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Shared electric vehicle platforms and more efficient electric vehicle designs will increase profitability, as electric vehicles are poised to be the dominant powertrain by 2040 says the report of Lux Research.
The automotive industry is under pressure to reduce emissions, both from government regulations and from consumers who are growing more conscious about the environmental impact of their vehicles. Electrified powertrains are a promising avenue to reduce or eliminate vehicle emissions for automakers. According to Lux Research’s report most of automakers’ attention has been focused on making battery electric vehicles (BEVs) that are profitable while addressing consumer pain points related to charging speed and range.
Chris Robinson, Senior Analyst at Lux Research and lead author of the report commented that, the consumers wanted to know, how far can the electric car go and what would it cost? Fortunately, BEVs were consistently making progress on how far they could go, with the average range now 230 miles. Since 2011, range has been consistently increasing, with a compound annual growth rate (CAGR) of 13.7%. The prices had also gone down, with the average vehicle’s base manufacturer’s suggested retail price (MSRP) in 2019 at $33,901, down from $42,189 in 2016. Those changes were making it easier for consumers to own an electric vehicle.
Robinson went on to add that, nearly all automakers were now selling some form of BEV, so now the focus has shifted to making them profitable. They have seen a large focus on electrifying high-priced brands. Luxury brands offered vehicles at higher prices points and were able to absorb the additional costs of the battery pack.This was also partly due to the need to offset higher emissions of the larger internal combustion engines, which caused more emissions due to their vehicles being larger and more powerful.
Lux believes automakers should focus on their battery supply chain. Battery shortages have already caused some automakers to reduce their BEV production plans. To fix this issue, which will only be exacerbated over the next few years as more electric vehicles come to market, automakers should secure raw materials like cobalt and lithium for their future vehicles. Another key strategy is to balance platform flexibility against commitment. Large original equipment manufacturers (OEMs) can afford to develop dedicated BEV platforms that save money, but smaller OEMs need to remain flexible to avoid taking a large financial hit if BEV sales are sluggish.
Currently, BEVs were more expensive and less convenient to use than their nonelectric counterparts, but technology would continue to close this gap. The company expects to see efficiency front and center as the next major focus of BEV design, with automakers either downsizing packs to increase profitability or offering more range. As the automakers continued to improve charging speed and minimize battery size, more consumers would be expected to seek out electric vehicles, said Robinson.
Lux Research predicts that it will take until between 2035 and 2040 for electric vehicles to make up more than half of all vehicle sales. While adoption was tracking ahead of forecasts pre-COVID-19, Lux believes that impacts from the pandemic will only cause short-term setbacks.