Vehicle Electrification Market

Global Industry Analysis (2017 – 2020), Growth Trends and Market Forecast (2021 – 2025)


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Demand for Cleaner Transport Fuels Vehicle Electrification

Attributes of electric transportation such as a clean mode of transport and affordability are expected to drive the demand for electric vehicles in top gear. The minimal dependency on fossil fuels, reduced negative impact on the environment and economic incentives are expected to help manufacturers push through passé perspective of automotive engineering.

These factors have led to commercialization and adoption of electric vehicles (EV). A paradigm shift in the mobility and energy solutions have made it clear that the automotive industry is at the cusp of a mobility revolution. Globally, automakers have experienced soaring demand for electric vehicles as end-user perception changes.

Pollution and Regulation Create Twofold Impact on Phasing Out ICE Vehicles

Rising pollution levels combined with radically changing climatic conditions are creating pressure on manufacturers towards developing more effective and sustainable transportation solutions. As a result, fossil fuel-powered vehicles are encountering competition from electric vehicles. Furthermore, developed nations, with better EV policies and infrastructure are also encouraging sales of EVs as compared to conventional vehicles.

As per the Energy Information Administration (EIA), the second-largest energy consumer in the U.S. is the transportation sector. About 80%-90% of the energy consumed by the transportation sector comes from gasoline. Globally, transportation sector represents a significant share of the total greenhouse gas (GHG) emissions. Continued use of internal combustion engine (ICE) vehicles is expected to contribute towards tremendous growth in the carbon emissions, especially in economies of China and India. To combat the same, governments are expected to invest in electrification to reduce emissions, minimize oil dependency and have the potential to curb oil prices due to price volatility.

Tesla, GM, Lucid, BMW and Nissan among other key players are leading the path for vehicle electrification while the rest of the players are likely to follow suit with plans alike. For instance, major commitments from automakers like Volvo include planned end of ICE vehicles starting 2019 with investments in EV. Additionally, VW group has been scheduling plans to offer over 70 EV options by 2025. Meanwhile, Ford is increasing its EV investment from US$ 4.5 Bn to US$ 11 Bn.

Charging Infrastructure Across Developed Regions to Encourage Vehicle Electrification

The massive infrastructural changes in Europe, China and the U.S. have been the precursors to the rise of the EV market. Countries are investing in building a robust charging infrastructure to reduce fossil fuel emissions and boost the uptake of electric vehicles. EV demand grew almost 40% and 80% depicting upward trajectory in the U.S. and European countries respectively during 2017-2018.

During the first half of 2020, the overall vehicle sales declined nearly by 35% in Germany compared to 2019 and during the strict COVID-19 lockdown in April. Sales historically slumped by 61%. Nonetheless, the EV car segment has bucked the trend and outperformed despite plummeting vehicle sales. Similar trends were observed in other European countries too, which aided the market growth by nearly 25% -28%.

Rapid development in commercial vehicle electrification has been rejuvenating the market. Public transportation and logistics vehicles are the backbone of the urban sector. European countries combined with Australia and some of the ASEAN countries observed high demand for a public transit system. Existing transportation facilities are likely to be inadequate in the coming years. This in turn is likely to pose a new opportunity for the OEMs and market expansion. With emission norms getting stricter by day, most of the OEMs have aligned their product portfolios towards EVs.

PHEV and HEV Race Ahead of Others

Alternative technologies to ICE vehicles include biofuels and electric vehicles. Technological developments have contributed towards better efficacy of the automobiles leading to the deployment of hybrid electric vehicles (HEV), plug-in hybrid electric vehicles (PHEV) and battery electric vehicles (BEV). EVs in the global market include these three types of electrified vehicles. The demand witnessed by PHEV and HEV was soberly higher until advanced lithium-ion and similar battery technology was incorporated in BEVs.

European Countries Pave the Way of EVs

By 2040, nearly half of the car sales are likely to be powered by electric power trains with approximately 45% market share contributed by Europe and 40% by China. Electric vehicle (EV) sales grew substantially by 60%, through 2017-18; however, the sales followed a relatively slower growth of 9% in 2019. Global EV sales slowed down in 2019, impacted EV industry growth. The downfall is attributable to cyclical demand fluctuation in automotive industry supplemented by costlier and lesser energy-dense battery technology.

Presently, European countries like Norway, Iceland, the Netherlands and Sweden are leading the race followed by Finland and China, which are followed by the U.S. and other countries. Despite vehicle electrification being highly practised in the European nations, EVs and batteries are not manufactured in the same region. Due to affordable labour overheads, Asian countries are witnessing the benefits of the same.

Sustainable Solutions to Remain Prime Focus of Automakers

The market is seemingly fragmented with major key players forming alliances. Nonetheless, the market is likely to expand during the forecast tenure with probable new entrants and existent players practising vertical integration.

Manufacturers are focussing towards developing cost-effective and sustainable solutions. Globally, manufacturers are embracing different strategies vis-à-vis joint ventures and mergers and acquisitions. Key manufacturers have collaborated with technology companies and battery makers to design better EV architectures and gain an upper hand in EV technology.

Ford and VW have collaborated on the same front for the development of autonomous and EVs. While GM and LG formed a joint venture thereby sharing the cost in emerging technologies.

Ford, VW, Nissan, Skoda, GM, BMW, Daimler, Denso, BorgWarner, Mitsubishi Electric Volvo, Lucid, Tesla, LG, ZF, Valeo, Robert Bosch, are some of the key players among others that are indulged in steering the market growth.

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