The B2B platform for full-electric and plug-in hybrid electric vehicles: Industry News

While the new McKinsey report suggests a “well to wheel” approach to better assess the environmental impact of EVs, its also explains how the electrification of cars will transform two existing industry and sketch a whole new industry: the battery industry.

The findings of this report add the needed whole vehicle production approach to EV discussions and explains how both the car makers and the utilities will have to adapt, prepare and respond to make the most of the foreseen changes in mobility.

From well to wheel or how green is my car really?

The report suggests that greater emphasis must be put on a whole-life-cycle analysis of the vehicle and the generation of its “fuel” to better assess the environmental impacts of traditional internal combustion engine cars and EVs. For electrified vehicles, this will include emissions produced when generating the electricity that powers the batteries.

Indeed, general perception is that internal combustion-engine vehicles emit greenhouse gases, such as carbon dioxide, as well as particulate dust and noise. On the other hand, EVs are quiet, emit no GHG if you focus on tailpipe emissions alone.

But, electricity is usually generated from a mix of primary fuels, so measuring charging emissions accurately means looking at the fuel used to generate additional electricity at night when most vehicle charging will happen.

According to the study, in countries such as China, Germany, and the United States, coal will be the fuel that generates electricity at night. In some regions, such as Denmark and Northern California, electric vehicles might use wind power that is not currently used when wind blows strongly during low-demand hours.

As such, the report prescribes a much thought-through smart approach to charging and electricity generation with greater use of renewables in the mix. “Getting a carbon-abatement advantage by switching from internal-combustion engines to electrified vehicles will require a thoughtful, nuanced, and integrated approach,” states the study.

Three industries adapting to challenges

The report states the obvious threat posed by the electrification of vehicles for the traditional automakers. As their main focus has been the internal combustion engine, they will have to adapt their business model so as to survive. Nonetheless, incumbency is also seen here as a strategic strength as new comers will have to face, amongst others: entry barriers, manufacturing scales, channel relationship and capital.

The report suggests that in a world where consumers buy 6 to 8 million EVs a year, annual sales of battery might equal some $60 billion. Battery manufacturers will nonetheless have to adapt their business model when battery cells become a basic commodity. According to the report, value will shift from the cell-level chemistry to the level of battery-pack systems and to the electronics that optimise a battery’s performance. To retain value in the long run, battery manufacturers may hence choose to partner with the automakers’ tier-one suppliers—which aggregate components into vehicle systems into vehicles – such as steering systems or dashboards—or with the automakers themselves.

Utilities’ profits will come under pressure when greater demand for energy efficiency finally comes from governmental demand and standards for home-owners, businesses... Nonetheless, if 20% of vehicles sold in the next decades have an electric drive, recharging vehicles could represent some 2% of total electricity demand. If the charging needs were to be met at night or at low-demand time, utilities could satisfy much of it without installing any additional capacity. Carbon-abatement taxes and trade mechanisms could also help utilities. Companies could ask for capture emission credit for the abatement that utilities make possible in the transport industry. Finally, to meet the challenge of “smart-charging”, utilities must plan now for the necessary costs, technologies and infrastructure patterns and business models if they are to make their business profitable.