Speaker 1: This is Dana Perkins and you're listening to Switch on
Speaker 1: the BNF podcast. Earlier in June, BNAF released the twenty
Speaker 1: twenty three edition of the Electric Vehicle Outlook, or EVO
Speaker 1: for short. It's one of our flagship publications where we
Speaker 1: take a detailed look at how electrification, shared mobility, autonomous driving,
Speaker 1: and other factors are going to impact road transport in
Speaker 1: the coming decades. The report is written by our extensive
Speaker 1: team of specialists from around the world. They can look
Speaker 1: at scenarios for how these trends are going to impact
Speaker 1: the automotive, energy, infrastructure, and battery materials markets. So we
Speaker 1: want to know what's changed since twenty twenty two and
Speaker 1: set it against net zero targets and also talk about
Speaker 1: which areas of the electric vehicle fleet are succeeding and
Speaker 1: which might be lagging. In today's episode, I get to
Speaker 1: speak with benef's head of Advanced Transport, Colin Mcharricer, and
Speaker 1: together we go through consumer demand for electric vehicles across
Speaker 1: different global regions, along with the current mid and long
Speaker 1: term sales forecasts. We also discussed the chin challenge is
Speaker 1: facing medium to heavy commercial fleets and the evolution of
Speaker 1: battery chemistries and the new battery tech that is now
Speaker 1: starting to reach the commercial market. Now, of course this
Speaker 1: is just a snapshot into what is an extensive report,
Speaker 1: but we've pulled out a few nuggets for you and
Speaker 1: hopefully you enjoy. And if you do like it and
Speaker 1: you want to hear more podcasts from us, make sure
Speaker 1: to subscribe to receive updates on future episodes. And also
Speaker 1: if you want to share it with others, the best
Speaker 1: way to do that is to give us a rating
Speaker 1: on Apple Podcasts or Spotify. Now my conversation with Colin
Speaker 1: about the twenty twenty three Electric Vehicle Outlook from vna Hi, Colin,
Speaker 1: thank you for joining us again today.
Speaker 2: Hid integrate to be on the program again.
Speaker 1: So we're here to talk about this year's edition. So
Speaker 1: the twenty twenty three Electric Vehicle Outlook. So we do
Speaker 1: one of these every year, which is a herculean effort.
Speaker 1: And I know there are numerous members both in your
Speaker 1: team and in other parts of VNF that all contribute
Speaker 1: to making this report happen. And so for those who
Speaker 1: maybe are not familiar with the report, or maybe didn't
Speaker 1: listen to our show last year where we went over
Speaker 1: some of the findings, which a few things have changed
Speaker 1: between then and now. Can you just give a very
Speaker 1: quick overview of what this is and perhaps isn't.
Speaker 2: Yeah, definitely. So the Electric Vehicle Outlook is our outlook
Speaker 2: at BNF for all of road transport. So despite the name,
Speaker 2: it's not only about electric vehicles, it's about everything that's
Speaker 2: going on with the vehicles on the road in the world.
Speaker 2: And it also bears mentioning that that isn't just passenger cars.
Speaker 2: So we immediately think of cars, but of course there's
Speaker 2: vans and trucks that are moving around all the goods
Speaker 2: around the world. In some markets, two and three wheelers
Speaker 2: are a big part of the mobility mix. There's municipal
Speaker 2: buses as well. And what you find as you dig
Speaker 2: into these is that not only is each country different,
Speaker 2: but each segment is on its own sort of different trajectory.
Speaker 2: So when we do this exercise, what we're trying to
Speaker 2: figure out is what's happening, and again not just with
Speaker 2: electric vehicles, with combustion vehicles and with other aspects of
Speaker 2: the road transport mix around the world and across all
Speaker 2: these different segments. So we sort of start with what
Speaker 2: does the world look like today, and that is saying
Speaker 2: literally how much do people move around in each country
Speaker 2: and how much do goods move around? So in people
Speaker 2: you're talking about something like a passenger kilometer, or in
Speaker 2: freight you're talking a freight ton kilometer, and then we
Speaker 2: look at how those might change over time. So that's
Speaker 2: where the things around, Okay, the adoption of electric vehicles
Speaker 2: comes in. That's where things like shared mobility. That's where
Speaker 2: things like autonomous driving, changes in consumer behavior, demographic changes,
Speaker 2: urbanization changes, and all of these things come together to
Speaker 2: form our outlook for what happens for road transport. And
Speaker 2: then once we've got that outlook together about where we
Speaker 2: think each segment and country is going, we then map
Speaker 2: that onto on all these other areas, and those are
Speaker 2: things like electricity demand, battery metals and materials, CO two emissions,
Speaker 2: oil demand, infrastructure needs, and of course vehicle sales as well.
Speaker 1: So that was for the people who are not necessarily
Speaker 1: avid followers of this one year to the next, but
Speaker 1: for those who are, there were some new sections this year,
Speaker 1: and within that we added a section on Nordic's in California.
Speaker 1: Can you explain why those sections were added and then
Speaker 1: let's come to some of the other things that maybe
Speaker 1: are newer updates for your loyal followers who have been
Speaker 1: waiting for this year's installment of the electric vehicle outlook.
Speaker 2: Yeah, so the Nordics in California. Every year we get
Speaker 2: asked for by quite a few of our clients to
Speaker 2: add different countries. And each time you add a country,
Speaker 2: it's quite a bit of work because you have to
Speaker 2: go and dig up all of the data about the
Speaker 2: mobility mix in that country and all the other factors
Speaker 2: that I mentioned about what might change that in the future.
