Exponential growth is seen in UK (300%), Germany (70%) and France (29.8%) in 2014 in the electric cars market. Norway leads the world in plug-in electric vehicles per capita.

Definition / Scope

• An electric vehicle, is an automobile that is propelled by one or more electric motors, using electrical energy stored in rechargeable batteries or another energy storage device.
• Electric vehicles can be further classified into plug-in hybrid electric vehicles (PHEVs), battery or pure electric vehicles (BEVs) & fuel-cell electric vehicles (FCEVs) based on the level of electrification of the drivetrain and the energy storage medium.
• A PHEV utilizes more than one form of onboard energy to achieve propulsion. In practice, that means a PHEV will have a traditional internal-combustion engine and a fuel tank, as well as one or more electric motors and a battery pack. It has an ability to travel in all-electric mode for most short trips, reserving the internal combustion engine for longer drives.A PHEV has another form called a range-extended electric vehicle (REEV) where an internal combustion engine becomes an auxiliary power unit to increase its all-electric range.
• A BEV, whereas, derives all its power from its rechargeable battery packs and uses one or more electric motors along with motor controllers for propulsion without having an internal combustion engine onboard.
• This report specifically covers PHEVs & BEVs (together referred as electric vehicles) passenger car market in Europe.

Market Overview

• With electric vehicles sales comprising of more than 1% of the overall passenger car sales, Europe is now moving beyond initial adoption phase of electric mobility.
• With a strong support from European Commission for the adoption of electric mobility, governments in Europe are providing various financial incentives and a range of benefits both to the consumer and producers making EVs a compelling value proposition.
• All major OEMs jump into the market with EV products making the market to explode with a stunning 53% growth y-o-y in Q2 2015.
• UK is the biggest market followed by Germany & France. The largest EV fleet per capita is in Norway.
• PHEVs have seen higher acceptance lately as compared with BEVs. Mitsubishi Outlander PHEV continues its dream run to become the largest selling EV in Europe.

Market Risks

• With a limited population, relatively slow economic growth and presence of weak & dependent GDPs (such as Greece), Europe may not turn out to be a dream run for an EV OEM if the world goes through another unexpected slowdown such as that of 2008-09.
• With the increased to the alternative transportation options such as car sharing, public bus, due to smartphones, Europeans are losing interest in owning cars. In the last 9 years, the car ownership rate has been declining in the European cities such as Paris, London & Munich as the new generation is moving from car ownership to car user ship.

Top Market Opportunities

• To succeed in the electric vehicle market, OEMs need to rethink their approach to building and selling cars. They need to see the bigger picture and consider mobility as their business.
  • Creating lightweight platforms using advanced materials and composites, efficiently managing the batteries using thermal management technologies, providing advanced level of connectivity technologies to enable car to communicate with user, OEMs and service providers can create a truly sustainable and economic value proposition in terms of the EV product.
  • Integrating and collaborating with partners in the value chain including battery manufacturers, connectivity technology providers, utilities, mobility solution providers (cab, car sharing or fleet operators) and charging infrastructure operators to create a complete mobility solution.

Market Drivers

• In the past few years, Europe has witnessed a very significant rise in adoption of alternative fuel vehicles (AFVs) and in specific, electric vehicles. In 2015, alternative fuel vehicles registration grew by 24.6% in the first half of the year and 17.4% in the 2^nd Quarter (Q2) compared to Q2 2014. This growth in Q2 was fueled by registration of electric vehicles which grew by 53% as compared with conventional hybrid vehicles and AFVs other than electric which saw a rise of 22.6% & 3% respectively. All the major auto OEMs now have released or announced an EV from its stable.
• Strong government support, strict emission norms, improved offering of EVs from automakers, increased availability of public charging infrastructure and consumer’s willingness to purchase EVs, have together catalyzed the growth of EV market in Europe.
• With 92,747 EV sales in 2015 (till July), Europe stands as the largest market for electric vehicles by sales in the world followed by North America & China.
• The growth of electric vehicles in Europe has varied from country to country with the United Kingdom taking the lead in terms of the sales of EVs whereas Norway is a clear front-runner when sales of EVs as a percentage of total passenger cars sold.
• In 2014, UK’s EV sales saw a super-impressive growth of 300.8% followed by Germany (70.2%) and France (29.8%), as compared year-on-year against 2013.
• When it comes to EV segment sales market share, Norway continues to lead the world by distance, with one EV being sold in three cars in Q1 2015. It has seen an exponential growth in terms on the EV sales segment market share growing from 1.6% in 2011 to 12.5% in 2014. Now EVs account for 2% of all cars on road in Norway.
• In Jan-April 2015, for the first time, Europe EV sales surpassed US sales (60% higher than US) due to relatively high acceptance of PHEVs in the European market.
  • In Europe, PHEVs and BEVs almost equally shared the overall EV market between them.
  • Whereas in US this ratio is 2:1 for BEVs and PHEVs.
• Major European EV markets such as UK, Norway, France, Germany, Italy and Belgium, have seen a trend of gradual decline in BEV market share in the overall EV market losing to PHEVs in the last three years.
  • In 2012, BEVs ruled UK with a 67% market share due to the top selling Nissan Leaf. But in 2015 (till July), PHEVs occupied a dominant 64% market share of the EV market. The biggest contributor to this is Mitsubishi Outlander PHEV which is now the leading EV sold in Europe.
• Governments’ key motivations to support electric vehicle industry throughout the globe remains environmental concerns and economic concerns, however, specific motivations may vary from country to country.
  • Environmental Concerns – Globally, governments are facing pressure for reducing GHG (Green House Gases) emissions caused majorly by industries and fossil-fuel-powered automobiles.
  • Economic Concerns – European automotive market growth hasn’t been very impressive lately with little chance of any high growth scenario in the near future. Therefore, it needs a revival in terms of job creation and becoming a center of innovation in the grid-connected EV space.Another concern is the dependence on foreign oil as most of the oil is imported from Gulf, Russia, etc.
• High upfront cost of the vehicle (due to expensive battery packs), lack of availability of public charging infrastructure (because of less no. of EVs on road) and range anxiety (limited range due to limited available charge in an EV battery) have remained as the key concerns in the mind of consumer considering an electric vehicle. Governments in the European nations have shown an exemplary commitment and support towards transitioning to e-Mobility in Europe by creating favorable policies to enable consumers to overcome these barriers.
  • Governments in Europe have used financial incentives such as cash incentive on purchase of EV (25% grant up to £5000 per car in UK), partial or full waiver of registration fees and taxes (exemption of Purchase Tax in Norway), income tax rebates, opportunities for businesses to relieve the cost of an EV against taxable profits (€19,000 for corporate EV owners over 5 years in Netherlands), discounting of parking & congestion charges (in London), etc. to positively influence demand of EVs.
  • On the other hand, governments are also investing in charging infrastructure and mobility programs to encourage supply. UK government rolled out a £400 million plug-in car incentive package that included £37 million to build EV charging stations. This has resulted in more than 57,567 public charging points all across UK.
  • Various European nations such as UK & France have also created grant programs to support research and development of electric vehicle technologies to develop competencies in this area.
  • Other benefits such as [[Building With Brains + Buildings With Brains = Sustainable Future|access]] to bus lanes, creation of zero-emission zones etc. also have a significant impact on consumers while considering purchase of automobile.

