© Oliver Wyman

EV UPTAKE IN EUROPEUnderstanding the dynamics

Srinath Rengarajan

Senior Automotive Researcher

Amsterdam

26 SEPTEMBER 2019

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4© Oliver Wyman

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and insurance

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Management, economic and brand

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Talent, health, retirement

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• 1937 year founded

• 22,000 colleagues

• 170+ offices worldwide

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• 1984 year founded

• 5,000+ colleagues

• 50+ offices worldwide

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• 1922 year founded

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Insurance broker and

risk advisor

Oliver Wyman Group is part of Marsh & McLennan Companies, a $15 BN global professional services firm

5© Oliver Wyman

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at leading global OEMs

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– …

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competences

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– …

• More than 200 projects

since 2004 and more than

80 active clients

– Nine of the top 20 companies

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companies

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Source: Oliver Wyman

Oliver Wyman’s Global Automotive Practice Oliver Wyman works with the world’s leading companies in automotive and manufacturing industries on a broad range of topics

6© Oliver Wyman

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Is happening today

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9© Oliver Wyman

Fastmarkets Battery Materials Europe ConferenceAgenda

1. CO2 Emissions in Europe

2. Push towards EVs

3. Short & Mid term Uncertainties

4. Deep-Dive on Customer Concerns

5. Takeaways

10© Oliver Wyman

European Automotive EmissionsOEMs are facing the risk of heavy fines by not complying with CO2 emission regulations and have to address the issue with urgency

Average CO2 Emissions Of New Cars in EU

In g CO2/km

Implications for OEMs

Source: Transport & Environment, ICCT, EEA, Oliver Wyman Research

• Vehicular emissions decreased by 25% in 2007-16

• However, they have risen in the last 2 years due to:

• While OEMs easily reached the 2015 target, many are at

risk of not meeting the 2021 target and face fines of €95

per exceeded gram for every newly registered car

• OEMs failing to rapidly reduce emissions will become

increasingly unprofitable and uncompetitive

Potential Levers:

120

0

100

140

160

2009

130 g CO2/km

2007 2012 2015 2018

95 g CO2/km

2021

Pooling with

other OEMs

Smaller

engines with

lower power

Lower ICE

emissions

with

technology

Boost EV

sales

Bigger

vehicles

+21% SUVs

in 2009-18

Engine

power

Average +10%

in 2012-17

Decline in

diesel cars

-18%

in 2012-17 (and associated

increase in petrol)

DIESEL PETROL

VS.

11© Oliver Wyman

Push Towards EVsOEMs must sink their 2021 emissions by 15% to 2025 and by 30% to 2030, and stop ICE car sales around 2035 to achieve zero emissions by 2050

Limited potential of other levers EVs are the only sustainable long-term solution

Pooling

with other

OEMs

Smaller

engines with

lower power

Lower ICE

emissions with

technology

Boost EV

sales

0

250

50

350

100

200

150

300

2020

0.1%

2012

0.4%

20252015

0.6%1.0%

1.5%

Share of Sales (%) Models Launched

1. ACES = autonomous, connected, electric, shared vehicles as elements of future mobility

Source: EAFO, Transport & Environment, IHS, Oliver Wyman Research

Surveys of prospective buyers indicate an

immediate untapped market of at least

Technology options

are becoming in-

creasingly complex

and expensive.

Concurrently, even

hybrids do not

provide a long-term

solution.

Only a stop-gap

solution

OEM need the

profits from SUVs to

fund the investments

in ACES1 and new

mobility

Increasing consensus

in forecasts that EVs

could account for

10%

of new light vehicle

sales in Europe by

~30%

2030

12© Oliver Wyman

Short & Mid Term UncertaintiesHowever, executives and industry insiders are unsure of EV uptake in the next few years due to customers having three major persistent concerns

“While the carmakers made a big

song and dance about their electric

vehicle plans in public, in

conversations behind the scenes

the discussion was more sober.

No one really has any confidence

in market demand, pricing, or the

ability to make margins.”

Max Warburton – Analyst at Bernstein

Source: Press, Company websites, IAA, Transport & Environment, Autolist, ACEA, Oliver Wyman Research

Afford-

abilityRange

Infra-

structure

• High purchase price of

EVs, in comparison to

equivalent ICE vehicles,

is a widely cited concern

• EV Sales need support

of various incentives

• Charger availability is

a big issue for many

potential customers

today

• Charging ecosystems

still nascent

• Despite launch of many

models with better range

offering recently, “range

anxiety” continues

being an inhibitor for a

fair number of

customers

“Everybody is worried about the

next two to three years. We have

the conditions for a perfect storm:

lower demand, increasing R&D

budgets, and fines.