Speaker 2: So we try and limit it to adding kind of
Speaker 2: one or two each year. And what we wanted to
Speaker 2: do this year is to show what does the transition
Speaker 2: look like in some leading areas. So California is of
Speaker 2: course leading the US, but as also a leader globally,
Speaker 2: the Nordics is probably the furthest along this transition of
Speaker 2: any group of countries or states. I'm sitting in Oslo
Speaker 2: and Norway right now. Over eighty percent of vehicle sales
Speaker 2: are fully electric. Markets like Sweden, Finland others are not
Speaker 2: too far behind. So what we I wanted to do
Speaker 2: was play out some of the emissions and energy market
Speaker 2: impacts and fleet turnover impacts in countries and regions where
Speaker 2: electricic flood option is going quite quickly, So that was
Speaker 2: the logic behind adding those. Last year we added a
Speaker 2: lot of detail on Southeast Asia because we were seeing
Speaker 2: really interesting things happening there. Next year we'll probably add
Speaker 2: another big emerging economy, so somewhere potentially like Brazil or Mexico,
Speaker 2: where again the mix some mobilities different and the timelines
Speaker 2: are different for all of the things that we're seeing
Speaker 2: happen around the world.
Speaker 1: So a bit of a case study and something that
Speaker 1: you could in theory extrapolate out.
Speaker 2: Yeah, exactly what we want to have is indicative countries
Speaker 2: or regions that people can understand. So we now cover
Speaker 2: fourteen major auto markets around the world.
Speaker 1: So there are a lot of different sections in our
Speaker 1: research on the vehicle outlook. Which section matters the most?
Speaker 1: Obviously they all matter, and it's hard to pick your
Speaker 1: favorite child, but in this you know what is weighted
Speaker 1: most heavily. When you think about things like batteries, battery chemistry,
Speaker 1: or supply chains or charging networks or consumer trends, which
Speaker 1: one would you say is probably the most influential part
Speaker 1: of actually determining what these long term forecasts really look like.
Speaker 2: Yeah, I mean the starting point for BNF has been
Speaker 2: for a long time that batteries are really what's enabling
Speaker 2: this change. And you can take the view that well,
Speaker 2: governments could just force the issue and push every all
Speaker 2: the markets over into electric with enough taxation or subsidies,
Speaker 2: but that gets politically difficult in a lot of countries
Speaker 2: if the underlying technology isn't continuing to get cheaper and better. Fortunately,
Speaker 2: the technology is continuing to get better. It actually got
Speaker 2: more expensive last year due to spike and raw material prices,
Speaker 2: So we go into that a lot and look at
Speaker 2: what's happening there. But I would say the starting point
Speaker 2: is still really in terms of what's going to change
Speaker 2: when we talk about electric vehicles anyway, is certainly the
Speaker 2: battery side. So one of the things we did this year,
Speaker 2: for example, is say, look, battery prices went out slightly
Speaker 2: last year, what do we think happens and what's some
Speaker 2: scenario analysis for when you get to in the passenger
Speaker 2: vehicle segment price parity with combustion vehicles based on different
Speaker 2: battery experienced curves or learning rates that we saw them
Speaker 2: go up for the first time last year. So again
Speaker 2: looking at the underlying technology, battery chemistry mix, and price outlook,
Speaker 2: it still forms the basis for us being able to
Speaker 2: say with some confidence that things are going to continue
Speaker 2: to accelerate quickly on ev adoption. And so again you
Speaker 2: said it, Yeah, I don't want to pick a favorite child,
Speaker 2: but I would say that's probably the most foundational part
Speaker 2: of the work that we're doing. Now. We also do
Speaker 2: this net zero scenario. So the base scenario in the
Speaker 2: report is this economic transition scenario, which says, look, this
Speaker 2: is led by techno economic forces and that's the primary
Speaker 2: thing that drives changes in the vehicle markets around the world.
Speaker 2: And we assume that no new policies are in place,
Speaker 2: and again that's where the battery cost stuff really becomes critical.
Speaker 2: But we also run a net zero scenario, which is
Speaker 2: more of a backcasting exercise that says, if we want
Speaker 2: to get to a net zero capable fleet by twenty fifty,
Speaker 2: what has to happen. That's less reliant on the battery
Speaker 2: price part, because you're sort of saying, well, if you
Speaker 2: believe we can get on track, here's where it would
Speaker 2: have to go, and here's the policy recommendations to keep
Speaker 2: it on track. Obviously, that's a bit of a different
Speaker 2: exercise than sort of what's the trajectory we're on today.
Speaker 1: But the punchline ultimately being that it is possible. A
Speaker 1: net zero future is possible with enough will.
Speaker 2: Yeah, definitely. And I mean one of the things we
Speaker 2: sort of show is that some countries are actually getting
Speaker 2: kind of close, and some segments are getting kind of
Speaker 2: close to the net zero scenario. So when we break
Speaker 2: out two wheelers, three wheelers, buses, those segments are actually
Speaker 2: pretty close. Three wheelers is pretty much on track, two
Speaker 2: wheelers and buses are pretty close, and then you get
Speaker 2: into light duty vans and commercial vehicles and passenger vehicles,
Speaker 2: and there's a lot of variation by country, but again
Speaker 2: you're starting to get some countries that are looking like
Speaker 2: they're going to be able to phase out combustion vehicle
Speaker 2: sales at least very close to by the early to
Speaker 2: mid twenty thirties. And that's roughly what you need to
Speaker 2: stay on track for a carbon neutral capable fleet by
Speaker 2: twenty fifty. Now, it's worth noting that twenty fifty carbon
Speaker 2: neutral capable fleet you also have to have a lot
Speaker 2: of stuff going on in the power system to decarbonize
Speaker 2: the power system to enable that fleet to actually operate
Speaker 2: in a zero emissions way. And so that's a separate
Speaker 2: part of bnef's work, the New Energy Outlook. But what
Speaker 2: we're doing here is looking at can the fleet of
Speaker 2: vehicles on the road operate without producing CO two emissions.
