Elaway is going International — but why?
As Elaway is moving forward and expanding to Sweden and Germany, you may wonder what we are aiming to achieve. Obviously, we aim to bring our EV (Electric Vehicle) charging products and services to new and immature markets, but the overarching objective of our international expansion is about so much more than that.
Transportation contributes to about 29% of the European greenhouse gas emission, out of which passenger cars represent almost one-half. The EU has a clear target of reducing its greenhouse gas emissions by at least 55% by 2030, compared with 1990 levels — often referred to as Fit for 55. In order for the EU to successfully do so, European passenger transport needs to be decarbonized at a tremendous rate. In this equation, EVs play a vital role. Coming from Norway — the world’s most mature EV market — the needed transition from internal combustion engine vehicles (ICEV) to EVs may seem achievable. Looking outside of Norway, however, the need for products and services to further accelerate EV growth is much more evident.
Looking at the German market, EVs accounted for 16.4% of the new car sales in Q4 2021, up from 10.9% in Q4 2020 and 1.8% in Q4 2019. In Sweden, the same figures were 24.2%, 12.8%, and 3.2%, respectively. In other words, we are starting to see a shift towards a decarbonized car fleet in Germany and Sweden as well. However, although the EV sales rates are picking up, we still have a long way to go to successfully decarbonize the car fleet, and substantial bottlenecks need to be resolved in order for the EU goals to be fulfilled by 2030.
Bottlenecks holding back the EV growth
So, what bottlenecks are holding back the EV adaption? The answer is at least threefold; (1) price imparity, (2) production capacity, and (3) scarce charging infrastructure.
Price imparity
As for most consumer goods, prices have been heavily affecting EV sales, effectively holding the EV rates low. Back in 2012, when the first Tesla Model S was introduced to the mass market, the price of Li-ion battery packs was north of 700 USD/kWh, making EVs unaffordable compared to ICEVs. Ever since, the battery prices have dropped significantly, currently approaching 130 USD/kWh. With reduced battery prices, combined with the advantage of having dedicated and more cost-effective EV production lines, the production costs are expected to drop significantly in the years to follow. Although the general retail price of EVs is still not close to that of comparable ICEVs, EVs are expected to have price parity with ICEVs within 3–5 years.
Sales statistics from multiple European countries have shown that customers are willing to pay a premium for an EV, rather than buying a comparable ICEV. This premium does, however, still not fully outweigh the current price imparity. To compensate for this, public incentives have proven efficient. In Norway, we have witnessed EV rates skyrocketing, primarily driven by subsidy schemes and convenience advantages in favor of EVs, and other countries are now following along. In Germany, for instance, the Government is aiming for 10 million EVs and 1 million charging stations on German roads by 2030. To achieve this objective, multiple national and regional incentives have been extended or added within the last few years, and there is more to come. With EV prices dropping and incentives being introduced, the price parity issue is reduced day by day.
Production capacity among car manufacturers
Due to the combination of the COVID-19 pandemic, a range of extreme weather incidents, and multinational trade restrictions, we have recently witnessed substantial supply issues, affecting the car industry. In particular, the shortage of semiconductor chips (often referred to as chip shortage) has been severe, causing prolonged delivery times. Although the situation has improved some over the last few months, it is still expected that the global shortage of semiconductors could linger well into 2023.
Another concern among car manufacturers and EV advocates is an expected demand/supply gap on lithium — a supply issue that could stagnate global battery production. To make matters worse, the ongoing war in Ukraine and the geopolitical situation are causing additional supply issues. Multiple car manufacturers have been sourcing parts from Ukraine, which now has been discontinued, following the Russian invasion on February 24th. Moreover, European car manufacturers, in particular, are highly reliant on Russian nickel and palladium for cathode material for EV lithium-ion batteries. Over the last few months, Russia’s gas pipelines have illustrated Europe’s energy reliance on Russia, but the Russian nickel supply is equally problematic for the EV adaption.
The range of challenges facing automakers — including semiconductors, lithium, and nickel — is unprecedented in recent times. Combined with skyrocketing demand, these challenges are inevitably resulting in prolonged delivery times and deferred price drops on EVs.
Scarce charging infrastructure
The third and most limiting bottleneck, curbing the EV adoption rates, is scarce charging infrastructure. In many ways, talking about the adoption of EVs and the establishment of charging infrastructure to meet tomorrow’s demand, we are facing a chicken or egg paradox. What comes first; the EVs or the necessary charging infrastructure?
When talking about EV charging infrastructure, we often refer to publicly available fast-charging facilities. For the consumer, however, the majority of charging will be done by the use of normal AC chargers. In fact, the European Federation for Transport and Environment estimates that more than 90% of all charging will be performed at home or work. This implies that we have to make the necessary preparations to meet tomorrow’s demand for residential and office buildings. In practice, this means that we need to establish infrastructure to make the most out of the available grid capacity.
Elaway — part of the solution
At Elaway, we are aiming to affect neither EV prices nor production difficulties among car manufacturers. We are, however, aiming to use our competence and experiences to accelerate the European development of charging infrastructure and thereby contributing to the fulfillment of Fit for 55.
Rewinding time a few years, in Norway, we witnessed the construction of charging facilities that were meeting the needs at the time, but which already have been outdated and therefore are being replaced by more sophisticated ones to meet tomorrow’s demand. Now, when we are entering the Swedish and German markets, we are witnessing the same phenomenon — charging facilities are being built to meet the current demand due to obliviate markets and are deemed to be replaced by more sophisticated ones as soon as the demand is picking up. By providing our customers with the necessary knowledge to make future proof decisions, we are making sure that their charging facilities are built to last and to meet tomorrow’s demand.
