What is holding back EV adoption?

The decarbonisation of transport is absolutely crucial to achieve global targets on CO2 emissions. Sales of electric vehicles (EVs) are accelerating in Western Europe with 2.2 million vehicles sold in 2021, compared to 1.4 million in 2020. At the end of 2021, there were 5.6 million EVs on the roads in Western Europe. However, it is not all smooth sailing and a number of barriers are potentially limiting further acceleration of EV adoption.

Supply chain vulnerability

To begin with, recent global events such as the shortage of semiconductors, the COVID epidemic and the war in Ukraine have shown how vulnerable supply chains are to disruptions. The vast majority of semiconductor production is outsourced to foundries in Asia, where in Taiwan one single company has close to 60% market share, based on revenue. The lack of companies capable of manufacturing chips, and long lead times to switch between suppliers, result in limited flexibility for automotive manufacturers (OEMs). The impact of this shortage on EVs is greater as they require more semiconductor content than internal combustion-engine vehicles.

There are also worries that OEMs in the EV space could face a critical shortage of batteries, with estimates that the current global cell production represents well under 10% of what will be needed in ten years.

OEMs are trying several strategies to manage this risk, for example by diversifying their supplier base, signing forward contracts (including volume commitments) with battery manufacturers as well as building up their own battery manufacturing capacity. Some are even rumoured to be considering diversifying into mining and refining lithium, a key component for battery production.

COVID took a toll on supply chains in 2020 and 2021. While many markets are moving to a “living with COVID” world, China’s zero-COVID policy is having an impact on supply of materials and components. In other parts of the world, larger outbreaks of the virus could still disrupt supply chains, due to workers falling ill.

Scarcity of parts sourced from Russia and Ukraine are also disrupting manufacturing. Plant shutdowns in Ukraine are having an impact on production in other markets (e.g., the shutdown of a European OEM plant in Ukraine is impacting EV plants in Germany).

Roll out of charging infrastructure continues to frustrate

Secondly, charging infrastructure remains an area of concern. EY has conducted several studies to understand the experience of various types of players in the emobility sector. The main pain point quoted by consumers is reliability of charge points. 70% of respondents cited this as an issue. Many also mention that there are simply not enough public charge points to cover their needs. Range and issues with charging the vehicles at home were both highlighted by around 60% of respondents.

Pain points for charge point operators include permitting and accessing the grid. In terms of permitting, companies responded that the planning application process with local authorities can be both long and complicated and they also said that gaining access to public real estate is also often a complex process. When it comes to getting connected to the grid, many charge point operators find that charge point connections are not always a priority, the process is very complex and there is a lack of technical transparency (for example in relation to network strength in exact locations).

Finally, uncertainty around long-term government policy is seen as a risk to accelerated investment. Many are also saying that the government needs to start focussing on facilitation and enablement in addition to setting targets.

So, whilst sales of EVs continue to accelerate, significant barriers to the continued pace of adoption exist, mainly in the form of macro economic risks, delays in the build out of charging infrastructure and uncertainty around government policy.

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.

Maria Bengtsson is Partner and EV Leader, UK & Ireland, at EY

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