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Electric Vehicles: A Force for the Future
Collaboration – Inside and Outside the Automotive Industry – Will Be Key to Electric Vehicle Development
The growth of electricpowered vehicles will lead to a fundamental shift in the existing landscape in areas such as design and manufacturing, distribution and aftersales service, and energy supply and infrastructure.
The electrification of the automobile is inevitable.
— Bob Lutz, Vice Chairman, General Motors1
Bob Lutz is not the only one who sees a bright future for electric cars. Most of the major automotive manufacturers – as well as new players like BYD and Tesla – are investing heavily in electric vehicle design and manufacturing. Governments and other public sector bodies from the U.S., France, the UK and other countries are making significant investments in the development of electric vehicles and introducing various tax credits, incentives and subsidies. In France, for example, the ministry of sustainable development recently launched a national plan for the development of electric vehicles and rechargeable hybrids. Energy companies and other industries have also set their sights on electric vehicles. ExxonMobil, for example, is sponsoring an all-electric car-sharing and rental program, called AltCar, at the Maryland Science Center in Baltimore.2 French utility company EDF is working with car maker Renault on a recharge system enabling communication between recharge terminals and electric vehicles.3 In Germany, Renault and RWE, a leading European gas and electric company, have partnered to create a common transport and recharge system for electric vehicles. The U.S. Postal Service is studying the feasibility of moving its fleet of 146,000 delivery vehicles to electric vehicles.4 And consortia combining different groups are working together in countries like Israel and Portugal to test various integrated models.
But most importantly, electric vehicle development is being strongly fueled by consumer demand stemming from economic and environmental factors. In Capgemini’s Cars Online 09/10 study, 41% of consumers said they currently own a fuel-efficient and/or alternative-fuel vehicle, up from 36% the prior year. And another 30% said they plan to buy a fuel-efficient and/or alternative-fuel vehicle. Hybrids Lead the Way Electric vehicles, particularly hybrid gas/electric cars, are the most commercially mature and viable of the various kinds of alternative vehicles and have demonstrated the potential to reduce fuel consumption and exhaust emission. Gas/electric hybrids are the primary type of alternative-fuel vehicle that consumers currently own or plan to buy.5 Hybrid electric vehicles still represent only a small share of overall car sales – estimated at about 1% in Europe and 2% in the U.S. Sales of hybrid cars, like all vehicles, have suffered recently. Nevertheless, future demand is expected to grow, particularly in the U.S. and Japan, as prices of hybrid and other types of electric vehicles begin to drop. By some estimates, global sales of hybrid electric vehicles may surge at a compound annual growth rate as high as 12% over the next few years. Developing markets like Brazil, India and China are also expected to contribute to this growth as they put more focus on environmental issues such as CO2 reduction.
1 2 3 4 5
“Bob Lutz: The Man Who Revived the Electric Car,” http://www.newsweek.com/id/81580 “Exxon and Electrovaya Launch Car Program in Baltimore,” http://www.businesswire.com/portal/site/home/email/alert/?ndmViewId=news_view&newsLang=en&newsId=20090623005671 http://press.edf.com/the-edf-group/press/press-releases/noeud-communiques-et-dossier-de-presse/renault-and-edf-strengthen-collaboration-on-zero-emission-electric-vehicle-602317.html “U.S. Postal Service: Electrification of Delivery Vehicles,” http://www.uspsoig.gov/FOIA_files/DA-WP-09-001.pdf Cars Online 09/10, Capgemini (study spans the U.S., Western Europe and the BRIC countries of Brazil, Russia, India and China), 2009
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Global Hybrid Electric Vehicle Sales
3,500,000 3,000,000 2,500,000
somewhat, but it is still early in the cost-reduction curve. Governmentsponsored programs in the form of both consumer credits/rebates and battery development incentives provide some cost relief. However, the price gap between gas-powered and electric vehicles will need to shrink if the mass market is to accept electric cars. Our Cars Online research found that consumers show some willingness to pay for improved fuel efficiency. However, most are unwilling to pay a premium of more than 10%. The existence of other alternatives: Electric cars are not the only alternative-fuel vehicles on the market. Other options like ethanol and gasoline/ethanol flex-fuel vehicles have grown in popularity in some countries. For example, in Brazil, 22% of consumers said they currently own or plan to buy an ethanol or flex-fuel car, the highest among the countries surveyed in Cars Online. Ecological value: While the general perception is that electric vehicles are more environmentally friendly than those powered by combustion engines, the actual ecological value is questioned by some. For instance, environmental concerns may be raised if a vehicle consumes electricity from a coal-fired plant. Other factors such as the recycling of used batteries may also impact the ecological equation. Technological maturity: Electric vehicles are a late entry into the automotive market and, as such, the standardization of components, technology and test methods is not yet mature.