Speaker 1: So there's a lot of money at stake. This is
Speaker 1: definitely a big industry and when we look at consumer demand,
Speaker 1: electric vehicle sales are increasing. Where are they I guess
Speaker 1: now in terms of sales and where do we expect
Speaker 1: them to be in the future, you know, twenty thirty
Speaker 1: all the way out to twenty fifty, both in terms
Speaker 1: of percentage of total vehicles sold, but also in terms
Speaker 1: of how much money is there actually flooding into this
Speaker 1: specific part of the market.
Speaker 2: Yeah, let's start with the near term picture. So last
Speaker 2: year there was about ten point five million plug in
Speaker 2: vehicle sold, so that's battery electrics and plug in hybrids.
Speaker 2: This year, we think there's going to be about fourteen
Speaker 2: million sold a little higher than that. Actually, we're trending
Speaker 2: a little bit above that, and by twenty twenty six,
Speaker 2: we're forecasting about twenty seven million sales, and just to
Speaker 2: translate that into percentage terms, that's about thirty percent, so
Speaker 2: just under a third of the global vehicle market we're
Speaker 2: saying as plug in vehicles by twenty twenty six, and
Speaker 2: that's really not very far away, and that's that's coming
Speaker 2: at us quite quickly. What's important again there is that
Speaker 2: there's quite a lot of regional variations. So countries like
Speaker 2: China are probably going to be above fifty percent by then,
Speaker 2: regions like Europe above forty percent, and then there's kind
Speaker 2: of everybody else, and there's quite a big spread between
Speaker 2: the some of the other markets. So the near term
Speaker 2: picture is one of continued pretty rapid acceleration, but then
Speaker 2: a lot of variety between the different countries. And we
Speaker 2: think the fleet of passenger vehicles we're talking about here
Speaker 2: crosses one hundred million evs by twenty twenty six. Now,
Speaker 2: one of the things that kind of falls out of
Speaker 2: that is that combustion vehicle sales have already peaked. So
Speaker 2: they actually peaked in twenty seventeen, they declined in twenty
Speaker 2: eighteen and twenty nineteen, then really dropped in twenty twenty
Speaker 2: because of COVID, recovered a bit in twenty twenty one
Speaker 2: and recovering again in twenty twenty two, but all of
Speaker 2: that recovery is essentially on the electric side, and we
Speaker 2: don't really see them ever getting back to those twenty
Speaker 2: seventeen highs. You just look at what's going on in China,
Speaker 2: where the most recent month sales are, you're already at
Speaker 2: a third of sales. In Europe, you're running around twenty percent.
Speaker 2: It's just really hard to offset that anywhere else in
Speaker 2: the world to get up to the levels of combustion
Speaker 2: vehicle sales we saw in twenty seventeen. So that's kind
Speaker 2: of a near term implication is that they're already combustion
Speaker 2: vehicle sales are already twenty percent off their peak of
Speaker 2: twenty seventeen, and they're probably going to be more like
Speaker 2: forty percent off their peak by the time you get
Speaker 2: to twenty twenty six, and they're now in terminal decline.
Speaker 2: When we look at it further out, a couple of
Speaker 2: things happen. One this gap between the countries, it sticks
Speaker 2: around for a while, but then it starts to even
Speaker 2: out a little bit. It starts to get smaller as
Speaker 2: things take off in the countries that have been slower
Speaker 2: to start with. So a good example of that is
Speaker 2: somewhere like Australia. It's been quite slow so far in
Speaker 2: evy adoption, but it's now picking up quite quickly. And
Speaker 2: we've seen this in a few cases, the countries that
Speaker 2: go slower at the beginning oft and then pick up faster.
Speaker 2: And some of that is just built up demand. There's
Speaker 2: also an economic effect going on when we look at
Speaker 2: emerging economies. So the way we model this is around
Speaker 2: the price competitiveness of evs in different segments and in
Speaker 2: different countries, and one of the things you find is
Speaker 2: that emerging economies are quite price sensitive, right There's not
Speaker 2: a lot of spare money people have to spend on vehicles.
Speaker 2: I mean there is at the premium end, but in
Speaker 2: the bulk of the vehicle market in emerging economy there's
Speaker 2: not a huge amount of extra money available. That price
Speaker 2: sensitivity works against EV adoption before the point of price parity,
Speaker 2: but then it accelerates it afterwards. Once EV's become the
Speaker 2: cheaper option, then things start to go quite quickly, whereas
Speaker 2: before they were the cheapest option, things go quite slowly.
Speaker 2: So that's why you get these different curves where it's
Speaker 2: kind of slow and then really accelerating in the countries
Speaker 2: that are going slowly now and in the emerging economies
Speaker 2: and it's actually fast, and then starting to tail off
Speaker 2: in some of the wealthier countries that are in China
Speaker 2: that are going quicker right now. And the reason for
Speaker 2: that tailoff is actually just you start to saturate the market.
