Electric Vehicles: a bump in the road?

In this episode, Jon Slowe is joined by two members of our EV team Oliver McHugh, and Kate Armitage as we explore a slowdown in the rate of growth of electric vehicles, it's implications for the EV charging sector, and look at battery-powered trucks.  

Episode transcript

[00:00:04.490] - Jon Slowe 

Welcome to Talking New Energy, a podcast from LCP Delta. I'm Jon Slowe. 

[00:00:09.290] - Sandra Trittin 

And I'm Sandra Trittin. And together we are exploring how the energy transition is unfolding across Europe through conversations with guests from the leading edge of the transition. 

[00:00:19.090] - Jon Slowe 

Hello and welcome to the episode. The energy transition is, in my view, and I imagine in most of you listening, your views, a one-way bet. But it won't be necessarily a smooth pass from here to a decarbonised sustainable future. And one illustration of that is what's going on in the EV, or electric vehicle sector today. So, I'm going to play with metaphors a bit to explore this bump in the road in the EV journey, or the journey to decarbonising transport. I'm joined by two colleagues at LCP Delta, Kate Armitage and Ollie McHugh. Hello, Kate. 

[00:00:59.660] - Kate Armitage 

Hi, Jon. 

[00:01:00.600] - Jon Slowe 

And hi, Ollie. 

[00:01:01.710] - Ollie McHugh 

Hello, Jon. 

[00:01:03.410] - Jon Slowe 

So you may or may not want to play with my bump in the road metaphor, but let's start by exploring what's actually going on with EV sales at the moment. Because for people that are not immersed in the sector, you see more and more EV models available, more EV cars on the road, more chargepoint. It looks like everything's going swimmingly. So, help us understand a bit about this bump in the road. What is it? What does it look like? Why it's there? Kate, do you want to start off? 

[00:01:32.200] - Kate Armitage 

Yeah. There's been a kind of change in wind direction in the last, I would say, 6-12 months where there's been a lot more negative commentary in the press about EVs. And some stories that the press have picked up on VW have had to stop production in some of their factories, actually their supply chain problems, rather than lack of sales as such. But generally speaking, the naysayers seem to be winning the discussion or getting the airtime at the moment with electric vehicles, and it's having a kind of ripple effect. We have seen a downturn. There's no escape in that. There's still growth, but it's not as aggressive as we'd expected it to be. Your analogy, a bump in the road is exactly how I see this. And it's quite dangerous to look at one-month sales or last quarter of one year when there are macroeconomic trends in play as well. 

[00:02:30.750] - Jon Slowe 

Ollie, just give us a sense of some of the numbers, then. Maybe not a downturn, but a slowdown in growth. Is that right? 

[00:02:38.000] - Ollie McHugh 

Yeah, absolutely. I mean, Kate does highlight a slightly negative picture over the past 6 - 12 months, but make no mistake, we still see strong growth in EVs out to 2035. We're expecting 120 million EVs on the road by 2035 in Europe, 60 million by 2030. So, the end result of where we're going is quite clear. It's just the shape of the curve to actually get there. So, battery electric vehicles did increase by 28% from 2022-2023 in Europe. That's 2 million sales in the past year. Compare this to the overall market the overall car market only increased by around 13%. So BEVs (Battery Electric Vehicles) are definitely one of the sorts of fastest growing fuel types out there. But I think we're not experiencing the same levels of growth that we were two, three years ago that everybody got excited about after Covid, which is why we'd seen these slightly negative news articles and negative feeling around the industry. 

[00:03:48.370] - Jon Slowe 

Okay, so what if we were in the 20% now in gross? We were higher than that in previous years? 

[00:03:54.730] - Ollie McHugh 

I'd have to check the numbers, but yeah. 

[00:03:56.030] - Kate Armitage 

And Jon, this is all part of scaling, isn't it? Because if I go back eight years, the volume of battery electric vehicles that were sold was significantly lower than it is today. So, to say that sales are doubled year on year is much easier to achieve when you're only talking about 100,000 vehicles. Well, now we're into the millions. Of course, doubling is a lot harder and there are still scaling up issues with manufacturing as well. So, in some ways, the market is growing as fast as it can. 

