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With the upcoming S&P Global CERAWeek and Innovation Agora event in Houston (TX), it’s good to remind
ourselves of the rich history of this high-level event in terms of
automotive and mobility sector leaders’ participation; especially
in an era where the mobility and energy transition is warranting a
more prominent centre stage role. Over the last few years, our
audience has benefitted from insights shared by thought leaders
such as Bill Ford (Ford Motor Company), Mary Barra (General
Motors), Jim Farley (Ford Motor Company), RJ Scaringe (Rivian), JB
Straubel (Tesla/Redwood) and Henrik Fisker (Fisker). Perhaps not
surprisingly, most of them have been discussing the challenge of
moving the industry on a trajectory of electrification and all the
associated benefits, along with the inevitable hurdles this
transition will bring to light.

In the context of today’s challenging global landscape,
particularly in geopolitical terms, with voters in 60-plus
countries heading to polls in national or local elections this year
– representing more than half the world’s population – the
potential ramifications for electric vehicle (EV) adoption could be
substantial.

Similarly, global supply chain disruptions could also impact the
mobility and energy transition which appears to lose the customer
interest across selected global markets. Outside of China,
questions are swirling about the near-term prospects for EV
consumer acceptance beyond earlier adopters. Effectively, the gap
between the prices of EVs and comparable ICE vehicles remains wide
in the United States and Europe—and a recent flurry of news
reports have reinforced that the EV public charging experience on
both sides of the Atlantic leaves much to be desired. And the
upcoming S&P Global CERAWeek and Innovation Agora event poses
the ideal platform to explore this situation further in the
presence of relevant industry leaders.

The year ahead promises to be precarious for the automotive and
mobility sector. According to the S&P Global Mobility “New EV
Players Monitor”, the year 2023 witnessed the most EV start-up
player failures since the inception of this dedicated research
service, with around 41% of new EV start-up players who made it
into volume production now no longer operating, and we expect this
number to rise to 50% by 2025. Effectively, the average lifespan of
now defunct new EV start-ups, that made it to start of volume
production, remains at only 4 years. And all this following an
estimated combined capital inflow of more than US$80 billion
invested in new EV start-ups since 2005.

Could this be the beginning of a wave of electrification
stakeholder consolidation, and possible more investment failures?
Already over the last six years the mobility industry has witnessed
a culling of a variety of forms of shared mobility, starting with
the infamous Chinese shared bicycles schemes after their boom
years, and now we observe similar indications in the car-sharing
sector after several major original equipment manufacturers (OEMs)
and investors suffered significant losses due to reduced demand and
high operational costs.

While growing climate pressure (as well as sustainability
factors) will increasingly manifest themselves across the
automotive and mobility sector, hence the energy transition –
effectively forms of electric propulsion – will eventually come to
the fore, but at the current rate this still seems a long way
out.

Once the electrification technology becomes more mainstream,
dependable, and more economical there will be a major case to be
made for multi-modal mobility solutions, and perhaps a new wave of
start-up communities to foster innovative ideas. Without a doubt,
artificial intelligence (AI) might even further revolutionise the
whole so-called “New-Mobility” sector and could unlock a future
mobility market which could see much less dependency upon
personally owned vehicles, and more on-demand vehicles such as
robotaxi and/or purpose build vehicles (PBV).

Objectively, electrification of the world’s vehicles (light and
heavy vehicles) is gaining momentum, yet progress for now remains
concentrated in selected markets. And while the automotive sector
leads in decarbonization efforts, the heavy truck sector lags
approximately a decade behind and varies across different
applications. Successfully meeting climate goals requires reducing
oil consumption, which necessitates addressing transportation fuel
demand. Currently, the electrification of the automotive fleet
stands out as the most advanced initiative within the
transportation sector, with one in every three light vehicles sold
in China being electric. However, the adoption of EVs by American
consumers remains lackluster, and the development of EV heavy
trucks lags significantly behind EV passenger vehicles. Despite
these challenges, the trajectory is clear: EVs are steadily
entering key markets, while oil demand is approaching its peak.
Encouragingly, evolving trends in fuel economy within the on-road
sector play a pivotal role in shaping S&P Global’s perspective
that oil demand is poised to reach its peak within the next five
years.

Policy and infrastructure will continue to play crucial roles in
shaping the trajectory of EV adoption. While three of the largest
markets—China, Europe, and the US—have established
longstanding government policies, regulations and incentives to
support EV sales and manufacturing. Moreover, China and Europe have
made comparatively greater investments in public charging
infrastructure, which continues to hold back greater EV sales
adoption in the US. According to a recent S&P Global Mobility
survey, after the vehicle purchase price, the lack of a charging
station availability is the largest reason for buyers not to
consider an EV with about half of those survey respondents raising
the issue. Concerningly, there are signs that EVs are encountering
challenges attracting buyers beyond early adopters. For example,
despite price reductions, Tesla has indicated that their sales
growth for the year may see a notable decline, while other
automakers have also cautioned about slower EV sales growth and are
temporarily scaling back investments in EV production capacity,
particularly in the US, but also in other markets.

The view from the automotive suppliers is that they understand
they too will eventually have to invest, but they also know they
can’t allocate too much of their capital too early as this could
cost them dearly. From their perspective it’s all about flexibility
and adaptation, ultimately to keep the right level of balance and
make sure they are prepared when the EV market grows in
earnest.

While consumer apathy towards EVs persists, policy initiatives
continue to forge ahead – such as the European Union’s de facto ban
on new light ICE vehicle sales from 2035. For now, a tension
between government regulations and consumer EV adoption is likely
to persist in many key markets, until EVs narrow the price gap with
ICE vehicles and public EV chargers become more ubiquitous. The
outcome of this tug-of-war holds significant implications for
automotive manufacturers, technology suppliers, and fuel refiners
alike.

Ultimately, the path to decarbonization for each vehicle
manufacturer varies as that path is influenced by factors such as
carbon footprint, global operations and the target year selected to
reach net-zero. Holistically, looking out to 2050 and beyond, it is
increasingly evident that (1) electrification of the automotive
industry alone may not be sufficient to meet the Paris Agreement
decarbonization goals overall. As a result, the automotive industry
may have to explore additional sustainable pathways, including (2)
net carbon-neutral production, (3) sustainable supplier
transformation, and (4) material reuse and recycling. Understanding
how these four pathways can work together is arguably the biggest
challenge ahead yet, it’s clear we’re in it for long-haul.

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Dive deeper into these mobility insights:

Attend CERAWeek – the
World’s Premier Energy Conference

Deep Dive: Electric
Vehicles and Batteries. Read More.

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/fuel-for-thought-ceraweek.html