Speaker 2: Around the twenty thirty five period, we have markets like
Speaker 2: Europe and China really starting to slow down because you
Speaker 2: start to get to sort of seventy eighty even ninety
Speaker 2: percent of sales being electric, and that just means that
Speaker 2: we think the last sort of ten percent is going
Speaker 2: to be a bit hard to address, and so the
Speaker 2: S curve flows down there. On a global basis, again,
Speaker 2: talking about the passenger vehicle segment. Evs get to about
Speaker 2: seventy five percent of sales in twenty forty globally, and
Speaker 2: that's pure electrics. At that point we see plug in
Speaker 2: hybrids kind of disappearing. By then there are scenarios where
Speaker 2: that goes faster. Of course, the net zero scenario it's
Speaker 2: much faster. It has to be one hundred percent or
Speaker 2: almost one hundred percent by twenty thirty five of new
Speaker 2: vehicle sales to standtrack for the net zero scenario. But
Speaker 2: that's our economic transition scenario, which says no new policies.
Speaker 2: It's about seventy five percent by twenty forty.
Speaker 1: So we've talked a bit about where adoption is going
Speaker 1: really well in what's working well. But let's talk a
Speaker 1: little bit about the medium in heavy commercial vehicle space,
Speaker 1: which is lagging behind some of the other success stories
Speaker 1: like three wheelers. So what is it that's keeping medium
Speaker 1: and heavy commercial vehicles from really having the same adoption
Speaker 1: as you're seeing in other areas.
Speaker 2: Yeah, so the commercial vehicle segment is significantly behind the
Speaker 2: other vehicle segments, and there's a couple couple of reasons
Speaker 2: for that. One of them so far has really just
Speaker 2: been around available models right now, there just aren't many
Speaker 2: that you can go out and buy, and there's sort
Speaker 2: of technological reasons for that. Batteries needed to get better.
Speaker 2: We're starting to see that log jam ease a little bit,
Speaker 2: and that's we're starting to see a lot more models,
Speaker 2: particularly launching in the big markets, so China, North America, Europe,
Speaker 2: and actually so far China is leading this, but it's
Speaker 2: interesting to note that trucking might be one of the
Speaker 2: areas where the US is really going to jump forward on.
Speaker 2: It's been a bit behind those other two regions on
Speaker 2: passenger cars. But I actually think there's some really interesting
Speaker 2: stuff happening on heavy and medium trucks in the US
Speaker 2: and a lot of very interested, large corporate buyers who
Speaker 2: are going to push that forward, and some interesting starting
Speaker 2: points places like ports using these big vehicles for dray Edge,
Speaker 2: and you're seeing some really fascinating activity happening there in California.
Speaker 2: But so there's that model availability question, which is sort
Speaker 2: of being easy now you're seeing more things launch. Then
Speaker 2: there's the price part of it. These vehicles are still
Speaker 2: significantly more expensive, but we see that coming down the
Speaker 2: same way we see it coming down on the passenger
Speaker 2: vehicle side. In general. We've seen the prices of batteries
Speaker 2: going into trucks lag a couple of years what you
Speaker 2: see in passenger cars, and that's just because passenger cars
Speaker 2: are a bigger segment, the buyers have more power, and
Speaker 2: there's just lower prices negotiated there. But again that's starting
Speaker 2: to close a little bit too. The last thing that
Speaker 2: is really still there is charging heavy trucks at the
Speaker 2: highway is tough. It's a lot of power. It's a
Speaker 2: huge demand on the grid in many cases in places
Speaker 2: where there isn't a very thick grid connection, if you will,
Speaker 2: and that's a challenge. Now, it's not a challenge for everybody.
Speaker 2: There is a fair amount of depot charging that can
Speaker 2: go on and predictable routes and relatively slow charging overnight
Speaker 2: because most of those vehicles stop overnight, but that really
Speaker 2: heavy duty, long haul trucking, there is a big charging
Speaker 2: infrastructure need there now. The good thing is we're also
Speaker 2: seeing a lot of money starting to flow towards that
Speaker 2: and a lot more truck focused charging stations start to
Speaker 2: be built. But it's kind of early days, and so
Speaker 2: the EV share of the medium and heavy commercial vehicle
Speaker 2: fleet last year was only zero point one percent, so
Speaker 2: we're at the very very beginning of that. So for
Speaker 2: passenger vehicles it's about two percent of the fleet last year,
Speaker 2: for some of the other ones it's much higher. Commercial
Speaker 2: and heavy vehicles about zero point one percent of the fleet.
Speaker 2: But we saw again just kind of when you're looking
Speaker 2: at these segments where it's early, you're trying to scan
Speaker 2: the horizon of it and see what's happening, and you
Speaker 2: start to see some interesting success stories. So China is
Speaker 2: doing a lot on this. You're in Towards the end
Speaker 2: of last year, there were a few months where medium
Speaker 2: and heavy zero missions vehicles so that includes some fuel
Speaker 2: cell vehicles hit around five percent of medium and heavy
Speaker 2: truck sales in China. On the light commercial vehicle front
Speaker 2: South Korea, about twenty five percent of light commercial vehicle
Speaker 2: sales in South Korea are already electric, so you're starting
Speaker 2: to see more of that stuff happen, but it is
Speaker 2: early days. And I think that charging infrastructure part is
Speaker 2: both a real opportunity and a real challenge.
