For the electric vehicle sector, 2023 saw waning consumer
preferences for EVs, several promising startups fall by the
wayside, a decline in battery materials costs, and ambitious OEMs
and suppliers from mainland China turning their focus to exports of
vehicles as well as components. S&P Global Mobility’s forecast
for 2024 is one of cautious optimism – with an increase in
affordable EVs, reliable vehicle-charging ecosystems, and
profitable returns.

Despite the slowdown in consumer sentiment toward EVs, there is
nonetheless an ongoing necessity for emissions reductions – with EV
regulations and milestones largely intact and looming a year
closer. However, slowing consumer desire for existing EVs could
boost profitable internal combustion engine (ICE) markets and
legacy automaker portfolios, driving consolidation and attracting
private equity interest.

Crucial strategic decisions regarding capital expenditures in
the electrification space need to be made in the near term. Several
OEMs are beyond the point of no return in their shift to EVs, while
some suppliers might be questioning the wisdom of going “all in” on
EVs quite so soon.

Much of the decision will be based on being able to deliver at
scale affordable mass-market EVs with enhanced real-world range.
These vehicles need to be integrated into charging ecosystems that
are both abundant and reliable. While ensuring profitability and
maintaining margins, these efforts are aimed at delivering returns
for investors who are eagerly awaiting returns on their capital
investments in the light passenger vehicle sector’s contribution to
the energy transition.

Here is our forecast breakout by various sectors within the
electrification space:

Global EV sales

Despite slowing consumer demand for electric vehicles, reports
of the demise of EVs have been greatly exaggerated. S&P Global
Mobility’s 2024 global sales forecast projects battery electric
passenger vehicles to be on track to post 13.3 million units
worldwide for 2024 – accounting for an estimated 16.2% of global
passenger vehicle sales. For reference, 2023 posted an estimated
9.6 million BEVs, for 12% market share.

Major markets are forecast for most of this volume, though
smaller markets will also see modest increases. Forecasted BEV
share by region is as follows:

The EV supply chain

OEMs are shifting toward in-house
development of electrified propulsion components, and the
landscape of outsourced programs for components such as integrated
e-Axles is exceptionally competitive.

Mainland China’s control over the electric motor market and its
required resources has led to growing technical and political
efforts to diversify away from permanent magnet (PM) usage. Primary
platforms, specifically secondary e-Axle applications in all-wheel
drive, are transitioning away from PM.

Increased OEM-supplier partnerships signal attempts to control
the electric motor market against mainland China’s dominance.
E-fuels’ “free pass” in Europe offers an opportunity amid declining
EV sentiment, prompting a shift of focus to research and
development (R&D) and supply chain scaling.

Additionally, the increase in production volumes is expected to
encourage more partnerships, alliances and joint ventures. This
collaboration allows OEMs to have greater control over a critical
propulsion value chain, which can present technical challenges and
potential supply chain constraints.

Tesla Cybertruck and thermal efficiency

Tesla and mainland Chinese OEMs lead in integrating thermal
components to create more efficient BEVs, and this trend should
continue globally. Thermal management, with its increasing content
per vehicle, could become a renewed focus for suppliers amid OEMs’
in-house shift.

Several OEMs have already started exploring the consolidation of
cooling circuits and integration of key system subcomponents such
as pumps and valves. If the Cybertruck’s innovative integrated
thermal management (ITM) technologies are effectively implemented,
it is likely that fast followers will emulate these advancements.
Potential implications could be a shift from low-voltage components
to 48V systems – affecting elements such as water pumps, cooling
fans, reservoir chillers, and the HVAC blower.

Such developments capitalize on BEV platform clean sheet
development freedoms to deliver more compact and efficient systems.
We expect this trend to persist among European and North American
OEMs, with many tier 1 suppliers continuing to develop and deliver
their take on the integrated thermal module.

However, while the launch of the Tesla Cybertruck may influence
near-term thermal management technologies, it may also prompt
questions about the efficacy of the combined Octovalve and Super
Manifold system in meeting performance needs in diverse operating
conditions.