Market Attractiveness & Top Opportunities

• Europe has a very high potential for uptake of electric vehicles given the conducive regulatory environment, availability of public charging infrastructure and increasing consumer familiarity and acceptance of electric vehicles.

• Major OEMs need to cut fleet emissions by ~30% by 2020 to meet EU emissions target. The most practical approach to survive and remain competitive is by adding ultra-low emission or zero-emission electric vehicles in the product portfolio.
• Western Europe remains and is expected to be the popular EV destination in Europe. UK, Netherlands, Norway, France & Germany remain the most attractive countries.
  • London Mayor is working with partners to put 100,000 electric vehicles on London’s streets by 2020.
  • The Dutch government set a target of 200,000 vehicles in 2020; and 1 million vehicles in 2025.
  • The Parliament of Norway set the goal to reach 50,000 zero emission vehicles by 2018.
• Given the trend of high growth in PHEVs over the last three years, PHEV segment is likely to remain as the major segment for growth as compared to BEV. Another reason for this trend is, until BEVs with substantial range (~300 km per charge) at an affordable price ($30,000-40,000) arrive to the market, consumer would consider PHEVs over BEVs to overcome the range anxiety.

Market Outlook

• Electric vehicles offer governments in Europe with a powerful lever to control the GHG emissions. The impact can be furthered when the electricity grid is gradually shifted to renewable sources of energy generation such as solar, hydro, wind, geothermal, tidal, etc.
• The coming years will be very crucial for EVs, where foundations of this industry will be strengthened by governments, OEMs, utilities and mobility solution providers working together to create EV-based sustainable mobility solutions for cities.
• As the EV volumes increase and battery prices come down due to technology development, electric vehicles will become at par with internal combustion engine (ICE) on upfront pricing making the former a preferred choice for consumers.
• Growing competition between European cities (Oslo vs. London) to become the EV capital or between European nations (Netherlands vs. Norway) to become the EV innovation hub is creating very favorable conditions for EV industry to bloom in Europe.

Distribution Chain Analysis

• The value chain of EV production consists of automobile OEMs, battery manufacturers, connectivity technology providers and charging infrastructure providers (manufacturers and operators).
• The Governments globally have approved standards such as CHAdeMO, SAE J1772 and IEC 62196 for charging and communication. All the major EV OEMs and charging infrastructure manufacturers comply with either of these charging standards.
• The European EV OEMs have partnered with Asian battery manufacturers such as Panasonic, AESC, LG Chemicals, BYD, Samsung, Mitsubishi/GS Yuasa, etc. to create safe and reliable battery technology for their products.
• European 2014 top 5 EV OEMs market share with Nissan (26%) leading the pack, followed by Renault (20%), Volkswagen (16%), Tesla (15%) and BMW (10%). The other OEMs such as Daimler, Ford, etc. have a total of 13% of EV market share in 2014.
• Europe has long known for its prowess in the automobile technology development and has remained the home to one of the biggest automotive business-houses such as Volkswagen Group (VW, Audi, Bugatti, Bentley, Scania, Skoda, Porsche, etc.), BMW Group (BMW, Mini, Rolls Royce, etc.), Daimler (Mercedes-Benz, Smart), Renault, Ferrari, Jaguar & Land Rover, etc. Most of these OEMs have either already started or announced an EV program to remain competitive in the EV space. 2016-17 is expected to see a lot of product launches in the EV space from these OEMs. Competition with these deep-pocket biggies would be little tough for a foreign auto OEM or a new EV OEM entering this space.

References

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