Speaker 1: And can we describe what a day in life really
Speaker 1: looks like for someone who is driving one of those
Speaker 1: commercial vehicles, because my understanding is that they're driving long
Speaker 1: distances and have really long hours. And to your point
Speaker 1: regarding charging overnight, that makes sense when you're on the road,
Speaker 1: but can you even make it to overnight? Do you
Speaker 1: have the range and the power? And if not, how
Speaker 1: long is your lunch break essentially that you will need
Speaker 1: to take in order to recharge in order to be
Speaker 1: able to make that route. And I guess if I
Speaker 1: really had to boil it down, what's the range and
Speaker 1: what's the recharge time for a let's say heavy duty
Speaker 1: semi style vehicle or a lory as they would call
Speaker 1: the mayor in the UK.
Speaker 2: Yeah, this is another one that varies a fair bit
Speaker 2: because there's actually different regulations in different countries on how
Speaker 2: long drivers have to stop for. So we did some
Speaker 2: work looking at root patterns within Europe and actually what
Speaker 2: you discover is that there's quite a lot of most
Speaker 2: of the freight moved is actually moved on routes less
Speaker 2: than four or five hundred kilometers in Europe, but you
Speaker 2: do still have a fair bit of really long haul
Speaker 2: stuff and in that case then you are going to
Speaker 2: be dependent on the charging infrastructure on route. And so
Speaker 2: what we did find is that if you say, look
Speaker 2: at Europe, the average time or the amount of time
Speaker 2: that a driver is required to stop for every four
Speaker 2: hours of driving sufficient to recharge to add significant enough
Speaker 2: range to continue on the trip. So I actually don't
Speaker 2: think the downtime is going to be the limitter. Here.
Speaker 2: You're starting to see the truck ranges creep up. A
Speaker 2: lot of them are still in regional and urban duty
Speaker 2: cycles right now, so they do maybe two three hundred,
Speaker 2: four hundred kilometers. Even we're probably going to see the
Speaker 2: next ones that reach five hundred kilometers in large scale
Speaker 2: production in the next little while. Tesla Semi of course
Speaker 2: claiming they're going to be able to do much more
Speaker 2: than that, but we haven't actually seen that in fully
Speaker 2: loaded delivering that capability, which is important to note, but
Speaker 2: I don't think it's going to be the dwell time.
Speaker 2: I think there is more activity around megawatt scale charging,
Speaker 2: so being able to deliver a full megawatt of power
Speaker 2: to the truck. Once you do that, you can cut
Speaker 2: the charging time down into what I think will fit
Speaker 2: into a normal rest period that a driver needs to take. Anyway,
Speaker 2: based on the calculations we've done, the bigger challenge is
Speaker 2: going to be getting all that power down to where
Speaker 2: you need it, and so there you might see a
Speaker 2: quite interesting set of solutions come in. You're seeing in
Speaker 2: China they're experimenting with some battery swapping. You're probably going
Speaker 2: to see a lot of battery storage at the sites
Speaker 2: so that you're charging those batteries at a slower rate
Speaker 2: and then charging battery to battery to cut some of
Speaker 2: the grid strain that you're seeing there. And then you're
Speaker 2: probably also going to see a bit of a land
Speaker 2: grab for where you have places where there is sufficient
Speaker 2: charging or power capacity coming down to the site that
Speaker 2: are going to be suitable as larger scale truck stops.
Speaker 1: Now let's switch over to innovation a little bit, and
Speaker 1: on the technology side, there have been some experiments of
Speaker 1: sorts going on when it comes to battery technology and
Speaker 1: battery chemistries. Can you share a little bit around what's
Speaker 1: happening when it comes to battery chemistries at the moment,
Speaker 1: maybe what are the more exciting innovations?
Speaker 2: Yeah, this year we highlighted three. So each year we
Speaker 2: try and do these thematic highlights where we look at
Speaker 2: things that are we think kind of interesting questions. And
Speaker 2: one of the ones that are beyond the sort of
Speaker 2: big picture modeling stuff and country level modeling, and one
Speaker 2: of the ones we came up with this year was
Speaker 2: noting how there are all these battery innovations that have
Speaker 2: been considered pre commercial for quite a while but are
Speaker 2: now entering the commerci realization phase. And so what we
Speaker 2: did is we identified three of them, and there are more,
Speaker 2: but I think three of the most interesting ones are
Speaker 2: one sodium ion batteries on next generation anautes and solid
Speaker 2: state batteries. And our battery team is all over this
Speaker 2: and they've been publishing a lot on tracking these developments
Speaker 2: over the years and how they've gotten to this point.
