Charging stations for electric cars are becoming an increasingly familiar sight in cities around the world, and the strangely silent hybrid vehicle, which once seemed like the stuff of science-fiction novels, is no longer a rarity on the road. Although actual numbers show that electric vehicles (EVs) are still far from achieving mass-market penetration, the combination of environmental considerations, more stringent regulation, incentives, and lower overall costs means the number of EVs on the road is set to rise significantly in coming years. As these cars gain in popularity, they will also pave the road for changes across a number of sectors that extend far beyond the auto industry.

Different technologies for different needs

EVs can be divided into three key segments. Hybrid electric vehicles combine an electric engine with a combustion engine and recuperate energy from braking. These produce 25 to 40 per cent lower CO2 emissions than vehicles with a traditional combustion engine. Hybrids are extremely fuel efficient in urban traffic and have a long driving range. Plug-in hybrid electric vehicles can be charged using a power socket at home and generate up to 70 per cent lower CO2 emissions, and zero emissions for short distances. Battery electric vehicles operate exclusively by means of an electric battery and are cheaper to charge than the cost of petrol for a traditional vehicle. They produce zero CO2 emissions from the tailpipe. 

Global popularity on the rise

“There is no exact data available for global EV penetration,” says Norbert Rücker, Head of Commodity Research at Julius Baer, “But generally speaking, significantly less than 1 per cent of vehicles on the road today are purely electricity-powered.” According to Rücker, even with including hybrids, penetration rates remain below 5 per cent, but he explains: “If you include vehicles that run on natural gas or fuel cell vehicles, a scenario where penetration reaches 50 per cent by 2025 is probable.”

Driving in bus lanes just one of many incentives

Forty per cent of air pollution worldwide arises from mobility, and road transport accounts for approximately 16 per cent of all CO2 emissions. In an effort to address the environmental impact of mobility, new regulations and incentives are providing convincing arguments for both manufacturers and consumers to switch to EVs. The EU is leading the charge, and from 2021 onward, all new cars produced in Europe must meet an average CO2 emission target of 95g/km, down from 172g/km in 2000.
On the consumer side, governments and municipalities are incentivising drivers to purchase these vehicles. In Germany, for example, EVs are exempt from road taxes. In Norway, where incentives are particularly far-reaching, battery electric vehicle drivers can save up to USD 8,200 per year in tax breaks, parking and tolls, and can use their electric vehicles in bus lanes.

‘Range Anxiety’ and other obstacles

So why aren’t more consumers buying EVs? One common misconception, often referred to as “range anxiety” is that EVs do not have sufficient battery life to get drivers where they need to go. “The average daily drive in Europe lies well within the constraints of an EV, and limitations on distance usually only become an issue when drivers want to take less frequent, longer trips”, says Norbert Rücker. Other challenges, such as lengthy charging times, limited charging possibilities, the short lifespan of batteries, and cost, are being addressed.
For those unable to charge their cars from home, for example, quick-charging stations are becoming more readily available, and can often charge up to 80 per cent of battery capacity in only 30 minutes. The number of standard electric charging stations is also on the rise. As technology advances and becomes more widespread, battery life is improving and the price of electric vehicles is falling. In addition to an increasingly lower price tag, the overall cost of operating an EV is actually less than for traditional cars thanks to cheaper fuel and maintenance costs: For some high-end models, the bulk of maintenance consists of a wireless update.

One door closes and another opens

The implications of rising EV penetration are big, and hold significant potential for investors. “Technology makes mobility cheaper longer-term. While the overall pie might incrementally shrink, some pieces of it are growing,” says Rücker. For example, explains Rücker, the auto industry has been undergoing a massive shift, with 75 to 80 per cent of value now being created by auto suppliers, who provide the technology for EVs, instead of manufacturers. This is one key area where growth is taking place.
Other segments to watch are electric utilities, which also have an important stake in EV penetration, and are actively supporting the build out of charging stations. Car sharing is another segment of mobility services that is likely to see significant growth, with many car manufacturers already hedging against the future shift by investing in this area.