Everyone will be crossing

the desert.”

Luca de Meo – CEO of Seat

13© Oliver Wyman

Deep Dive: Affordability While lower battery costs are expected to support EV sales in the future, various measures are critical across regions and players in the interim period

EV Market Share in Europe by Country

% of new car sales in 2018

are concentrated in just sixWestern European countries

Necessary Measures

• Sales to private customers will be

dependent on incentives till EV

prices are comparable to ICE cars

• However, achieving TCO parity

by 2023-26 offers opportunities,

especially for fleet vehicle sales

• Companies stocking their car

sharing fleets with EVs and

encouraging staff to take EVs as

company cars offers a further

avenue for pushing sales

Source: ACEA, LMCA, Oliver Wyman Research

2020

50

20300

100

150

200

250

2015 2025

Regional Variations in EV Affordability within Europe

Potential Decrease in Battery Costs

€/kWh

Key Facts

Expected TCO parity for EVs and ICEs

0% 1% 2% 5% 10%

• A majority of EU member

states only grant tax

reductions or exemptions

related to acquisition/ownership

• Only 12 EU countries offer

explicit bonus payments or

premiums to EV buyers

Market share is over 3.5%only in countries with GDP over

€42,000

Over 80%of all

EV sales

14© Oliver Wyman

Deep Dive: InfrastructureEuropean Commission estimates that at least 2.8 million EV charging points will be needed by 2030, equating to a roughly a 20x increase

Charging Points in Europe

Necessary Measures

• OEMs have been building

partnerships to roll-out charging

infrastructure, especially along

motorways

• EU Alternative Fuels

Infrastructure Directive

mandates member states to set

deployment targets for chargers

in 2025/2030

• Revised EU Energy Performance

of Buildings Directive mandates

supporting EVs through minimum

requirements of chargers

• Infrastructure development in

existing buildings (eg. condos,

rented homes) and on-street

parking places in built-up areas

requires concerted efforts

across various stakeholders

Source: ACEA, EAFO, Oliver Wyman Research

Historical Growth

Units, 2014-18

Distribution by Country

Units, 2018

0 500 1k 5k 10k 25k 40k

17%

19%

26%13%

201434,000

2018143,000

…

+42,9%

15© Oliver Wyman

Deep Dive: RangeCustomers seem to overestimate their own range needs, while there seems to be a lack of awareness on what is already available to them on offer

Recent Oliver Wyman survey highlights a lack of customer awareness

regarding the range offered by EVs in the market today1 Necessary Measures

• Increase in sales and marketing

efforts will help change buyer

attitudes - for example, information

on charging prices and EV

maintenance resulted in +38%

change in customers perception

• Raising customer awareness is

critical for promoting EV uptake

• Concurrent battery technology

development efforts are expected

to further EV range offer and

assuage customer concerns

Do EVs today have

sufficient range?

What is the range of a new mid-range EV today?

How early will EVs have sufficient range?

21%

35%

28%

13%3%

Totally

disagree

Totally agree

Neutral

Neutral

Disagree

53%35%

12%

27%

28%

32%

17%

11%

17%

29%

27%

9%20% 27%

53%

3%

WeekendLocal Work

Commute

Long Distance

1. Based on an extended customer survey, including two focus groups and a web-survey with 1060 customers in France

Source: LMCA, Oliver Wyman

2016 2018 202420222020 2026

40

2028 20300

50

60

70

Expected Average EV Battery

kWh

2025+ 2023 2021 2019

<150km

150-250km

250-300km

300-400km

>400km

11%

28%

15%

28%

18%

Actual

average

range

16© Oliver Wyman

5 Key Takeaways

PERSISTING APPREHENSIONS

OEMs have been forced to bet on EVs but customer concerns

need to be priced into these calculations1

MARKET EXPANSION CRITICAL

Urgent need to make EVs a realistic option for more customer

and market segments to achieve uptake forecasts2

INFRASTRUCTURE COLLABORATIONS

Issues require multilateral collaboration and tangible regulatory

push covering diverse stakeholders 3

EV RANGE

With significant technical improvements already achieved, fleet

operators and OEMs have to convince and support customers in

switching to EVs

4

COST PAINS

Discomfort has to be borne with in the next ~5 years, with

attempts to address through incentives and tax benefits for EV

buyers

5

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