[ The Gear Shift of the Automotive Industry ]

Electrification is radicalising the automotive industry

One of the sectors that has bucked the trend in consumer buying over the last 18 months is that of the electric vehicle (EV) industry. In 2020, more than 10 million electric cars were registered on the roads globally, a 43% rise from the previous year. In Europe, nearly half of all car purchases in 2020 were EVs.

With legislation, government incentives and tax deductions to encourage the transition to a carbon-neutral environment, there is a sea change forecast over the next 10 years in the transport industry, which in Europe accounts for 27% of the EU’s total CO2 emissions. 

Two years ago, the European Commision launched the “European Green Deal”, a framework around which a set of proposals have been set out to reduce net greenhouse gas emissions by at least 55% by 2030, and also has the goal of having 100% emissions-free vehicles on Europe’s roads by 2035. 

Truly ambitious targets, so what’s next?

Pushing Forward With Speed

Believe it or not, there are 370 electric car models now globally. What used to be seen as a “personal branding” statement of individuality is now mainstream. Issues like range capability are now obsolete, with some cars (battery electric vehicles) able to run up to 350km on one charge, up to 7 times more than PHEVs (Plug-In Hybrid EVs), and equivalent to its traditional counterparts. 

However, this revolution is not just a car issue. The electric revolution runs across all transport, from HGVs (Heavy Goods Vehicles) all the way down to e-scooters (micromobility).

EVs are forecast to reach over 7% of new car sales in Europe by the end of 2021, a considerable 66% jump from 2020. There is no doubting that the pandemic has helped to accelerate these numbers, particularly on a corporate level, with the explosion in home deliveries contributing to EV registrations, and pressure on companies to adapt their company car schemes.. 

The EV market has been divided into traditional OEMs (Original Equipment Manufacturer), for instance BMW, and those that are new entrants into the marketplace ie. NIO. All the manufacturers have targets they have vowed to deliver on over the course of the next 10 years or so. Volvo has set itself the target of only selling EVs by 2030 globally, and in Europe, Ford will only sell electric cars in Europe by the same time period. To show how transformative and mainstream the industry will become, below are some of the objectives set not just by the automotive companies, but also by the private sector:

Brand                                  Objective                                                                       Timeline

Volvo                                    To sell only EVs globally                                                   2030

Ford                                      To sell only electric cars in Europe                                2030

IKEA                                     Zero-emission deliveries in all cities globally             2025   

Electric micromobility is another area that surged in the second half of 2020, with more than 100 cities adding operations since July last year. The market in micromobility (scooters and mopeds) in Europe is becoming increasingly competitive. Bearing in mind the sector is still in its infancy (nee. 2019), there has been a flood of entrants into the market, with a raft of companies picking up huge fundraising success from Dott’s 30 million euros in 2019, to Voi’s 100 million euros over the past 2 years. The moped market also increased by 30% in 2020. 

What this does pose is how brands can transition somehow seamlessly and maintain their audience at the same time. Manufacturers are having to adapt their marketing priorities and model ranges to manufacturer emission targets. Having discussed the importance of ESG in a previous article, “purpose” still continues to rise to the top of the corporate agenda. Companies continue to seek to differentiate themselves by acting as a force for change, and this is no more evident than in the automotive industry. 

Marketing departments are having to assess their databases and deep dive into their audiences in order to segment them to fit into this brave new world. By looking at their customer approach, they are looking to facilitate the transition to EV sales. 

Brand loyalty is extremely important in the automotive industry, so building a customer portrait is imperative in the transition to EV, identifying motives for and against behavioural change.       . 

EV Supply Chain Obstacles

One of the main obstructions, however, to the acceleration to electrification, is not the OEMs, but the supply chain, owing to the different levels of infrastructure capability across a diverse European region, mainly centring around the lack of charging infrastructure, especially in the UK and Central & Eastern Europe. 

With another 85 new models forecast to be launched in Europe by 2023, there is some clear catching up to be made on the supply chain side. A global taskforce set up involving 100 of the top automotive-related companies to help address many of the issues on the table, with such aims as to seek tax procurement benefits from the public sector, and to lobby for more supportive policies from state, regional and city government level. 

Battery supply has been significantly lagging behind EV sales. In Europe, production demand has far exceeded domestic production capacity. The main battery factories for Europe are located in Hungary and Poland,with momentum evident for plans to expand through support from the EIB (European Investment Bank) for new battery plants in other countries, primarily around CEE. 

CEE is playing a key role in EV development

Although it is clear that across CEE, the infrastructure to adopt the measures that need to be taken for electrification are lagging behind many of its western neighbours, the region is still paying a pivotal part in the development of the industry. 

Across Europe, Slovakia is forecast to be producing the most EVs per capita by 2025, with the Czech Republic and Hungary also boasting significant production centres. However, it is in the area of e-batteries that CEE has positioned itself as the European hub, with billions being invested by the Asian market into the region. Poland is now the fifth biggest supplier, globally, of lithium-ion car batteries, with LG Chem being a notable investor. Other companies with significant investments in the battery market include Samsung SDI and SK Innovation in Hungary. 

Foreign investments are also being made in car production, including Jaguar Land Rover building a new factory for its next-generation Defender in Slovakia. Audi, BMW, and Mercedes have all chosen Hungary for their own new production facilities. 

In terms of EV adoption in the region, Hungary, Slovenia and Romania lead the way, however in comparison to its Scandinavian counterparts,the region is still lagging far, far behind. Infrastructure appears to be the main problem, not being as up-to-speed in its ability to cope with the necessary transition.

CEE is embracing EV, but mainly at the moment in public transportation, like buses. However, a couple of countries developing their own proprietary EVs are Romania and Poland. Romania’s Dacia Spring is touted to be the cheapest electric car on the market, although there has been widespread criticism that its production has been outsourced to China for cost purposes. 

Summary

The key takeaway from the EV transition is that this is no longer a statement of individuality. From top down, governments to battery suppliers, the industry is moving at such a pace of transition with very ambitious goals and timelines, that it has already entered the mainstream. How this transition will bear out across a very diverse set of cultures and countries across Europe remains to be seen, however it would seem that aiming to achieve self-sufficiency would be a good starting point for all countries, especially in CEE. With so much development happening in the EV market across the region, there are no excuses to not develop the infrastructure needed. Governments and lobbying bodies need to help to adopt incentives to facilitate the transition to a rapidly changing industry and environment