[00:04:30.820] - Jon Slowe 

What's the mood in the sector, then, amongst maybe the car manufacturers or the chargepoint manufacturers? People involved in the ecosystem. Yeah. Did they see this coming? Are they surprised? Are they riding it through? Is it causing a bit of turbulence? 

[00:04:47.410] - Ollie McHugh 

It's a very good question. I think it's definitely a challenging time for industry, particularly for the chargepoint manufacturers. So, as mentioned, many of them scaled up production, scaled up sort of staff coming out of Covid they saw more of a supply constrained market where they couldn't sell the kit quick enough. Now we're approaching more of a demand constrained market. So, you factor that in with other pressures, such as supply chain pressures and the fact that scaling a home chargepoint solution across Europe is difficult. Entering different markets across Europe can be really complex and we've seen real issues from players such as easy, who come into issues in Europe and actually been banned from selling in some countries. And so, you combine those factors altogether with softer sales from the past year, and we see a slightly more challenging market ahead over the next 2-3 years. 

[00:05:44.210] - Jon Slowe 

It's quite a change of environment, isn't it? From that supply constraint. I can sell whatever I can produce. My challenges production to it will call this blinding. How do I find more customers? 

[00:05:57.090] - Kate Armitage 

And there's so much competition out there as well, Jon. So, they're definitely chasing business, there's no doubt about that. And I think the honeymoon is over. Okay, so the money has flown into this, has come into this sector, billions of pounds worth of investment and now those investors are saying, right, well where's my return, you know, it's just much more commercial. It's much less about being innovative, getting out there, building a brand, and it's much more about, I want to see my money back, please. 

[00:06:33.180] - Jon Slowe 

It's about the execution now. 

[00:06:35.420] - Ollie McHugh 

And with a lot of pressure from manufacturers from China producing cheaper models as well, chargepoint manufacturers in Europe are really starting to have to differentiate their product from the rest of the market to show why customers should be buying their products. 

[00:06:51.000] - Jon Slowe 

Yeah, okay, well maybe this is almost an inevitable phase of the market development from sort of market creation phase is the right word. But the market really getting going, it being huge opportunity, sell whatever you make into a bit of a shakedown in the market and maybe ultimately that's not difficult if you're in the middle of that. But the companies that come out of this and come through this will help then drive that long term growth. Ollie, that you mentioned at the beginning, because the long-term future is absolutely crystal clear. 

[00:07:24.700] - Ollie McHugh 

Yeah, absolutely. And I think this is probably mirrored in other markets that are at similar stage. I personally think we're going to see quite a lot of consolidation over the next few years as market players perhaps who don't make it get bought up by other players. We saw the acquisition of ABL and Wallbox. Now there's a different reasons for this. It could be for Wallbox wanting to actually enter the German market, but they did get by them market staying at quite a cheap rate. So, it could be sort of signs of just general market consolidation and people looking for a solution. 

[00:07:59.360] - Jon Slowe 

Is the shape of the growth curve just now slower than it was? Are we on a different trajectory or do you think in the next year or two we'll see sales pick up again? I've not brought the crystal ball out yet, so maybe. Sure, should be a question for later, but what's your views and what's the mood in the market? How long will this bump in the road last for? Is it one speed bump to get over or is it all series of speed bumps over the next years? 

[00:08:28.230] - Kate Armitage 

It's such a good question, Jon. There are so many facets to it in terms of the kind of manufacturing, the investment, but then also this consumer behaviour, consumer attitude, and of course, this whole switch towards ultra-low emission vehicles, of which, at the moment, battery electric is the outright winner that has been driven by legislation. And we need those governments, and we need the EU to stay strong and stay resolute in all of this and not send out confusing signals. I'm thinking very much about what we saw happening in the UK last year with the government back their ambitions to ban petrol and diesel, new cells of petrol and diesel cars, by 2030. That's now being pushed back to 2035. All of these different factors are in play, and we just need to double down and be absolutely resolute as an industry and as a country and as a continent and as a planet, that this has to happen. This must happen and it has to happen quickly. So, the optimist in me says, let's stop examining month-on-month sales and look forward and be positive and really be resolute in what we're going to deliver. 

