10 minute read 28 Sep 2021
Electric car at charging station with the power cable

How the UK can become an electric vehicle world leader

Authors
Charlie Simpson

EY-Parthenon Partner and UK Future Mobility Lead, Advanced Manufacturing and Mobility, Ernst & Young LLP

Passionate about future green transport and energy transition. Avid cyclist and Leeds United fan. Married with two children and dog. Proud global citizen of Brighton, UK and Ireland.

Maria Bengtsson

Partner, UK&I Electric Vehicle Lead, Ernst & Young LLP

Dedicated to providing advice to clients around strategy and transactions in the energy sector, enabling them to find opportunities and manage risks in the energy transition.

David Borland

EY UK&I Automotive Leader

Passionate about the automotive industry and delivering innovative solutions for clients. Outside of work, focused on family and community. Enjoys sports.

Gaurav Batra

EY Global Advanced Manufacturing & Mobility Analyst Leader

Passionate about mobility disruption. Helping share the auto industry narrative in this disruptive landscape.

Contributors
10 minute read 28 Sep 2021

Fourth in the first EY EV Country Readiness Index, the UK needs joined-up thinking to drive adoption and de-risk investment to rank higher.

In brief

  • The new EY EV Country Readiness Index ranks 10 nations on the basis of supply, demand and regulation, and categorises them as leaders, aspirants or followers.
  • As the global EV market gathers pace, nations must prioritise infrastructure investment and boost domestic demand if they want to become EV industry leaders.
  • For the UK to rise from fourth in the inaugural rankings, it must optimise its charging infrastructure and develop a manufacturing base for EV batteries. 

The global electric vehicle (EV) transition is set to happen faster than previously anticipated. Key auto markets around the world are experiencing broadly observed shifts in consumer sentiment that reflect increasing concerns about sustainability, wellbeing and the environment.

Last year, there was a clear acceleration in the global transition to EVs, with a 39% increase in battery and plug-in hybrid EV sales, in the context of a 15% drop in overall car sales. EY’s Mobility Consumer Index research shows that 41% of consumers are now actively considering buying an EV as their next vehicle. In our view, this is a clear sign that the global EV market is picking up pace. As a result, we believe that countries vying to become EV industry leaders must build or strengthen their domestic markets rapidly by prioritising investment and support of local EV supply infrastructure, at the same time as boosting demand.

The first edition of the EY EV Country Readiness Index shows that the largest markets are preparing for an acceleration in e-mobility adoption, but with varying degrees of ambition and urgency. The index ranks 10 countries – accounting for 75% of the global light-vehicle market – on the basis of the three pillars of supply, demand and regulation. It categorises these countries into leaders, aspirants and followers.

The EV Index has been created to help cross-sector players such as automakers, energy companies and governments understand the factors underlying EV readiness. It provides insights into how countries can develop robust and successful EV markets in line with global decarbonisation efforts. With such information, it will be possible to plan for and, in the case of some countries, lead the development of the global EV market.

The acceleration in the global transition to EVs

39%

increase in battery and plug-in hybrid EV sales.

The case for countries to develop a leading EV proposition is clear. The EY Mobility Lens Forecaster shows that combined EV sales in the US, China and Europe will surpass all other vehicle-engine sales as soon as 2033, with non-EV sales shrinking to less than 1% of overall sales in these countries by 2045.

China, Sweden and Germany are currently leading the rankings because of key EV market strengths such as original equipment manufacturer (OEM) presence, policy support and battery supply. The UK has ranked fourth overall, but is in the top three for the categories of regulatory and demand readiness, ahead of Sweden and Germany. While the UK has some elements of real strength, its supply ecosystem will require further development if this market is to become a world leader.

The chart below shows the rankings of the 10 markets based on supply, demand and regulatory factors.

The global rise of EVs

The case for countries to develop a leading EV proposition is clear. The EY Mobility Lens Forecaster shows that combined EV sales in the US, China and Europe will surpass all other vehicle-engine sales as soon as 2033, with non-EV sales shrinking to less than 1% of overall sales in these countries by 2045.

Unsurprisingly, the restrictions enforced by governments at the height of the COVID-19 pandemic have led to a sharp decline in daily travel. When people do travel, however, they are increasingly choosing cars because the pandemic has caused a spike in concerns around hygiene, cleanliness and general wellbeing. Indeed, the index shows that modes of transport that involve travelling with strangers – taxis, buses and other public transportation – are now seen as less attractive than personal vehicles, such as cars, bikes and scooters.

