Arrival, the New Electrical Vehicle unicorn in making in the United Kingdom

British Electrical vehicle manufacturer Arrival has announced that it has won a contract from United States based courier Major UPS (United Parcel services) a contract to supply 10,000 electric vehicles worth £339 million. Arrival would be making purpose-built vehicles for UPS which will be used in in the operations of UPS in United Kingdom, Continental Europe as well as United States of America. UPS, while keeping the option under the contract to purchase another 10,000 of these vehicles than what is now being contacted for, would also be taking up an undisclosed equity stake in the company if things go smoothly. Arrival enjoys a unicorn status in United Kingdom, having a valuation on nearly £3 billion after Hyundai and Kia Motors of South Korea invested nearly €100 million in the company.

Arrival founded in 2015 by entrepreneur Denis Sverdlovsk has been on a rapid growth trajectory since. The company builds its vans using a modular design, in a micro factory using robots, saving massive costs on labour facility and logistical costs. The growth of this company in the United Kingdom, when other established companies are struggling to clear their existing stock levels, demonstrates the way electric vehicle technology is being received by the markets. Underpinning on the value of the order, the company now plans to open micro factories closer to its end markets in New York and Los Angeles. The first vans of the company however, rolled out from its factory in Banbury, Oxfordshire in the United Kingdom.

The company is one of the many who are riding on the success of Lithium ion battery technology which has taken the automobile sector by storm in recent years. Lithium, which is one of the lightest known metals and also one of the least-dense solid elements known with a great electro-chemical potent ironically has a very low melting point. This property makes it one of the most preferred materials for the manufacture of rechargeable batteries. Capitalizing on this unique electro-chemical property of the element, approximately half the world’s produce of this element has now been shifted into the production of lithium-ion batteries. Lithium-ion batteries are now the most important electronic components of almost all present era electronic devices. Be it cell phones, laptop computers or electric vehicles, these batteries can be found everywhere. In Fact, it was the weight to energy density characteristic of lithium-ion batteries which was responsible for the cellular phone revolution in the world followed by the smartphone and tablet industry take-off towards the late 2000s. Today it is  providing the foundation for new technological developments taking place in energy storage devices, consumer electronics, and is also fuelling the shifting global emphasis towards electrically powered vehicles (EVs).

Part of the reason for Arrival’s success is the conductive environment created by the British government for the development of Electric Vehicle technology in the country. The government has been promoting this technology to reduce greenhouse gas emissions from the its largest emitting source in the United Kingdom- internal combustion engine vehicles accounting for 28 per cent of all UK greenhouse gas emissions in 2017. Recognising these challenges, the Government has set an ambitions target of ensuring that almost every car and van in the country is a zero emission vehicle by 2050, and to make the United Kingdom a world leader in Electric Vehicle and battery technologies. In 2017 the United Kingdom ranked fourth worldwide by market share in the worldwide sale of electric vehicles, representing 1.7 per cent of all new Electric Vehicle car and van sales in the world. Recently, projections made by National Grid company has estimated that the stock of Electric Vehicles in the United Kingdom could reach between 2.7 and 10.6 million by 2030 and could even rise to as high as 36 million by 2040. The opportunity thus, for manufacturers of Electric vehicles, in the United Kingdom is tremendous.

In terms of electric vehicles sold United Kingdom ranked seventh in the world with the country seeing sales of 47,250 electric vehicles in the year 2017. The first three positions are however held by China, the United States of America and France which saw sales of 579,000, 198,350 and 118,770 vehicles in their respective countries in 2017. The International Energy Agency however estimates that the number of electric passenger cars and light commercial vehicles in the world could reach 125 million by 2030 if governments increase their ambitions, in line with international climate change goals.

The Arrival-UPS deal however could be the tip of the iceberg, as it is highly likely that we could see more such transactions taking place in the near future. There are several corporate and non-governmental organisations who have been showing considerable interest in the technology. Only recently a lot of companies have shown interest and have been investing heavily in electric vehicle charging stations and related infrastructure keeping an eye on the rapidly expanding Electric vehicle industry in the United Kingdom. The existing internal combustion vehicle manufacturers in the country having sensed the changing winds have also started to invest heavily in the development of electric vehicles, with many already offering vehicles in multiple categories. This transition also brings to the fore the importance of batteries and the expansion of this industry in the United Kingdom.

Electrical Vehicle technology could play a pivotal role in meeting the country’s climate change mitigation goals. Under the Climate Change Act of 2008, United Kingdom aims to cut greenhouse emissions by at least eighty per cent compared to the levels of 1990 by the year 2050. The transportation sector of United Kingdom is the largest emitting of greenhouse gases in the country, accounting for 28 per cent of all United Kingdom greenhouse gas emissions in 2017. Recent research also indicates that Electrical Vehicles have the potential to reduce greenhouse gas emissions by as much as 50 per cent compared to equivalent conventional petrol and diesel vehicles over the lifetime of their usage.  In the United Kingdom poor air quality is the greatest environmental risk to public health and is responsible for many premature deaths and the second major cause of avoidable mortality. These pollution hazards cost the United Kingdom economy on an average £20 billion per Year.

Considering the above, United Kingdom has introduced several policy measures at promoting the development of the Electric Vehicles market. Major barriers of entry to the industry include high costs of Electric Vehicles and batteries, the limited choice of Electric Vehicle models, small number of existing charging points and technical challenge of managing increased electricity demand for Electric Vehicles.