There is huge momentum behind the electrification of transport and while the environmental consequences are huge, there are also significant commercial rewards for the fastest movers in the evolving electric mobility (eMobility) ecosystem. A new study from EY and Eurelectric, Accelerating fleet electrification in Europe: When does reinventing the wheel make perfect sense?, concludes that fleet electrification should lead the way and will make the biggest and fastest contribution to the decarbonization of road transport.
The study includes analysis from discussions with industry leaders across automotive, utility, oil and gas, battery manufacture, fleet management, leasing and charging infrastructure businesses. It collates insights and opinions, identifying key value pools and actions to accelerate and build out eMobility solutions at scale.
eMobility nears inflection point
Regulatory pressure has increased for road vehicles, with new carbon dioxide (CO2) emissions standards for automakers coming into effect across Europe. Meanwhile COVID-19 economic recovery packages largely focus on carbon-neutral and renewable energy solutions, that together have favored the shift to eMobility.
According to the study, in the 11 months to November 2020, a landmark one million vehicle sales in Europe were either pure electric or hybrid models – accounting for one in every 10 passenger cars sold in Europe. In fact, in Europe, in the first nine months of 2020, EV sales outstripped those in China for the first time in at least five years. In the UK, in September 2020, EV sales eclipsed diesel sales for the first time, though only just.
Cristian Cârstoiu, Partner, Business Consulting, EY Romania, Head of Automotive, Digital Transformation and Innovation, EY Romania: “In Romania, the transition to electric mobility, although it is at a slower pace than in western European countries, is accelerating every year. The number of electric cars purchased and charging stations installed are constantly increasing, being encouraged by the state’s bonuses. Utility, oil and gas companies, as well as retail, appear to have taken on the role of leaders in this transition through investments in infrastructure and service development. Another signal also comes from local authorities, which are starting to replace vehicles in the fleet with electric cars.”
This is a significant turning point in moving toward achieving 30%–40% electric vehicle (EV) sales volume by 2030, putting Europe’s carbon-reduction targets within reach.
Of the 308 million motor vehicles on Europe’s roads today, just 3 million are electric. But the future potential is vast. EY analysis puts the estimated number of EVs at 40 million by 2030.
Mihai Drăghici, Senior Manager, Business Consulting, EY Romania: “Romania is significantly below the European Union average from the perspective of electric car adoption. New electric models announced by local manufacturers, investments in recharging stations and support schemes will help speed up adoption locally.”
The need for speed
How soon countries decarbonize will determine climate, health and environmental outcomes for decades to come. According to the study, transport emissions have been rising for the last 3 years, and a 65% reduction, or 10% year-on-year saving, is needed to achieve Europe’s targeted 55% reduction, compared with 1990 levels.
The study identifies that in order to achieve this ambition, accelerating the transition to fleet electrification is essential. To enable this, policy goals need to align with commercial opportunities around cohesive regulation; new funding models for public and private charging infrastructure; a fresh focus on the end-to-end supply chain; improving consumer confidence by boosting physical infrastructure; and a seamless digital interface from vehicle to grid.
The fleet sector must electrify first
Europe’s fleet sector, though relatively small at 63m vehicles (20% of Europe’s total vehicle parc), is disproportionately damaging to the environment according to the study. It accounts for more than 40% of total km traveled and half of total emissions from road transport in Europe. In addition, the lessons learned from accelerating fleet electrification such as the development of sustainable business models that support charging infrastructure investment and integration of smart charging capability, will enable the wider secondary and passenger vehicle market to transition quicker. It therefore makes for the biggest and most impactful test case.
The study highlights four key drivers that will support a fleet first transition:
- Fleets will have to switch to alternative vehicle types over time as CO2 emissions standards restrict non-EV sales.
- Polluting fleet vehicles are banned from more than 300 major European cities and towns that operate low-emission zones. The alternative is to pay a penalty or switch to EVs.
- Fleet vehicles tend to travel regular routes and cover a fairly consistent daily distance. They have fixed destinations and stopovers, which can be combined with charging.
- The total cost of ownership of EVs is fast reaching par with internal combustion engine vehicles. Incentives and grants can bridge the gap, while reduced servicing and maintenance, as well as significant fuel savings, make the economic case for fleet electrification.
An emerging eMobility ecosystem
As with other sectors in transformation, a supporting ecosystem has begun to develop to accelerate the eMobility transition. It includes innovative customer solutions and value-added propositions to propel eMobility into mainstream adoption. For example, energy providers are already forming partnerships with charge point operators and leasing companies, and automakers are teaming-up with utilities and setting up their own captive leasing businesses.
Combinations of new and established players are working collaboratively to earn customers’ trust and enhance their overall experience of eMobility. The study states that significant gains are possible for the earliest adopters. The study also identifies opportunities within the eMobility ecosystem, including network management; EV power and charging solutions; fleet management; vehicle and battery management; battery end-of-life solutions; financing; and data management.