Speaker 2: But I think the important thing to note is that
Speaker 2: one innovation in the battery industry is not slowing down
Speaker 2: at all. If anything, it's speeding up as the industry grows,
Speaker 2: which is what we've expected, but it's still sometimes hard
Speaker 2: to predict exactly what shape that takes. On sodium ion batteries,
Speaker 2: this is a technology that is in theory been around
Speaker 2: for quite a while, but there was challenges. You've got
Speaker 2: this balancing act anytime with a new battery around things
Speaker 2: like cycle life and capacity and density and all these
Speaker 2: sorts of things, and some of those it looks like
Speaker 2: some of the leading battery manufacturers have significantly improved on
Speaker 2: the technology enough to be confident that they can put
Speaker 2: it into passenger cars. So you've seen the very first
Speaker 2: set of announcements from some smaller players and some big
Speaker 2: ones on building significant amounts of sodium ion battery capacity
Speaker 2: and commercializing that into vehicles late this year or more
Speaker 2: likely in the next few years, but that's a big
Speaker 2: that's a potential game changer. Now, the energy density isn't
Speaker 2: as good as traditional lithium ion batteries, but they're very
Speaker 2: stable and the materials for them are very cheap, and
Speaker 2: we've done some work looking at how low those prices
Speaker 2: could go, and we think there's a route to getting
Speaker 2: fifty dollars a kilo what hour sodium I own batteries,
Speaker 2: which would be a game changer for very affordable electric vehicles. Now,
Speaker 2: that won't happen overnight. What we've seen is that things
Speaker 2: take time to scale up in the battery industry. But
Speaker 2: that is a chemistry and a technological advancement that we
Speaker 2: think can play a significant role in alleviating some of
Speaker 2: the pinch points we've seen on the battery supply chain
Speaker 2: for some of the materials, So things like lithium or
Speaker 2: cobalt or nickel that spiked last year and I have
Speaker 2: since come down quite significantly, So it's not to say
Speaker 2: they all remain high, but there will be future spikes
Speaker 2: of all of these things and having a diversified portfolio
Speaker 2: of battery options that you can go to if that
Speaker 2: happens for a prolonged period of time, is very, very
Speaker 2: good for the industry. So we think sodium ion is
Speaker 2: going to start at the lower end of the vehicle market,
Speaker 2: similar to the way lithium iron phosphate batteries did a
Speaker 2: few years ago, but we think it has potential to
Speaker 2: change the dynamics significantly sort of in twenty thirty and
Speaker 2: beyond in terms of total amount of lithium demand needed
Speaker 2: for vehicles.
Speaker 1: So really at a point when we talked so much
Speaker 1: about range anxiety and wanting to increase range for drivers
Speaker 1: over and over again, and how that instinctively seems like
Speaker 1: the way of the future. The way of the future
Speaker 1: also increasingly looks like you're going to have different types
Speaker 1: of vehicles for different economic price ranges and also use cases,
Speaker 1: and that perhaps maybe a much lower range but also
Speaker 1: much lower cost for a specific use case. Perhaps urban
Speaker 1: pinging around seems like it's more of a potential than
Speaker 1: it was in the past.
Speaker 2: Yeah, definitely, And this is an important thing, is that
Speaker 2: you're going to see more separation in the overall vehicle
Speaker 2: market in terms of all of it, really the battery
Speaker 2: chemistry they use, the range that people require. As you
Speaker 2: get to more and more scale and get into more
Speaker 2: and more segments, As I said earlier, some segments are
Speaker 2: more price sensitive than others, so you really need to
Speaker 2: have affordable options there. And I think you are going
Speaker 2: to see more diversification of the technology going into different vehicles,
Speaker 2: and even now you're starting to see that. So you're
Speaker 2: starting to see say a Volkswagen or a Ford saying actually,
Speaker 2: our entry level vehicles and even Tesla, Tesla push pioneering
Speaker 2: this approach among Western automakers. Our entry level vehicles are
Speaker 2: going to use a lithium iron phosphate battery. Our higher
Speaker 2: end ones are going to use an NMC or an
Speaker 2: NCAA battery with higher density and higher associated cost as well.
Speaker 2: I think it won't end there. I think you will
Speaker 2: have some who say, no, we're just focusing on urban
Speaker 2: vehicles and those are going to be using a sodium
Speaker 2: ion battery and it's going to be ultra cheap and
Speaker 2: ultra affordable, but still very safe. And I think that
Speaker 2: is a significant difference from where we were a few
Speaker 2: years ago and is a big.
Speaker 1: Change now we can't seem to make it through an
Speaker 1: episode here these days without talking about supply chains. So
Speaker 1: let's go there. Because supply chains globally are shifting, certainly
Speaker 1: within the battery space, but how about within the auto
Speaker 1: manufacturing space. I know, for electric vehicles, a big part
Speaker 1: of the kit is the battery, so we can't touch
Speaker 1: upon that. But when it comes to making that complete
Speaker 1: vehicle that rolls off the line, whether it's for commercial
Speaker 1: or direct individual use to get around town, are those
Speaker 1: supply chains also dramatically changing?
Speaker 2: Yeah, definitely. One of the consistent things in the auto
Speaker 2: industry is that it's always changing and evolving, and you
Speaker 2: can see that over the decades. I think automotive is
Speaker 2: a fascinating lens to view the world through. Generally, you
Speaker 2: have these waves of different companies and countries coming in,
Speaker 2: so the Japanese automakers in the seventies and eighties, and
Speaker 2: then the Koreans and the nineties and two thousands, and
Speaker 2: now the Chinese coming in the twenty twenties. Here that
Speaker 2: will continue to happen. Automotive supply chains are long, so
Speaker 2: they reach a long way up. There's even in an
Speaker 2: ev where there's less parts there's still a lot of parts,
Speaker 2: there's a lot of material, a lot of physical material
Speaker 2: that goes into making a car, and so they are
Speaker 2: also subject to trade challenges. Right, generally they've been able
Speaker 2: to operate without too many restrictions and a lot of
Speaker 2: countries have benefited from relatively free trade on automotive but
Speaker 2: that period may be ending a little bit. We start
Speaker 2: to see more and more tensions around this topic. Other
Speaker 2: policies that are aimed at really explicitly supporting domestic manufacturing.