(Chapter breaker)
1

Chapter 1

Support for battery manufacture and supply ecosystem key to progress

Government and industry must work together to accelerate the development of the UK’s EV industry.

When the EV index results are broken down into the individual categories, the UK is in the top three in terms of demand, as measured by factors including consumer awareness and knowledge, current EV penetration rates, fleet demand, and total cost of ownership. EY’s Mobility Consumer Index shows that 41% of surveyed UK consumers intend to buy an EV as their next car. During 2020, UK EV sales grew 1.4 times, despite a 29% decline in light-vehicle sales.

The UK’s position in the rankings has also been boosted by a supportive regulatory environment that has already been used to stimulate EV demand and, increasingly, supply. The UK is a part of the leader band of three countries under the regulatory pillar of the index, ahead of second-placed overall market leader Sweden. The UK Government has used a mixture of sticks and carrots to reach this position. Its Ten Point Plan for a Green Industrial Revolution, for example, suggests using £12bn of government funds in sectors such as zero-carbon vehicles to unlock private investment and boost green jobs. In other areas, stringent emissions regulations and a firm commitment to phase out combustion engines have been balanced by support for local battery manufacturing, development of charging infrastructure and consumer incentives, such as charger grants and parking perks.

In a bid to provide further detail around its decarbonisation plans, the UK Government unveiled its Transport decarbonisation plan in July 2021. Transport Secretary Grant Shapps described it as “just the start”, calling for “continued efforts and collaboration” to deliver the Government’s commitments in this area. So, how can government and industry work together to accelerate the development of the UK’s EV industry?

Consumer purchasing behaviour towards EVs

41%

of UK consumers intend to buy an EV as their next car.

De-risking UK supply infrastructure

The UK certainly has the potential to develop a world-leading EV market, but if it is to improve its position in the rankings of the world’s top EV markets, the supply ecosystem needs further support. Of the three areas measured by the EY Global EV Country Readiness Index, this is the key element holding the UK back when it comes to advancing the domestic market.

The index measures five main elements in relation to supply: the domestic presence and future plans of OEMs; energy ecosystem maturity, which includes renewable energy penetration, availability of smart charging and vehicle to grid (V2G) options, and the electricity demand-supply gap; charging infrastructure; EV battery supply; and the prevalence of new battery and EV business models, such as leasing, subscription, battery swapping and finance options.

For the UK to progress further in the rankings, certain areas will require government support, as well as public and private investment. Optimising the fragmented nature of the UK’s charging infrastructure should be a top priority, as should developing a UK manufacturing base for EV batteries. Such issues are already being addressed in other markets; for example, the German Government announced plans in July to fund a €90mn (£77.2m) public charging infrastructure modernisation programme.

What action can the Government take to thrive in the future?

While the UK is fairly competitive among peers in terms of EV demand, it is pegged comparatively low on consumer perception parameters, such as behaviour towards charging infrastructure availability and intention to purchase an EV as a next vehicle. About 54% of the surveyed consumers in the UK consider a lack of charging infrastructure as a deterrent to purchasing an EV, compared with less than 36% in Sweden, 40% in China, and 52% in Germany and the US, according to the EY Mobility Consumer Index.

Indeed, the UK’s EV charger to parc ratio – which measures the number of chargers available versus the stock of EV vehicles in use – is 0.08, slightly below the global average of 0.1. Charging capacity will need to increase to encourage motorists to purchase EVs in the short term, but also to underpin any future increase in EV use in the UK. There is also a need to balance out public, private and workplace charger availability. At-home chargers currently account for 90% of the UK total, according to the International Council on Clean Transportation. Building up workplace and public charging options should be a key element of any effort to develop demand by facilitating ease of EV use among consumers.

Consumer attitude towards being deterred to purchasing an EV

54%

of the surveyed consumers in the UK consider a lack of charging infrastructure as a deterrent to purchasing an EV.

The UK’s EV charger to parc ratio – which measures the number of chargers available versus the stock of EV vehicles in use – is 0.08, slightly below the global average of 0.1. Charging capacity will need to increase to encourage motorists to purchase EVs in the short term, but also to underpin any future increase in EV use in the UK. 

