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Electric and autonomous vehicles advance

Electric and autonomous vehicles advance

(11 October 2018 - Europe) The Paris Motor Show has highlighted car makers biggest concerns including falling sales, EU regulatory pressure, trade barriers and innovation investment, placing global operations under increasing pressure.

New electric vehicle (EV) battery models are the key hope for the European industry to overcome its most pressing challenge of hitting the ever-tightening CO2 targets in the next ten years. Electric vehicles are moving rapidly towards broader use with several manufacturers making commitments to convert to electric power. Widespread adoption of EVs will have a significant impact on the economy and society as a whole, creating new challenges and opportunities for the future including energy markets. The European Parliament voted to introduce rules that would force carmakers to lower their 2020 CO2 emissions targets by 40 percent by 2030 and carmakers that miss the targets will face penalties. “No industry in history has been asked to bring in reductions of this scale,” said Didier Leroy, Toyota’s European president.

All of the major manufacturers will launch a variety of electric and hybrid cars in the coming years, in part to hit the EU’s CO2 rules in 2020 which require a fleet average of 95g/km of CO2 per kilometre — down from 130g/km in 2015. But the 2030 requirements are far more stringent, requiring widespread sale of EVs by manufacturers which threatens existing engine-based supply chains and past investments into technologies frowned up by regulators, such as diesel. The push is compounded by the spiralling decline for engines that run on diesel, a technology that was once embraced across Europe because it emits a fifth less CO2 than petrol. “The challenge is as everything is calculated on CO2, now the diesel demand goes down, then the CO2 goes up and causes an impact,” said Luca de Meo, Seat CEO. With electric cars less profitable than traditional vehicles, carmakers are also cautious about trimming narrow margins further. Even with the running costs of EVs brought down by low energy and servicing costs, consumers still hesitate at the prospect of a much higher purchase price. Consumers are also unlikely to buy electric cars unless they can recharge them. Erik Jonnaert, secretary-general of European carmakers’ association ACEA, said the onus was now on governments to provide charging points. “There are 200,000 charging points across Europe. We need 2.5m by 2025. This requires commitment from both governments and industry. Governments need to deliver, you cannot have manufacturers only asked to contribute.”

Europe’s carmakers need a battery “champion” to stop the region falling behind Asia and the US in the race to dominate the technology of the future, two of the industry’s leading executives have warned. Carlos Ghosn at Renault-Nissan-Mitsubishi and Carlos Tavares at Peugeot-owner PSA both stressed that the continent needs to build its own capacity to remain competitive. While carmakers today buy in many of their parts, almost all of them still make engines and that is the area where they add specialisation. With EVs, Europe risks losing its competitive edge unless it builds battery sites. Mr Ghosn said the industry “cannot continue to prosper” unless it builds its own capacity. “Right now there is a shortfall in batteries. We need more capacity.” Asia is building more than a dozen “gigafactories”, while the US already has Tesla’s battery plant. Plans are afoot in the European Commission to develop a region-wide champion akin to Airbus, the aerospace group that formed out of a joint effort to rival Boeing. But as the demand for EVs increases in the EU, its carmakers will continue to “transfer 40 per cent of value to Asia” every time they sell an electric model, Mr Tavares said. “This is a question for society and political leadership.”

A recent report by KPMG, Electric Vehicles, is the energy market ready, analyses the readiness of the energy sector as more electric vehicles hit the road. Seamless integration requires the right energy resources to be available in the right places to match demand and the right regulation to facilitate this. However there is substantial uncertainty on the amount and location of electricity needed for vehicle charging that could limit the ability of commercial businesses and regulated networks to provide sufficient capacity in advance of the increasing demand. Many factors will influence EV charging. Some factors are personal, like how consumers use their car. What is certain is growth in numbers of EVs will introduce new businesses into the energy sector. Managing the impacts of EVs will require co-ordination and co-optimisation of decisions across a range of diverse businesses who will each have their own objectives and aims. A level of government guidance and over-sight will certainly be needed. Widespread adoption of electric vehicles will bring further disruption to the sector. A clear regulatory and policy framework needs to be put in place to ensure that EVs are efficiently integrated into the evolving energy markets. Without this, it could cause significant additional disruption through the potential impacts on the electricity system from charging and potentially discharging. Effective integration means that there are no barriers to customers’ uptake, the cost impact is managed and the benefits from electric vehicles to the energy market are fully captured.

Further disruption will be felt with the wide scale adoption of autonomous vehicles (AVs). By the end of 2018, in the metropolitan area of Phoenix USA, consumers will be able to summon an autonomous vehicle from ‘Waymo’ using an app on their phone. The nation’s first commercial robo-taxi service will be limited to certain areas, but the territory will gradually expand as the cars get even smarter with experience. Waymo is viewed as a leader in autonomous vehicle technology, building up 10 million miles of real-world driving and 5 billion simulated miles. But it’s still up to the public to decide if they want self-driving cars. Waymo’s robo-taxi service will be an early test of that question.

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