Speaker 2: So the Inflation Reduction Act in the US China have
Speaker 2: of course been supporting domestic manufacturing of vehicles and batteries
Speaker 2: for quite a long time. Europe now responding to Inflation
Speaker 2: Reduction Act. So this play by play of where are
Speaker 2: the job's going to be and where are the vehicle's
Speaker 2: going to be made and where the battery is going
Speaker 2: to make it's going to continue. We're not at anything
Speaker 2: resembling a steady state on that yet. One thing I
Speaker 2: will say though, is that in the long term, you
Speaker 2: do want to generally make vehicles near the market where
Speaker 2: they're being consumed or used, I should say, and similar
Speaker 2: for batteries. Now right now you're seeing some interesting dynamics
Speaker 2: where a lot of companies are making evs in China
Speaker 2: and shipping them to Europe. I think that holds at
Speaker 2: some reasonable volume and for a little while, but I
Speaker 2: think in the long term it is more desirable to
Speaker 2: have the vehicles made relatively near where they're being consumed. Now,
Speaker 2: there's always going to be exceptions to that, but if
Speaker 2: you look at the orientation of vehicle markets over the
Speaker 2: last twenty years, that is still the case. So, Yes,
Speaker 2: there are lots of Japanese vehicles sold in the US,
Speaker 2: but most of them are made in US plants. Yes,
Speaker 2: there are some vehicles shipped from Germany to China or
Speaker 2: the US, but there's also a lot of those made
Speaker 2: domestically in those countries as well. So it's going to
Speaker 2: continue to be a dance. There is going to be
Speaker 2: a fair bit of localization. I think it is going
Speaker 2: to continue to be a bit of a political hot
Speaker 2: potato around how you incentivize domestic jobs and domestic manufacturing.
Speaker 2: I think this year it caught us by surprise a bit,
Speaker 2: the Inflation Reduction Act, and I think it caught a
Speaker 2: lot of people by surprise, even within the industry, just
Speaker 2: how big a push that was going to be on
Speaker 2: shore the US vehicle and battery manufacturing supply chain, and
Speaker 2: that is happening. It's happening really quickly. There are tens
Speaker 2: of billions of dollars announced since Iro's announced in North
Speaker 2: American battery and component manufacturing, and so I sometimes hear
Speaker 2: this view that like, oh, this has done, China won
Speaker 2: this race. I think we're still in the early going
Speaker 2: of this. I said only the end of the last year,
Speaker 2: only two percent of all the vehicles on the road
Speaker 2: we're electric. There's a lot of rooms still for countries
Speaker 2: to carve out new industrial policy clusters and build new
Speaker 2: base of jobs and innovation. So I think we're going
Speaker 2: to continue to see a fair bit of maneuvering there.
Speaker 2: I hope it doesn't end up too fragmented, because I
Speaker 2: think that will slow down the transition at a time
Speaker 2: when we want to be speeding it up. But I
Speaker 2: think that's a very real possibility.
Speaker 1: So now it's going to be impossible to go through
Speaker 1: everything in this report, and I feel like we pulled
Speaker 1: out some interesting themes, and certainly there is also the
Speaker 1: meat of these forecasts. But I want to pivot now
Speaker 1: to something that I've started doing at the end of
Speaker 1: most of the shows now, which is trying to find
Speaker 1: out what our lead analysts are looking at, what they're watching,
Speaker 1: and what they're ignoring. Maybe in the category broadly of
Speaker 1: weird and wonderful tech, so not covered in this report,
Speaker 1: but in Collins list of things to watch and ignore.
Speaker 1: I'm wondering about hydrogen vehicles.
Speaker 2: Yeah, and that's a good question. I get asked this
Speaker 2: question a lot. I'm still not really clear always why
Speaker 2: I get asked it a lot, because the picture hasn't
Speaker 2: actually changed very much. So this year we actually took
Speaker 2: hydrogen vehicles out of the passenger vehicle forecast. And I'll
Speaker 2: give you a bit of background of why hydroden vehicles
Speaker 2: sales vehicles. Hydroden fuel cell vehicles, I should say, have
Speaker 2: been around for quite a long time. The first discussions
Speaker 2: of them go back decades, and really they have not
Speaker 2: delivered on any of the promise that has been discussed
Speaker 2: over the years. And last year sales of them fell
Speaker 2: from twenty twenty one, so they were down. And not
Speaker 2: only were they down, we saw a few automakers sort
Speaker 2: of reduced their commitment, and we also saw more and
Speaker 2: more of the sales concentrated in the passenger vehicle segment
Speaker 2: in South Korea, So it's about seventy percent of passenger
Speaker 2: fuel cell vehicles were in South Korea. About fifteen thousandth
Speaker 2: sold last year. It's not very many. It's a very
Speaker 2: very small market. It's concentrated in a few models, a
Speaker 2: few automakers, and a very small number of geographies. The
Speaker 2: few refueling infrastructure part is still a major major challenge.
Speaker 2: We've seen supply issues at the hydrogen fueling stations that
Speaker 2: are there a lot of them offline at any given time,
Speaker 2: and some of them just plane removed. For example, in
Speaker 2: the UK, Shell pulled a few out because they weren't
Speaker 2: being used enough. So it's expensive and it's just not
Speaker 2: really what consumers seem to want. In the places even
Speaker 2: that built a fair amount refeeling infrastructure, like California, sales
Speaker 2: are way way down. Sales have plummeted in Japan, which
Speaker 2: has been the biggest backer of the technology. So at
Speaker 2: some point, as forecasters, we just start to get really
Speaker 2: uncomfortable saying I don't feel comfortable making a twenty year
Speaker 2: forecast for something that is so concentrated and falling last year,
Speaker 2: so we just sort of said, look, we're taking it out.
