China has claimed pole position in the race for the transition to electric vehicles (EV), ahead of Sweden and Germany in second and third places respectively on the inaugural EY Electric Vehicle Country Readiness Index. A strong battery manufacturing sector, widespread charging infrastructure and government policy helps propel China to the top of the Index, which ranks the 10 leading automotive markets globally. The Index accounts for 75% of the global light-vehicle market – measured based on supply, demand and regulation.
With EV sales expected to outstrip the sales of all other powertrains in China, Europe and the US by 2033, the EV Index helps industry players across multiple sectors – such as automotive, energy and government – understand the factors underlying EV readiness. The Index further provides insights into how countries can develop robust and successful EV markets in line with global decarbonization efforts.
Randy Miller, EY Global Advanced Manufacturing & Mobility Leader, says:
“As we approach the tipping point for global EV sales in 2033, the key questions are how we’ll get there and who will lead the way. This is not a competition, but the Index clearly highlights that some markets are doing better than others. Following the recent UN Climate Change Conference, ‘COP26,’ decarbonization of transport is set to be one of the key levers in helping the world tackle climate change. If countries want to reduce their carbon emissions, then governments and industry need to work together to meet the challenge by adopting sensible regulation and facilitating robust supply chains and consumer demand. The Index and research that underpins it can be used to help governments and manufacturers get further down the road toward a decarbonized future.”
Varying degree of ambition
According to the Index, the largest markets are preparing for an acceleration in e-mobility adoption, but with varying degrees of ambition and urgency.
China, Sweden and Germany currently lead the rankings due to key EV market strengths such as original equipment manufacturer (OEM) presence, policy support and battery supply. The UK ranks fourth overall but features ahead of Sweden and Germany at third position in both the regulatory and demand readiness categories. The US lags major European markets in terms of EV demand, in part due to a lack of nationwide internal combustion engine (ICE) phase-out targets and continued poor consumer perception toward EVs.
Canada, Italy and India occupy the last three places in the ranking. With a phase-out target of 2040 for ICE vehicles, Canada is 6th position in the regulatory rankings, yet struggles in relation to supply (9th) and demand (10th) along with Italy (8th in both supply and demand) and India (10th and 9th). This is due to a range of factors, including insufficient charging infrastructure, fewer EV models available and high consumer preference for ICE vehicles.
The power of regulation
Governments across the globe are aiming to stimulate both demand and supply for EVs through initiatives such as the European Green Deal (Fit for 55), the UK Transport Decarbonisation plan and the US bipartisan Infrastructure Investment and Jobs Act.
China tops the regulatory category, with the government adopting stringent emissions regulations as well as EV purchase incentives to set up a supportive EV ecosystem.
In leading markets, fleet demand is being stimulated by government fleet electrification plans and adoption by the public and goods transportation sector. In addition, five of the top ten markets have adopted or proposed ICE phase-out goals, with the UK, Sweden and Canada setting up definitive timelines. Non-monetary incentives such as low emission zones, reserved parking spaces and EV-only lanes are also being used to drive customer demand for EVs in European countries such as the UK, Germany and Sweden.
Miller says: “It is encouraging to see many governments implementing much needed regulation, challenging OEMs and industry to meet goals but also providing incentives for consumers to help them on the journey to electrification. However, we still need more collaboration and coopetition. The transition to EVs is too complex and challenging for one company or one industry alone to overcome. Industry players across the mobility, power and utilities, private equity and energy industries, as well as government, must come together to create an ecosystem that is efficient, interconnected and profitable.”
De-risking supply infrastructure
China also tops the ranking in relation to supply, supported by strong local battery production, EV model launches and improving charging infrastructure. OEM electrification and production plans see Germany and Sweden ranked highly in the same category at second and fourth positions respectively. And East Asian countries’ dominance in battery manufacturing is helping them climb the rankings, with South Korea and Japan entering the top five of the supply ranking. This is prompting western countries to establish their own battery ecosystem for cost competitiveness and supply resiliency, with battery manufacturers planning to co-locate supply chain partners and low-carbon energy production to strengthen the supply ecosystem.
Miller says: “The Index tells us that one of the key accelerators for electrification is having localized battery production. Local production shortens supply chains and makes them more robust.”
US lags consumer demand in Europe and China
According to the July 2020 EY Mobility Consumer Index, customers in China (48%), and European countries such as Sweden (48%), the UK (41%) and Germany (38%) are more inclined toward switching their vehicle to EV or plug-in hybrid electric vehicles (PHEV) in the future relative to other regions. This is also reflected in the rising share of EVs across light vehicle sales in European markets.
The US sits seventh in the demand ranking and is lagging behind major European markets in terms of EV demand overall, partly due to a lack of nationwide ICE phase-out targets.
Miller says: “While the EY Mobility Consumer Index shows that car buyers across the globe are looking to buy EVs more than ever before, and with 41% looking to buy an EV as their next car, the perception of EVs in some countries needs to change – whether that’s in relation to cost, range or straightforward desirability. This is likely to change, as more models reach the market and the cost of EVs continue to fall.”