[00:09:46.310] - Jon Slowe 

So, Kate, your view, it is a bump, it's still growing, it's a slowdown in the growth, but you feel that the drive for that growth is still continuing, and we'll look back on this as a bump rather than a fundamental change? 

[00:10:01.950] - Kate Armitage 

That's definitely my view, yeah. 

[00:10:03.810] - Jon Slowe 

Ollie, how about you? 

[00:10:04.450] - Ollie McHugh 

As I said, I think some challenging times ahead for players in the industry. It's difficult to predict what the future speed bumps may be, but I'd be very surprised if there weren't any others before we hit that 2035 target. I think the industry is just affected mainly by the macroeconomic events that we've all seen and other industries are facing as well. But as Kate says, customer acceptance is a really important one here. We may see a slight softening of customer demand in the short term, but we're seeing way more interesting products and solutions and tariffs coming out that can really help with engaging customers to make the switch to electric. 

[00:10:47.060] - Jon Slowe 

That's an interesting point, because with companies like BYD bringing their models to Europe, model availability and brand availability is widening. As you say, tariffs are getting smarter, people can drive more cheaply. So, there's a lot of oomph still behind in the next few years, isn't there? A lot of things that will just keep pushing this market forward. One thing I think is interesting is you could make an argument that people like me have bought electric vehicles, innovators, early adopters have, and there's a famous book, I don't know if either of you have read it called 'Crossing the Chasm'. It basically illustrates how some innovations get stuck in innovators and early adopters and they never cross this chasm to the majority market, and they end up in niche innovator early adopter markets. Now, I don't think long term that's true of electric vehicles. I think they will definitely become less market. In some countries they already are less market. But if I think about people with, like myself, I've got a driveway, it's quite easy to charge. There's a big chunk of the market that don't have driveways. So is part of the challenge at the moment that shift from the innovator early adopter market to the majority market who are maybe less environmentally motivated or don't have off street parking. So, is that part of the reason for the slowdown or not, in your opinion? Interested in what you both say? Kate, do you want to go first? 

[00:12:20.410] - Kate Armitage 

Jon, you mentioned tariffs that make owning an EV more cost effective, and it raises a really good challenge that we've had since the energy crisis and the rising cost of electricity, because from a consumer point of view, it is the cost of running your electric vehicle has pretty much doubled since the electricity prices have spiked. And that is even if you have off road parking at home and you're able to use a time of use tariff, even those off-peak tariffs are still significantly higher. And then when you look at people who haven't got access to a home charging, which is significantly cheaper, and you're at the mercy of public charging, then you are going to pay a lot more for your electricity than you would have done 3 years ago. So, it's definitely a factor. It's definitely a factor. And in cases, it is quite difficult to look people in the eye and say, yes, you'll save money if you switch to an electric vehicle, if they're 100% dependent on public charging. 

[00:13:32.590] - Jon Slowe 

And do you think we're seeing that shift now where people who don't have off street parking, who can't charge at home, are starting to buy electric vehicles in a big way, or is that still that part of the market, still largely not buying electric vehicles? 

[00:13:48.290] - Ollie McHugh 

I think that the vast majority of vehicle sales go to people with off street parking, and I think it's around 85% of EV drivers in the UK and perhaps a little bit lower in Europe do have the ability to park and charge at home. But as you say, Jon, there are solutions out there for those who don't have access to a driveway at home. We see only around 30% of EV drivers charge at work, yet 3/4 of EV drivers can park at work. So, there's definitely scope here for those drivers who can't charge at home to have the ability to charge at work. Slow AC charging is a really cheap solution, and if your car's parked at work for 8 hours a day, it makes sense. The other barriers, I think have been highlighted on a previous podcast include the multifamily home market. I know there's a lot of attention in France at the moment and even some funding going into addressing this solution in the French market. And I think it was Teddy from wevo who was talking about all the load balancing solutions. But again, that's quite a complex solution because all the different players involved, the owner of the building versus the employer versus the resident, et cetera. 

