What challenges await automakers transitioning to electric vehicles?

Highlights

EVs need to be embraced as a mode of transportation if the world wants to cut its emission levels.
Major automakers around the globe have announced their plans to enter into the electric vehicle segment.
The big question is – will the entry into the EV market in the future be as easy as it is right now?

The success story of Tesla, Inc. has marked the start of a new era for the automotive industry. One of the world's most valuable carmakers, Telsa’s rapid rise has opened up new growth opportunities in the electric vehicle space.

Electric Vehicles or EVs have been in existence long before Tesla revolutionised the industry. However, it was limited to research projects or R&D prototypes. Tesla has shown to the world that EVs could run faster.

The Paris Agreement on climate change has compelled several countries to commit to lowering their emission levels and give a push to renewables. The transport sector accounts for a considerable share of overall emission levels. The basic conclusion is that when it comes to air quality and climate change, EVs are clearly preferable to combustion engines.

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Big names jump on EV bandwagon

According to the Resources and Energy Quarterly December 2021 edition, EV sales are estimated to surpass the 5-million mark in 2021. The sales are rising exponentially, making the industry highly lucrative.

The likes of Ford, General Motors, Toyota, Land Rover, Volkswagen, and other major automakers are all eyeing to capitalise on the vast opportunity. Some of them have already launched few versions. Meanwhile, most of them have provided a timeline for going full electric in future.

However, the bigger question is – are they falling behind the times? The market dynamics are changing rapidly, and it seems to be a huge task for a behemoth to enter into a new segment given they need to change the entire mode of operations and get new vendors or develop vendors for a new product.

But it is also possible that if they do not diversify or change as per the market sentiments, they may cease to exist.

What are the challenges automakers facing in this transition?

There are a few challenges that auto manufacturers need to address for a smooth transition to EVs.

Supply of raw materials

The powerhouse of any EV is its lithium-ion battery. As the name suggests, it contains lithium along with nickel, cobalt, and copper. These metals are extracted from various mines spread across the globe.

Mining is a huge source of emissions. Making a car for a greener future without solving the supply chain issues of raw materials will not serve the overall objective.

For instance, most of the cobalt is mined in the Democratic Republic of Congo (DRC). The country is accused of employing child labours and human atrocities in its mines. The industry has to either search for another source of cobalt or it has to find an alternative of cobalt in the battery. Also, cobalt is the costliest component of battery metals.

Infrastructure

The current transport industry has a well-developed network of fuel pump stations and fuel supply routes. For every few miles, there is one such station in urban areas and a few hundred miles in remote areas. Also, automakers provide road assistance in case of a breakdown. All in all, it is a worry-free situation when it comes to vehicles running on fossil fuels.

On the other hand, EVs will require huge infrastructure support of charging systems for the batteries. Also, batteries will take some time to get charged, a bottleneck in their sales. For gasoline, recharging takes only a few minutes.

A few countries have come out with the solution of providing electromagnetic systems beneath the streets, which will charge batteries while it is running above the surface. Currently, all these are in the initial testing phase, and the infrastructure development will take considerable time to develop around the EVs.

Vehicle cost

The cost is a major factor buyers take into consideration while buying a vehicle. EV companies are promoting their vehicles based on a comparative analysis of the cost of services for conventional vehicles. Also, the cost of charging is far lesser than gasoline or diesel prices.

Model 3, the highest selling Tesla model, costs around US$12,000, while general Model hatchbacks cost more than this in the USA. Also, when you look at other markets, including India and China, their local automakers manufacture cars that cost half as much as Model 3.

These companies are also working to develop reliable EVs and are expected to develop one with a cost lower than that of Tesla and other European manufacturers. Apparently, penetrating these markets with high-end cars in future will be not easy.

Bottom line

As of now, EVs are not entirely emission-free. The metals used in batteries and other car components are mined and extracted, which causes severe emissions. Several lithium producers are working on mining designs that can produce green lithium. With more automakers entering into the electric segment, it is likely that investment in this space will ramp up, and the world could have its first zero-emission car in real sense.

Nitish Kumar

Author

Nitish Kumar - Mining Analyst
211 Posts
Nitish Kumar is Research Analyst at Kalkine Media Pty Ltd, with over 5 years of experience in Energy and Commodities domain. He has a key exposure to oil and gas sector with sound knowledge of drilling operations. He holds a M.B.A degree from Univers...
Supriya Kumari

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Supriya Kumari - Research Editor
2 Posts
Supriya is a Research Editor at Kalkine. She comes with a rich experience of 11 years in online journalism. She has worked for leading media brands like Zee News & MSN Australia, specialising in world affairs. She is a Bachelor of Science (Honours) g...

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What challenges await automakers transitioning to electric vehicles?