With a larger battery and more demanding operating conditions,
there may be doubts about whether a complex and relatively small
system like the Super Manifold can adequately perform cooling and
heating duties. This could lead Tesla to reconsider their
one-size-fits-all system strategy. One potential implication could
be the necessity to incorporate electric heaters to manage the
challenges posed by colder operating conditions.

Mainland China EV startups

What will be the outcome for mainland
Chinese EV startups and tier 1 cell manufacturers in mainland
China if domestic EV demand does not grow as anticipated? If new
import tariffs in Europe are implemented, OEMs that assemble their
export vehicles in mainland China might find margins diluted.

Furthermore, mainland Chinese companies are pursuing agreements
with Korean and Moroccan counterparts, anticipating compliance with
subsidy rules. Stringent IRA criteria, excluding batteries with
minor contributions from mainland China, may restrict the
eligibility of those EVs for the $7,500 credit. Additionally,
potential loopholes, such as assembling in Free Trade
Agreement-compliant countries, will likely be addressed and
eliminated.

EV raw materials prices and battery cost
dynamics

Stagnant metal prices in 2024 are likely to bolster vehicle
margins, but the unexpected decline threatens mining projects’
viability.

Lithium prices for batteries dropped more than 60%, and nickel,
graphite, and cobalt each fell about 30% in 2023. Stagnant metal
prices throughout 2024 will help reduce battery costs, thereby
improving vehicle margins (or affordability if savings are passed
on to consumers). However, the unexpected decline in lithium,
cobalt, and other EV battery metal prices is impacting mining
firms, prompting the suspension or delay of new projects.

EV charging incentivization and regulations

The number of AC and DC chargers installed globally surged from
3 million in 2019 to more than 10 million in 2022. The count will
increase to more than 15 million globally in 2023, and we forecast
70 million in 2030. As charging availability
remains a key issue for the widespread deployment of EVs,
governments are one of the main actors to further the cause of
easing the access to it.

For the US, the National Electric Vehicle Infrastructure
Standards, or NEVI Formula Program, specifies where federally
funded infrastructure must be placed. In Europe, the Regulation for
the Deployment of Alternative Fuels Infrastructure sets minimum
requirements to which EU member states must adhere, specifically
regarding the number and specifications of publicly available EV
infrastructure.

Observance of these and other such regulations globally will
ensure sufficient deployment of infrastructure. However, open
questions remain around interoperability across networks, ease of
payment, transparency of expected charge times and plentiful access
to fast charging.

EV charging and range technology

Wide bandgap (WBG) materials such as silicon carbide (SiC) and
gallium nitride (GaN) are transforming power electronics, promising
BEV drivers faster charging, extended range, and lower costs. They
are seen as superior semiconductor technologies for high-voltage
power devices and, consequently, an ability to sustain higher power
for extended periods. WBG technology facilitates faster switching,
leading to decreased power losses and more compact systems.

Europe’s PFA ban

The EU’s delayed decision on the per- and polyfluoroalkyl
substances (PFAs) ban will hinder the automotive industry’s
development planning, despite ongoing alternative testing. The
European Union’s slow decision-making process and deadline setting
for the ban on PFA usage and production remain on the 2024 agenda,
but progress has been delayed. The lack of clarity on impending
regulation is unhelpful to the automotive industry, particularly in
terms of future development and certification planning. Although
companies are already testing alternatives, a definitive trend has
yet to emerge.

The long tail of ICE

All these potential stumbling
blocks bring us full circle to existing internal combustion
technology.

The “free pass” given to so-called e-fuels in European
legislation regarding the ICE phase-out poses an opportunity
should EV sentiment continue to decline. R&D efforts, as well
as the expansion of the supply chain, will continue to explore the
potential of this opportunity. These efforts are particularly
relevant for those who deem EVs an imperfect solution for specific
use cases.

If EV sales growth continues to decelerate, several major
suppliers are strategically positioned to deliver key internal
combustion components in a market sector that, despite its decline,
potentially remains highly profitable and consolidated. In 2024, further
consolidation is possible, with suitable candidates drawing the
attention of keen private equity investors who have ample capital
to invest.

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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• Source: http://www.spglobal.com/mobility/en/research-analysis/2024-ev-forecast-the-supply-chain-charging-network-and-battery.html