In addition to strengthening and expanding the UK’s existing charging infrastructure, localising battery manufacturing could help boost the EV market. The battery is set to emerge as the biggest value pool in the transition to e-mobility, the development of deep and local manufacturing capabilities will be essential for the leading countries in this market 

Support for localised battery manufacturing facilities will help keep costs down for consumers and sidestep logistical issues, as well as tariffs under the Trade & Cooperation Agreement (T&CA), that could arise from the need to import components from other countries. There is also scope for the Government to use the development of UK battery manufacturing capacity as a way to replace or transfer the highly skilled jobs that are being lost as the UK shifts away from internal combustion engine (ICE) manufacturing.

What action can corporates take?

In 2020, UK battery manufacturing capacity was around two gigawatt hours – just 4% of European capacity. However, plans are in development to boost this capacity. The UK Government and local authorities are reported to be speaking to at least six companies about building EV battery production facilities, including established automakers and start-ups.

The recent focus on localised battery manufacturing is likely to create new skilled jobs, not only in the battery manufacturing industry, but also across the supply chain. With battery manufacturers planning to co-locate supply chain partners and low-carbon energy production to strengthen the supply ecosystem, more regions of the UK are expected to become a core part of the EV-focused ecosystem. This ties in well with the Government’s ‘levelling up’ agenda to improve opportunities throughout England and Wales.

Aiming to support electrification of the automotive industry ahead of the 2030 ICE transition deadline, the UK Government is funding various lithium-ion battery manufacturing projects through different channels, such as the Advanced Propulsion Centre. However, the Government’s current £1bn fund for financing gigafactories is dwarfed by the €2.9bn (£2.5bn) on offer from the EU. The latter already has 38 planned gigafactories compared with two UK projects announced to date. If it is to compete with nearby countries and regions to gain market share, the UK Government will need to expand its support of such initiatives. 

(Chapter breaker)
2

Chapter 2

A joined-up approach to developing the UK EV value chain

Strategically effective cross-sector partnerships can help deliver additional growth and manage risk.

Public and private sector coordination and integrated planning will be necessary to boost the UK into the ‘leader’ band of the EY EV Country Readiness Index. However, the Government has a clear role to play in signalling commitment and direction to give the necessary confidence to the private sector.

Consumer demand for EVs is strong in the UK and the Government has been an important driver of that to date. The UK has also started to make inroads into the development of a local market for battery R&D, as well as battery and EV manufacturing. But there is scope for the UK to do so much more.

In addition to creating demand, the UK has the capabilities to become a leader throughout the EV value chain. Continued support for innovative R&D around battery technology is one element of this pathway. This will require funding for facilities and for the development of a highly skilled and adaptable workforce. There are also opportunities for the UK further out along the value chain – for example, in the extraction of raw materials and the production of chemicals for EV battery manufacturing.

The need to foster and support the EV ecosystem across these sectors is clear if the UK is to become a global leader in this industry. For policymakers, this means continuing to provide consistent, joined-up structures, targets and roadmaps. For corporates, finding the most attractive value pools and business models to maximise return on investment will be key. Strategically effective cross-sector partnerships will help to deliver additional growth, while managing risk. Technology will also play a key role in driving digital transformation, implementing operational efficiencies and improving profitability in this sector.

With the right industry partners, corporates and policymakers can play a significant role in de-risking the EV investment outlook and ensuring that the UK becomes one of the global leaders of the EV transition.

Summary

Having ranked fourth in the first EY EV Country Readiness Index, the UK must achieve public and private sector coordination, and integrated planning, to become a global leader of the EV transition. While consumer demand for EVs is strong, continued support for the development of battery technology – and greater investment in the nation’s fragmented charging infrastructure – are key to the UK’s progress. With the right industry partners, corporates and policymakers, the UK can hope to de-risk EV investment and rise up the index rankings. For more information on the findings of the EY EV Country Readiness Index, please contact the team below.

About this article

Authors
Charlie Simpson

EY-Parthenon Partner and UK Future Mobility Lead, Advanced Manufacturing and Mobility, Ernst & Young LLP

Passionate about future green transport and energy transition. Avid cyclist and Leeds United fan. Married with two children and dog. Proud global citizen of Brighton, UK and Ireland.

Maria Bengtsson

Partner, UK&I Electric Vehicle Lead, Ernst & Young LLP

Dedicated to providing advice to clients around strategy and transactions in the energy sector, enabling them to find opportunities and manage risks in the energy transition.

David Borland

EY UK&I Automotive Leader

Passionate about the automotive industry and delivering innovative solutions for clients. Outside of work, focused on family and community. Enjoys sports.

Gaurav Batra

EY Global Advanced Manufacturing & Mobility Analyst Leader

Passionate about mobility disruption. Helping share the auto industry narrative in this disruptive landscape.

Contributors