President Joe Biden announced that the US will return to the Paris Agreement on addressing climate change, and to be consistent with its 2030 greenhouse gas emissions target, a 5% year-over-year reduction is needed at a minimum. Road transportation is a natural focus, since it accounts for almost one-quarter of total US emissions. With that in mind, the Biden Administration has also proposed replacing the federal fleet of 645,000 vehicles with EVs and financing half a million charging stations nationwide by 2030. He plans to allot $174 billion to increase the production and sales of zero-emission buses and cars, including $100 million on consumer rebates.
Additionally, many states have been leading on this issue for several years — for instance, 11 have committed to deploying 3.3 million zero-emissions vehicles by 2025. Some states, such as California, have gone so far as to ban the sale of ICE vehicles in their state by a certain date, and legislation on this issue is being debated across the country.
All of this builds on increased shareholder activism and pressure from investors to orient businesses around sustainable, long-term value and “stakeholder capitalism,” coupled with evolving demands from consumers for vehicles that reduce carbon emissions (without the sticker shock).
While the pandemic made many people more budget-conscious, one of the few positive impacts from lockdowns also offered a peek at what a cleaner future could look like, with a 13% decline in emissions in the first half of 2020 compared with the year-ago period. Now, with COVID-19 hopefully fading in the US, consumers are opening their wallets for delayed vehicle purchases at a rate that the auto industry is struggling to keep up with. The EY Mobility Consumer Index shows that, globally, almost one-third of non-car owners said they planned to buy a car in the next six months, and among both current car owners and non-car owners, 30% said they’d prefer a non-ICE vehicle for their next purchase.
Start building the future with electric vehicles — now
Today, a number of hurdles remain for consumers: a limited choice of EV models, a lack of charging infrastructure, range anxiety and higher prices compared with ICE vehicles. But viewed opportunistically, addressing the challenges can start to look like new opportunities for growth. Among them are:
Cohesive regulation and funding models
One large area of focus should address how to align the EV rollout and infrastructure vision with grid plans, as shifting vehicles away from gasoline and onto electricity will significantly increase demand that utilities will need to meet. Agreements on financial and tax incentives are also important. New funding models for grid reinforcement and connections can help accelerate plans into action. Industry should have a voice in how these goals can be fulfilled and take an active role in how their future is shaped.
The need for collaboration
The transition to e-mobility will force industry players that have never teamed at such an enormous scale to forge lasting, trusted relationships, with traditional boundaries between the energy, automotive, retail and other industries becoming hazier. To create an efficient, interconnected and profitable ecosystem, extensive public-private partnerships and cross-sector alliances are a must.
Reoriented supply chains
Battery manufacturing capabilities may require partnerships with chemicals and mining companies to secure supply of raw goods. Likewise, skills and human resources also require a shift across the value chain — for instance, addressing different engine types and technology in repair shops, and capturing new opportunities in the aftermarket, such as gaining new uses for retired batteries.
New public infrastructure
Charging stations, and how they are aligned to the grid and energy system, are one of the greatest concerns. In a 2019 EY study of American consumers, half of respondents expressed fear that there will never be enough places to charge electric vehicles. While existing gas stations offer a potential foundation for the transition, it’s not just a matter of hauling away pumps and putting in plugs. Standard interoperability protocols will go a long way toward simplifying this infrastructure nationwide, along with a quicker permission and connection process for charger installations.
Similarly, a digital interface between the vehicle, charge point and grid can enable smart charging and grid optimization. With the right vehicle-to-grid infrastructure, EVs can even double as storage on wheels when they’re not being used, with energy sold back to the grid in peak hours — for instance, a school bus can store 10 times the amount of energy that a typical home would need in a day. Simplified authentication protocols can drive seamless, fair and transparent payments as well.