunity. Those with realistic plans and strong partnerships will benefit most, but there is no turning back now.
  • Market drivers vary regionally. Market forces, including government support, the enabling infrastructure, customer attitudes and the EV’s value proposition, will determine the type of customer, as well as the timing and trajectory of EV sales.
  • Worldwide, fleets — particularly those that are government-backed — are ideal candidates to begin the conversion to EVs because their load requirements match EV capabilities; they own the support infrastructure as well as the vehicles; and they are concerned with total cost of ownership rather than solely up-front costs.
  • Coordination between the automobile and utility industries — and their regulators — is crucial to developing an EV ecosystem as these two industries undergo rapid change. The shift will be transformative for both industries and open opportunities to new entrants.
  • Technological challenges remain crucial. The arrival of stronger, lighter and more affordable batteries that operate at longer ranges will accelerate EV adoption. Power train technologies also can be improved.
  • Batteries pose separate business model questions. A number of factors related to batteries deter the purchase of EVs: their high cost; expectations of their rapid obsolescence due to continuing innovation; safety and performance risks; and the question of what to do with spent batteries.
  • EVs are only one element of the transformation of utilities. Utilities have the capacity to generate and perhaps even deliver the power EVs will need. The broader challenge is the creation of an electrical grid that can manage alternative (hence intermittent) energy sources, distributed power generation, energy storage and feed-in tariffs. The path forward is very uncertain.
  • The role of government in setting standards, granting funds, mandating purchases and spearheading industry coordination efforts is critical. Insufficiently supportive government policies were cited often as a top constraint to adoption.
  • Innovative business models are needed to help accelerate rollouts. Among new and emerging business models around the globe are aggregators, or intermediaries setting up charging stations. Niche EV makers and their unique ownership and pricing structures were also considered novel in both the US and Europe.
  • Creative partnerships can break infrastructure gridlock. In Europe and the US, cross-sector collaboration was seen as essential to integrating a highly complex value chain.

The EV industry is in its infancy but developing very rapidly.

For the fifth straight year, we hosted a global series of cleantech ignition sessions — executive roundtables that convene key stakeholders to discuss important cleantech issues.

This year’s sessions focused on electric vehicles (EVs) because the transformational change under way in this industry cuts across many sectors and has profound implications for:

  • automakers
  • utility companies
  • battery developers
  • smart grid operators
  • renewable energy suppliers

The sessions — in Munich, Shanghai and Silicon Valley — were jointly hosted by EY’s Global Cleantech, Automotive and Power & Utilities Centers. Each meeting brought together the full range of stakeholders, including innovators, corporations, investors, government, utilities and NGOs.

Ready, set...go? Is the electric vehicle industry ready to move forward with its promises?

After several decades of stops and starts, the global EV industry is poised to fulfill its promise:

  • battery makers have made major strides
  • cleantech innovation is being supported by big stimulus money
  • car makers are shifting gears to EVs
  • governments have begun to set needed EV standards
  • the industry is finally in take-off mode

Major milestones just since June 2010 include:

  • The introduction of the Chevrolet Volt and Nissan Leaf EVs
  • GE’s launch of an EV charging-station business
  • Tesla Motors’ initial public offering and US$50 million in strategic investments by Toyota
  • European auto manufacturers’ agreement on standard plug and socket specifications for overnight or slow EV charging, allowing drivers to use the same charging cables in different cities, regions and countries throughout Europe
  • China’s completion of construction of its largest EV charging station in Shandong province, 1 of 75 slated to be completed by State Grid Corporation of China

New electric vehicles to enter the market

This pace will continue: at least 18 battery electric vehicles (BEVs) are slated to arrive between 2010 and 2013 from both incumbent automakers, such as Ford, Fiat, Mitsubishi and Renault, and new entrants including Tesla Motors, Coda Automotive and BYD.

Many challenges remain: opinion varies widely as to the technology and business model path to adoption, and EV stakeholder interests are often misaligned.

“As far as we’ve come, many are still not on the same page,” one participant said. “We need to focus on execution and moving forward together.”

For a smooth ride over the inevitable bumps, dialogue, coordination, creativity and partnerships between government and industry will be critical.

To make sense of this rapidly evolving landscape, session participants shared their insights about business models that work and ongoing issues that companies, utilities, governments and EV charging aggregators face as the industry ramps up from pilots to commercial-scale production.

 A few key observations

A few key observations

  • The train has left the station. Auto manufacturers, utilities, aggregators and parts makers are taking major steps to capitalize on the EV opportunity. Those with realistic plans and strong partnerships will benefit most, but there is no turning back now.
  • Market drivers vary regionally. Market forces, including government support, the enabling infrastructure, customer attitudes and the EV’s value proposition, will determine the type of customer, as well as the timing and trajectory of EV sales.
  • Worldwide, fleets — particularly those that are government-backed — are ideal candidates to begin the conversion to EVs because their load requirements match EV capabilities; they own the support infrastructure as well as the vehicles; and they are concerned with total cost of ownership rather than solely up-front costs.
  • Coordination between the automobile and utility industries — and their regulators — is crucial to developing an EV ecosystem as these two industries undergo rapid change. The shift will be transformative for both industries and open opportunities to new entrants.
  • Technological challenges remain crucial. The arrival of stronger, lighter and more affordable batteries that operate at longer ranges will accelerate EV adoption. Power train technologies also can be improved.
  • Batteries pose separate business model questions. A number of factors related to batteries deter the purchase of EVs: their high cost; expectations of their rapid obsolescence due to continuing innovation; safety and performance risks; and the question of what to do with spent batteries.
  • EVs are only one element of the transformation of utilities. Utilities have the capacity to generate and perhaps even deliver the power EVs will need. The broader challenge is the creation of an electrical grid that can manage alternative (hence intermittent) energy sources, distributed power generation, energy storage and feed-in tariffs. The path forward is very uncertain.
  • The role of government in setting standards, granting funds, mandating purchases and spearheading industry coordination efforts is critical. Insufficiently supportive government policies were cited often as a top constraint to adoption.
  • Innovative business models are needed to help accelerate rollouts. Among new and emerging business models around the globe are aggregators, or intermediaries setting up charging stations. Niche EV makers and their unique ownership and pricing structures were also considered novel in both the US and Europe.
  • Creative partnerships can break infrastructure gridlock. In Europe and the US, cross-sector collaboration was seen as essential to integrating a highly complex value chain.
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