195,000 230,000 5,000 20,000 1998 30,000 1999 55,000 110,000 2000 2001 2002 2003
• Sales expected to surge at a CAGR of 12% during 2008-2015 • Hybrid car sales in the U.S. market are likely to cross 1 million by 2012 • Hybrid vehicle production in Japan is projected to hit a CAGR of 6.6% from 2008 to 2011
Sources: Capgemini analysis; “Global Hybrid Car Market Forecast to 2010,” RNCOS
Addressing the Challenges Although there is considerable interest in electric vehicles, a number of challenges must be addressed if widespread acceptance is to be achieved. Performance of batteries: The industry must solve issues such as low distance capability, recharging duration, battery weight, short lifecycle and the high cost of batteries. Infrastructure investment: The development of the electric vehicle is dependent on the parallel
Electric Vehicles: A Force for the Future
development of a recharging infrastructure. The current low distance capability and frequent recharging necessitates a significant number of charging points, which will require considerable planning and investment. Market acceptance: Current electric vehicles do not yet meet consumer expectations regarding speed, power, performance, recharging capability, distance and, especially, price. Price: Prices of new electric hybrid vehicles have begun to drop
What Do We Mean by ‘Electric Vehicle’?
In a general sense, electric vehicles are powered by electricity to some degree or another. However, there are a number of different types of electric vehicles, including but not limited to:
Gasoline/electric hybrid vehicle: has both a gas and an electric motor, and is based on two energy carriers: liquid and battery. A gasoline/electric hybrid vehicle typically has a limited electric range. The electric propulsion can be mobilized for short urban trips, but the true utility of the electrical energy is to serve as a boost for the gas engine. The electricity is produced in the vehicle (recovery through regenerative braking); these vehicles do not need to be recharged. Rechargeable hybrid vehicle: also called a plug-in vehicle. This is a primarily electric vehicle that also has a small combustion engine. Typically it can be used at 100% electric power in the city with a distance capability per charge of approximately 50 km. Electricity must be provided by the electric network grid. This type of vehicle does not require complicated recharging terminals; existing electrical outlets in most public and private parking areas may be sufficient. Fully electric vehicle: 100% electric vehicle without any type of heat engine. A pure electric vehicle requires prior creation of an infrastructure for recharging batteries. Currently the distance capability per charge of a pure electric vehicle is still low (about 200 km) and the cost is high.
Despite these challenges, there is no lack of investment in electric vehicles. The continued volatility in oil prices, growing focus on ecological issues and the ongoing improvement of technologies should lead to an increasingly favorable environment for electric vehicle sales. Development Scenarios Will Depend on a Range of Factors The development scenarios for electric vehicles will depend on technical, political and energy considerations. Capgemini expects two scenarios to rise to the forefront over the next few years: Market specific: In this scenario, electric vehicles will hold a measurable market share in certain regions and for specific uses (like urban mobility, sport vehicles or private company fleets). The technical maturity will be present, however the lack of consultation and cooperation among market players in areas such as infrastructure and standards will adversely affect development on a broader scale. In this scenario, the development and dissemination of the electric vehicle will occur through specific segments such as commercial fleets. In addition, a higher-income socio-professional category of consumers will help drive the development of electric vehicles. New model expansion: In this scenario, electric vehicles will hold a more substantial market share. The social consensus and the organized convergence of infrastructure and standards will result in a strong and lasting market for electric vehicles. This scenario will be dominated by new business models and a new vision of vehicles and mobility.
I think we will start seeing an awful lot more cars available in electric form. And greater pressure will be put on drivers to be more green aware.
UK consumer, Cars Online 09/10
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Development Scenarios for Electric Vehicles
New vehicle, % market share (e.g., France) Electric vehicles % of global market Dynamic in 2020
B. Market Specific
C. Classic Expansion
D. New Model Expansion • 15% = 300,000 • 5% = 1,500,000 • The social consensus, the organized convergence of infrastructure, standards, regulated and deregulated operators trigger a lasting market • Progress of electric vehicles • Price of energy • Carbon tax • New business models, new vision of vehicle, new mobilities • Owner • Online standard terminal network • Vehicle to grid
• 1% = 20,000 • <0.3% = 100,000 • The dynamic is not built
• 5% = 100,000 • 1.7% = 500,000 • The technical maturity is present but the lack of consultation and cooperation has adversely affected the development
• 15% = 300,000 • 5% = 1,500,000 • The electric vehicle has made such progress that it replaces the gasoline vehicle without great change or modes of mobility vehicles or business model • Progress of electric vehicles • Price of energy • Carbon tax • Open
• Progress of electric vehicles • Progress of gas • Price of energy • Some fleets and Autolib* (e.g.)