[00:15:02.200] - Ollie McHugh 

And then the one that I'm really interested in is those that don't have the ability to charge at home but continue to use their vehicle like they would with a petrol or diesel vehicle. So just going to a rapid charger once a week. Now, from a behavioural point of view, this would make sense for most people because it's similar to filling up a petrol or diesel car. We've seen a big emergence in these ultra rapid chargepoint installations all across Europe, and EV drivers do like them because it charges the battery quicker. So, I'm really interested to see what's going to happen in this space. And will EV drivers perhaps just go to the supermarket once a week and use a rapid to top up similar like they would do with their petrol diesel cars? It's not the cheapest option. We all know rapid charges are more expensive. So, yeah, it'd be interesting to see what happens going forward with that. 

[00:15:54.850] - Jon Slowe 

I guess what you're saying there is that there is a whole range of solutions for people that don't have off street parking, cannot charge at home. We're in relatively early days in most markets of this, but there's a lot of people creating those solutions for these types of customers. 

[00:16:10.020] - Ollie McHugh 

Yeah, absolutely. 

[00:16:11.460] - Jon Slowe 

One other aspect of the electric vehicle market that isn't talked about much, but I think it's quite interesting is trucks. So, if you live in a European city, you may be seeing more and more electric buses. Buses return to depot, they're charging straightforward. Five years back, I think a lot of the thinking was, well, electric trucks, hydrogen is going to be better for trucks, but we're seeing a lot more developments with electric trucks, and I think be interesting for our listeners just to get a snapshot of where that's at... Is it early days? Is it moving forward quickly? What sort of trucks? Kate, do you want to give us some thoughts on not a niche, but part of the EV market. 

[00:16:57.350] - Kate Armitage 

Oh, Jon, I'm so glad you asked, because it's one of my favourite topics, to be honest with you. I'm going to start with trucks make up 2% of road transport, and when I say trucks, I'm talking about vehicles that are above 3 and a half tonnes. So, it's quite a broad spectrum. They make up 2% of the vehicles on our roads in Europe but are responsible for almost 30% of all the emissions. So, from an environmental perspective. 

[00:17:28.290] - Jon Slowe 

 30%? Wow! 

[00:17:28.780] - Kate Armitage 

30%. From a mathematical perspective, we would have started with trucks rather than with passenger cars. But of course, the battery technology wasn't there. Wasn't good enough. But the battery technology has developed, and you're absolutely right, every year that goes on, that all trucks will it be hydrogen? Will it be battery? That discussion is starting. There's a bit of a gap emerging here because we've definitely seen the truck market take off. Still early days, so I would liken it to 2011, 2012 with the passenger car market in Europe. And there are definitely still a market... 

[00:18:14.590] - Jon Slowe 

What that in not many models available. Or is the supply of products an issue? 

[00:18:19.300] - Kate Armitage 

Still not many models. Low volume manufacturing. And the sales that are being made are still very much. Maybe not demonstration projects as in government funded, but the companies that are taking these vehicles are taking them in, maybe ones or twos slightly more. 

[00:18:35.340] - Jon Slowe 

Sometimes they're testing them out. Yeah. 

[00:18:38.790] - Kate Armitage 

They want to understand the technology and prove their business case. 

[00:18:42.710] - Jon Slowe 

So, what about the charging, Kate? Is it still depot charging or chargepoints or different charge speeds? Help us understand the charging of electric trucks a bit more. 

[00:18:53.840] - Kate Armitage 

So, we see that there are three different places or three different types of charging. So, you mentioned depot charging, Jon. That's definitely going to emerge first. That's the more controllable for the fleets who are operating these vehicles. We also see that there will be growth in transit charging that is also starting. So, there's a consortium of truck OEMs (Original Equipment Manufacturers) who have created a company called Milence, and for those who are involved in the industry, this is the equivalent of IONITY for passenger cars. So, they've come together, created a pot of money and are building out truck charging infrastructure across Europe. They went live with their first charging station at the end of last year, but their plans for growth are quite dramatic and we've also seen the oil majors, so Shell, BP, and Total coming into this market as well, and we're expecting that the third location will be what we call third party or destination. So, a truck that is regularly visiting the same customers or the same suppliers will look for charging infrastructure there. So, it's not necessarily within their own depot that will facilitate them running these vehicles. That sector is slightly slower to emerge, but we are seeing some activity there. 

