Will you chart a course on e-mobility or be left behind? Will you chart a course on e-mobility or be left behind?

Authors
Karen Felton

EY Americas Power & Utilities Leader

Delivering solutions to help utilities to transform and to solve their most pressing strategic priorities.

Marc Coltelli

EY Global Energy Strategy & Operations Leader (E-Mobility Lead)

Innovative, focused energy professional with more than 25 years’ experience. Passionate about turning strategy into reality.

Sachin Lulla

EY Advanced Manufacturing & Mobility, Global Digital Strategy & Transformation Leader

Internet of Things strategist. Digital influencer. Sector-focused thinker. Keynote speaker. Proud husband and father.

6 minute read 22 Jun 2021

Electric vehicles will literally transform the landscape of the US, demanding proactive planning and cross-industry sector collaboration.

In brief:

  • EY research shows that US sales of EVs will outpace those of all other engine types in 2036 — about a decade sooner than expected.
  • The auto, power and utilities, oil and gas, retail and other industries all have roles to play alongside the public sector. The future must be built today.

Electric vehicles (EVs) will transform the lives of Americans and their communities, yet this major reckoning, seeming both inevitable and indefinite, has historically remained on the horizon. Today, there are more signs than ever that this future is about to become the present, with the tipping point for passenger EVs likely arriving sooner than you think — rewriting business-as-usual for the transportation and energy industries and requiring collaboration across all industries and public-private partnerships.

While the shift toward e-mobility is accelerating, many challenges must be addressed — too many for one company or even one industry. The infrastructure for this transition needs to be designed and deployed in a way that anticipates how consumer demands will change, while maximizing investment value and improving electrical grid resilience. 

At stake is an e-mobility market in the US that will be worth $72 billion by 2030, EY analysts predict — and continue to surge as EVs dominate sales in the US likely that same decade. This includes revenues from the burgeoning ancillary market in batteries, vehicles, charging infrastructure and more.

What’s fueling the momentum for electric vehicles?

In 2020, just 2% of cars on the road in the US were EVs. But by 2036, EV sales in the US will outpace those of all other engine types, including hybrids — almost a decade sooner than previously expected — according to the new EY Mobility Lens Forecaster, a neural-network-based forecast modeling tool that analyzes supply and demand trends through 2050. By 2050, there could be as many as 165 million EVs in operation just in the US.

It’s another study suggesting that, within 10 to 15 years, most forms of urban transport, including buses and taxis, will be electric (or run on alternative power sources, such as hydrogen). Meanwhile, China and Europe are on even faster timetables, and by 2045, non-EV sales will shrink to less than 1% of overall sales globally, our forecaster tool predicts.

On the one hand, this increase will be fueled by basic economics: while perhaps considered a niche product for the wealthy and environmentally focused today, these vehicles are expected to achieve cost parity with internal-combustion engine (ICE) vehicles in about five to six years in most regions, thanks to the rapidly declining costs of batteries. This is one crucial tipping point for transformation of the energy sector, tempered a bit by the possibility of a shortage of raw goods for battery production, such as lithium, amid surging demand.

Further, the new federal administration’s priorities on sustainability and infrastructure investment, along with renewed economic optimism as the US emerges from the shadow of the pandemic, are adding additional momentum behind addressing the ever-present challenge of climate change. 

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.

Digital interfaces  

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.

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Summary

New value pools created by vehicle electrification can seem abstract at first. Companies across sectors need to determine potential synergies within their existing businesses to determine where to play and what capabilities should be added through acquisitions, partnerships or in-house investments. The environmental and social benefits are vast, but so are the commercial gains for the first and fastest movers.

About this article

Authors
Karen Felton

EY Americas Power & Utilities Leader

Delivering solutions to help utilities to transform and to solve their most pressing strategic priorities.

Marc Coltelli

EY Global Energy Strategy & Operations Leader (E-Mobility Lead)

Innovative, focused energy professional with more than 25 years’ experience. Passionate about turning strategy into reality.

Sachin Lulla

EY Advanced Manufacturing & Mobility, Global Digital Strategy & Transformation Leader

Internet of Things strategist. Digital influencer. Sector-focused thinker. Keynote speaker. Proud husband and father.