According to the Environmental Protection agency, the transportation sector generates the largest share of greenhouse gas emissions – and cars are the biggest contributors. As such, car makers have a key role to play in the fight to improve air quality and reduce emissions.
To mitigate climate change and improve local air quality, a growing number of countries have announced plans to phase out internal combustion-engine (ICE) vehicles and introduce new regulations. Several countries have also introduced targets to achieve net-zero emissions by 2050. Against this backdrop, EVs are forecast to hit 10% of global passenger vehicle sales by 2025, rising to 28% in 2030 and 58% in 2040.
Today, however, EV penetration remains low at 1% of total car sales. And so, in the latest instalment of Industry Insights, Ilana Elbim, Senior Credit Analyst, examines the barriers for EV adoption – for both manufacturers and customers.
Elbim explains: “Today EVs are not, if barely, profitable because of battery costs and the need to adapt production lines.” However, as technology improves, battery costs should fall. As such, she expects “a tipping point” in a few years’ time, “when EVs will be as profitable as ICE vehicles”.
With significant investment required to develop technologies for EVs, manufacturers are increasingly announcing partnerships with other competitors and with players outside the car industry. “This allows them to still position themselves for the future and lowers the impact on their financial profile,” Elbim adds.
How is the industry positioned for the road to zero? To find out, watch the short video below.