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Vertaeon LLC – Evolving scenarios for the current electric vehicle (EV) picture

Image Credit “Created in Canva by Brandon McKay Crooks, Vertaeon LLC”.

Today, we see most of the indicators pointing in the electric vehicle (EV) direction, from the IPCC (Intergovernmental Panel on Climate Change) urging us to sharply curb our carbon emissions, to the Superbowl commercials promoting almost exclusively futuristic EV, and the regulations in Europe and California preparing for che end of combustion engine cars by 2035 to accelerate the shift.

Yes, all the actors in the automobile industry value chain need to get ready for the unavoidable transition and the huge disruption and opportunities which this technology shift will imply.

Whenever an emerging industry sector is that obvious, much like when the automobile industry started in the beginning of the 1900’s, this tends to attract existing and emerging players, all striving to both capture the new market share and to comply with regulatory demands. Even in such an attractive environment, it is important to take a step back and analyze all the indicators and drivers that may at first glance appear counter-intuitive.

First, let’s identify the bottlenecks. Whenever an industry is scaling-up, new problems of scale are emerging. In the case of EVs, we see this in four broad areas (i) grid capacity (ii) material and device availability in supply chain, (iii) charging station infrastructure and (iv) equity, moving the pendulum from passenger vehicles to a ubiquitous model in electric fleets.

Tesla Shanghai Factory, Image Credit Reuters

If EVs represent only a few percentages of the total cars in circulation, the impact on the electric grid demand and on the charging stations network is marginal. As we move more towards growth targets, there will be considerable stress on the power grid and the demand for charging station infrastructure.
This picture becomes more drastic with high drought conditions and hydropower generation in question as seen recently in Chengdu in Sichuan Province, China. This impacted both suppliers and automakers.

A key part is the stress on the battery supply chain as we discussed in our March webinar with SEEA (Southeast Energy Efficiency Alliance). Manufacturing and supply chain constraints combined with rising costs would potentially make the push to EV a lot less attractive to consumers. Year-to-date, Chinese battery-grade lithium carbonate prices have risen by 90% while lithium hydroxide is up by 127%. At the same time competition for future lithium has only intensified as automakers from Ford to Stellantis sign agreements to lock up supply.

Charging infrastructure can pose a big bottleneck once the supply and production constraints are overcome. Subsidies, financial considerations, partnerships, charges, and energy access can all play a role here. In addition, the cost of (kWh) of electricity itself has been multiplied in Europe this year!

Equity is another big consideration, if choosing an EV would no longer be a choice and independent transportation would become a luxury for the privileged few. A wider use for electric buses, truck fleets and more could become the new norm both from EV numbers and charging stations. Additional options can emerge – instead of car ownership, subscription models including battery replacement, contracts limited in miles driven per month in times of need.

Second, let’s keep in sight the initial drivers (no pun intended) for this transformation, and see if they are still as relevant today as yesterday, and more importantly tomorrow, as they might be today. Why do we have this push for transport electrification globally from many governments across the world? It is to limit our impact on climate change, and to improve the air quality, the PM2.5 fine pollutants in large metro areas. If this foundation is being put into question as we are scaling-up and getting closer to the regulatory deadlines, this could possibly initiate a 180-degree change of direction from the regulatory bodies which could be potentially detrimental to the EV industry which is seeing heavy investments both from emerging and well-established car manufacturers. Soft signals are starting to emerge in questioning these fundamentals. On the other hand, some governments may push back on this goal.

When factoring in the entire value chain, from mining to electricity generation to recycling, EV may need to drive over 77,000 km based on current EU energy mix before reaching parity with a conventional car. Earlier research also suggests a disparity based on how electricity is sourced. In Europe, an electric car generates up to 69% less CO2e per km than a petrol car. However, in India, this figure is 34%. Likewise, PM2.5 is not only coming from the fuel burnt, but from the tires and brakes wear and tear, which EV might offset with being on average 30% heavier than traditional cars.

Questions challenging assumptions will be raised by the larger scientific and environmental groups. Only a few countries in the world have the capacity to produce 100% green electricity. For all the other countries, any additional kWh consumed to power electric cars will partly come from fossil fuel. In addition, cost parity will be a key concern for the larger population, who decides the pace of adoption, besides regulations.

Third, focus on the best available alternatives, the ones only the most visionaries are already focusing on today. Alternative battery technologies, longer range EV, Hydrogen fuel-cell, Solar cars, ultra-high efficiency combustion engine, new public transit, shared ride services, carbon sequestration offset, or anything not discovered yet. Our ability to focus on the best alternative technologies relies on our capacity to remove our blinders, to question the conventional wisdom and to not necessarily invest all our R&D resources where everybody else does. This is where scenario thinking comes into play.

Assumptions can evolve over time, giving a head start to anyone who was able to anticipate them. We were certain that coal as a source of energy had a limited future, and yet…we are not so sure now as abundant “clean coal” might be necessary to pair with intermittent renewable sources of energy to power the needs of a growing world population and to counter energy supply shortages.

Image credit: iStock by Getty Images

In Conclusion, bet on multiple futures…

There will be considerable push to grow the EV market and shift from ICE (Internal Combustion Engines). More than one scenario will emerge in our move to a lower CO2 world, whether it’s a new battery technology, alternate materials, new collaborations, or alternate fuel sources. New policies may change the focus to address other greenhouse sources instead of individual cars, once this industry has been widely considered to have reached its optimal efficiency. Is your company tracking all the macro and market indicators to assess these multiple futures and plan for various scenarios?

Vertaeon can help you take the blinders off, give you a holistic view on all the indicators, short and long term, which are or will inevitably impact your industry. Our customizable risk and market intelligence SaaS platform will help you in your strategic decision process. It will also help you anticipate market changes, from company movements to impactful weather events to financial stress on tier 1-tier n suppliers. All of these will be vital in preparing and anticipating instead of reacting to adverse events.

Rekha Menon-Varma is Managing Partner at Vertaeon LLC, a risk and strategy analytics firm. She brings extensive expertise in corporate strategy, enterprise risk and digital transformation to the firm. David Chouvelon is business development consultant at Vertaeon LLC, with expertise in market and business management. Both have 20+ years of experience each in automotive and industrial value chains.

The content in this white paper is intended for informational purposes only. Vertaeon provides no endorsement and makes no representations as to accuracy, completeness, or validity of any information or content on, distributed through or downloaded, or accessed for this article. All rights and credit go to original content owners from various sources. No copyright infringement is intended. Vertaeon will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis without any obligation to make improvements or to correct errors or omissions. Vertaeon makes no guarantees or promises regarding the sources and does not necessarily endorse or approve of their content. You may contact Vertaeon at with any questions.

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Thu. July 18th, 2024

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