• Progress of electric vehicles • Price of energy • Fleets, Autolib, cargo and urban mobility, CSP**, sport • Owner • Some urban public terminal
• Owner Charge Discharge
• Owner • Online standard terminal network • Vehicle to grid
Source: Capgemini * Autolib (Automobile Liberté) is an electric car-sharing plan in Paris ** CSP = Socio-professional category of consumers with higher incomes Dynamic in 2020: Arrows refer to “unchanged,” “changed” and “changed considerably” Technical Scenarios 2020: Arrows refer to the degree of progress, with a greater number of arrows indicating greater progress Energy Scenarios 2020: Arrows refer to the anticipated increase in energy prices, with a greater number of arrows indicating higher price increases
We anticipate that the market-specific scenario will be the most realistic path for electric vehicles as it is more evolutionary in nature. The new model expansion scenario is more revolutionary and would require the convergence of all players around a number of key dimensions, including technology, infrastructure for recharging, tax and regulation, evolution of users, and the development of the industrial/manufacturing capability. This second scenario will only happen
Electric Vehicles: A Force for the Future
if there is significant government intervention in terms of subsidies and investment, brought about by growing concerns for the environment and for long-term oil supplies. Changing the Landscape As these development scenarios play out, the growth of electric vehicles will raise a number of critical questions: ■ Will traditional players (vehicle manufacturers, suppliers, energy
Capgemini anticipates that electric vehicle development scenarios B and D are the most likely future models, with B being the most realistic path.
companies) be able to maintain their dominant positions? ■ Will new players be able to design viable products and strategies to gain market share? ■ Will new aftersales players design and implement new business models? ■ Can business – and potentially government – define and develop the standards and infrastructure necessary to provide the power supply for electric vehicles? ■ Can companies and governments optimize the management of electrical energy needs? The answers to these questions will underlie a fundamental shift in the existing landscape in areas such as design and manufacturing, distribution and aftersales service, and energy supply and infrastructure. Traditional and new players will need to consider the potential impact of this emerging market on their business. Traditional manufacturers will need to define their strategy for positioning the different “clean” vehicle technologies and rethink their design and manufacturing capabilities as well as their supply chain. Automotive suppliers will need to adapt existing products and develop new products to suit electric vehicles, while new suppliers with purpose-built products will enter the market. Traditional car dealers, service providers and spare parts vendors will need to adapt and transform their activities to serve the electric vehicle market. Gasoline and tanker companies will need to manage the
I will purchase an alternative-fuel car as I am very concerned about the environment. But I hope that prices will come down as it will encourage others to purchase this type of vehicle as well.
U.S. consumer, Cars Online 09/10
transition to a new power source that will reduce the traditional heart of their business. And large utilities will need to take into account the potential impact on the grid, new rate structures and new types of services. At the same time, new players, including vehicle and battery manufacturers, will need to master the technology development and scalability needed to serve the mass market. Mobility service providers and car rental companies will also need to adapt their business models for this new market. The development of a significant market for electric vehicles will likely give rise to the need for a new network of charging points that could include traditional gas/petrol stations as well as other players with a large number of physical locations. This could include big fast-food operators such as McDonald’s or retail chains like Walmart. Conclusion: Collaboration Is Key to Electric Vehicle Development Electric vehicles have the potential to be a market-changing force. However, the continued development of this business will require collaboration both inside and, more importantly, beyond the automotive industry. Parties including vehicle manufacturers, suppliers, dealers, other retailers, consumers, electric/utility companies and governments must all be aligned. Capgemini has the supporting tools and methodologies to help bring together these key stakeholders in the emerging electric vehicle business, as
well as broad and proven experience in automotive strategy, process, infrastructure and retail. We use proprietary approaches such as our Accelerated Solutions Environment (ASE) to harness high-performance group creativity and collaboration to achieve buy-in and build solutions in record time, particularly relating to emerging technologies and business models. According to one vehicle manufacturer, the ASE approach helped the company “…achieve in three days what would have taken four years of NetMeetings and thousands of PowerPoint slides to accomplish.”
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About Capgemini and the Collaborative Business Experience
Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working, the Collaborative Business ExperienceTM. The Group relies on its global delivery model called Rightshore®, which aims to get the right balance of the best talent from multiple locations, working as one team to create and deliver the optimum solution for clients. Present in more than 30 countries, Capgemini reported 2008 global revenues of EUR 8.7 billion and employs 90,000 people worldwide. More information is available at
For more information, please contact: Gord Reynolds Energy & Utilities Practice Smart Energy Services Global Operational Services Lead +1-416-732-2200 [email protected]
© 2009 Capgemini. All Rights Reserved. No part of this document may be modified, deleted or expanded by any process or means without prior written permission from Capgemini. Rightshore® is a trademark belonging to Capgemini.