Speaker 2: We'll revisit it when field sell vehicles reach zero point
Speaker 2: one percent of global vehicle sales. So that's not very much.
Speaker 2: That's not a high bar. Zero point one percent is
Speaker 2: pretty low. That would be around eighty thousand vehicles a year.
Speaker 2: Maybe they get there. Will happily revisit it when they do,
Speaker 2: but they're not there now, and it's very uncomfortable for
Speaker 2: people who rely on data to try and make a
Speaker 2: long term forecast. Trucking. They still play a role in
Speaker 2: our zero scenario, but they're sort of backfilling where batteries
Speaker 2: don't work rather than the main solution. So I think
Speaker 2: another way to think about hydrogen fuel cell vehicles if
Speaker 2: you're thinking about energy and emissions from the passenger vehicle segment,
Speaker 2: if you were to double the size of the passenger
Speaker 2: fuel cell vehicle fleet, So you take all the number
Speaker 2: that have been on the road sold over the last
Speaker 2: twenty years, and you double it every three years, so
Speaker 2: all the way out to twenty forty. Every three years
Speaker 2: you double the size of the fleet. That's a pretty
Speaker 2: aggressive rate of growth considering how long it's taken to
Speaker 2: get to where we are. If you do that, then
Speaker 2: they will be about zero point two percent of the
Speaker 2: vehicle fleet in twenty forty, so have no meaningful impact
Speaker 2: on emissions or energy consumption in passenger transport. So again
Speaker 2: you sort of look at that. If that's the upper
Speaker 2: bound snario, that's the optimistic scenario for growth, and it
Speaker 2: has zero impact on global CEOTO emissions in twenty forty,
Speaker 2: then you have to sort of say, well, why are
Speaker 2: we spending so much time talking about this? So I
Speaker 2: think there's still a potential role to play as backfill
Speaker 2: in the trucking segment, in heavy duty long haul in
Speaker 2: parts that are hard to electrify. I think it's significantly
Speaker 2: smaller than batteries and smaller than a lot of the
Speaker 2: proponents suggest. But I really don't see, at least in
Speaker 2: the data right now, much of an interest from consumers
Speaker 2: in the passenger vehicle segment.
Speaker 1: So maybe more in the weird and wonderful category. Are
Speaker 1: you closely watching or ignoring solar cars?
Speaker 2: Ignoring? That's for me, the ignoring camp.
Speaker 1: So last one, you can't look at the news these
Speaker 1: days without looking at something that has to do with AI,
Speaker 1: and I want to know, are you closely watching or
Speaker 1: are you sort of ignoring self driving vehicles because the
Speaker 1: self driving space has come in and out of fashion
Speaker 1: a few times.
Speaker 2: Yeah, we're not ignoring it. And I would say if
Speaker 2: you read media coverage only, you would think that self
Speaker 2: driving cars are completely failing. And our view has always
Speaker 2: been that it will take time. Once we're talking about
Speaker 2: big impact. Societal impacts are more of a twenty thirties
Speaker 2: and twenty forty story, but there is real progress being made.
Speaker 2: There are commercial self driving car services you can take
Speaker 2: now in San Francisco, in Beijing, and they're expanding. Yes
Speaker 2: they're geofenced, and yes, there's all sorts of caveats to it.
Speaker 2: But you should probably be more optimistic on the technology
Speaker 2: now than in the past because it exists now and
Speaker 2: it didn't when the sort of hype cycle was that
Speaker 2: its peak. You couldn't commercially go and get in a
Speaker 2: self driving car. You can do that now and they're
Speaker 2: really racking up the kilometers and the China market is
Speaker 2: moving really quickly. So I think all this stuff around
Speaker 2: stelf driving cars gets caught up in these all or
Speaker 2: nothing it's going to go take over one hundred percent immediately,
Speaker 2: or it's all smoking mirrors and nothing's going to happen.
Speaker 2: I think you're going to see this stuff slowly and
Speaker 2: steadily expand more geofenced areas. But it is real, and
Speaker 2: so one of the things we did this year is
Speaker 2: run two scenarios to say, look, what does happen if
Speaker 2: this stuff really takes off? And it does potentially dramatically
Speaker 2: cut down the size of the global vehicle fleet, and
Speaker 2: it also can push you towards electrification sooner. And that's
Speaker 2: because more of the autonomous vehicles that are being used
Speaker 2: for testing right now are electric, and there's a lot
Speaker 2: of reasons to think because of economics and regulation that
Speaker 2: future ones are going to be electric as well. That
Speaker 2: means that the kilometers can go electric faster than the
Speaker 2: fleet can if we take how much people move around
Speaker 2: and assign it to different drive trains, so it can
Speaker 2: both lower the size of the vehicle fleet and push
Speaker 2: it towards electric faster. Of course, there's still the nightmare
Speaker 2: scenario where there's a big bound in the amount of
Speaker 2: vehicle use because of the self driving cars. We didn't
Speaker 2: really dive into that in this time, but in general,
Speaker 2: I think it's not something you should ignore. I think
Speaker 2: it's something you should recognize that we don't know and
Speaker 2: do sensitivity on scenario analysis accordingly. So I think it's
Speaker 2: definitely still something to watch, and I actually think you're
Speaker 2: going to hear quite a bit more about it in
Speaker 2: twenty twenty four and twenty twenty five, as some of
Speaker 2: these services start to scale up further.
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