[00:20:16.640] - Jon Slowe 

These charging hubs Kate, these must be pretty high power. When you add up the chargers and the power of the chargers, they'll be quite power hungry, won't they? 

[00:20:27.320] - Kate Armitage 

Yeah, and that's why I think it's a small but very interesting segment. So, we already have a charging standard, which is called across Europe, which is called CCS (Combined Charging System), which will charge vehicles up to 350 for a lot of trucks, particularly urban and regional trucks, that is more than sufficient. But we also have a new standard that's being developed called the Megawatt Charging System (MCS), which goes from 350 kw up to 3.5mw. Standard has been written and agreed. Prototypes are being developed and tested now that's for road transport, but also for marine and aviation. So, it has a bigger audience as well. Not being used in anger yet in public charging, but that's where we see it will go. It will go into transit charging. Milence have already said that they will switch across to MCS once the standard is stable. 

[00:21:27.140] - Jon Slowe 

I can see some electricity network companies getting quite nervous about these huge power draws who are going to be needed for these houses. 

[00:21:34.640] - Ollie McHugh 

I mean, it's a real issue in general, connexions for chargepoints across Europe generally. But again, there are some solutions for this. We're seeing sites paired with batteries, storage to really help the distribution grid. So again, it's an interesting space to follow. 

[00:21:51.860] - Jon Slowe 

Well, there's no shortage of things to keep you both busy, Kate and Ollie, in your work analysing these markets. Let's bring out the talking energy crystal ball now. And I'm going to set the dial not too far in the future, because I think the long-term future for EVs is quite easy. It's the journey to that that's maybe harder. So, let's set the dial for three years ahead so, 2027. And I'd like you each to give me an observation. It could be the mood music, it could be growth rates, anything you want about the EV sector in three years’ time, if we're on a bump in the road now, what will it feel like in three years’ time? Ollie, do you want to go first and then Kate? 

[00:22:35.610] - Ollie McHugh 

It's a difficult question, Jon. Obviously, as you say, the longer-term view is the easier one. But, yeah, I think over the next three years. It will be tricky for industry as I've already mentioned, we are still anticipating a doubling of EV sales across Europe, so there is going to be still some growth there. I think more generally we'll see more and more interesting propositions for EV drivers in terms of their tariffs and perhaps pairing those with public charging bundles as well. And I'm really interested to see how the behaviour of EV drivers will change as we approach that mass market. I do predict we'll see more sort of ultra rapid charging usage occur as people treat them a bit more like petrol and diesel cars. 

[00:23:24.790] - Jon Slowe 

That'll be fascinating to see in our annual tracker survey of EV drivers how those patterns change year-over-year. Thanks Ollie. Kate, your view of three years in the future? We're in 2027. What does it feel and look like? 

[00:23:38.040] - Kate Armitage 

I'm going to stick with trucks Jon, I kind of alluded to the fact that I said that the truck industry years ago, but the acceleration in trucks is going to come much quicker because a lot of the technology is already in place, the understanding of the battery technology, a lot of the supply chain is already there. So, I think we'll see a dramatic uptick in both medium and heavy-duty trucks on our road within the next three years. 

[00:24:10.060] - Jon Slowe 

Well, that 30% of our transport emissions or road transport emissions number, that's my stat of the week. Kate, that's really stuck in my head. 

[00:24:17.410] - Kate Armitage 

It's bonkers, isn't it? 

[00:24:18.680] - Jon Slowe 

We better leave it there for today. So, Ollie, Kate, thanks so much for your time and sharing your thoughts and expertise today. Thanks, as always to everyone for listening. We hope you enjoyed this view of the EV sector today and where it's going in the next years and look forward to welcoming you back next week. Thanks, and goodbye. 

[00:24:39.190] - Sandra Trittin 

Thanks for tuning in. We are excited to bring you captivating conversations from the leading edge of Europe's energy transition. If you've got suggestions for topics or guests for future episodes, please let us know. 

[00:24:50.970] - Jon Slowe 

And if you're enjoying the podcast, then please do rate it and share it with colleagues. For show notes, transcripts and more, please visit lcpdelta.com.