Electric vehicles: drivers of mass-market adoption

Infrastructure is still a crucial stumbling block 

Infrastructure, in particular access to charging points, stands out as a critical barrier to EV adoption. 

At the BNP Paribas panel at Salon Autonomy, “Electromobility: Challenges, Solutions and Perspectives”, Joachim Reinboth, Co-Head of Automotive and Mobility Services at BNP Paribas CIB, set the scene: “The EV ecosystem is still very complex for consumers, who lack both knowledge and access to solutions that fit with their daily lives.”  

Nastia Koro, Urban Mobility Expert and Founder of On Her Way agreed: “To see real change in customer mentality, buying an electric vehicle needs to be convenient. Consumers need to know they can get from A to B without issues. Charging infrastructure is still a major stumbling block.” 

Current issues cited include the number of charging stations, leading to drivers’ ‘range anxiety’, or the fear of not having sufficient battery to reach a destination; the location and distance between charging points; the quality of chargers; and the length of charging time.  

According to research from BNP Paribas Exane, increased charging network density is key. With a broader network, original equipment manufacturers (OEMs) can sell more affordable BEVs with shorter ranges, and smaller, cheaper and faster-charging batteries, rather than resorting to larger, more costly batteries.  

Finance has key role to play 

To accelerate the adoption of EVs, banks and financial institutions are key.  

Reinboth explains: “Addressing some of these key pain points will require collaboration across the industry, from OEMs and suppliers to public authorities, investors, and  banks as intermediaries to bridge financing needs. At BNP Paribas CIB, we are engaging with institutional investors around the future for EVs, connecting them with those in need of capital to accelerate the transformation of the industry.” 

Philippe Jouglard, Head of Strategic Analysis & Projects, BNP Paribas Leasing Solutions, agreed: “We are slowly but surely seeing more and more charging projects, and it is clear that financing is and will be a key accelerating driver.” 

Policy will be a critical accelerator  

Experts at the two events pointed to policy as a crucial accelerator for the EV market.  

In 2022, the US implemented the Inflation Reduction Act (IRA), comprising US$370 billion in subsidies and tax credits. One of its key goals is to increase EV sales to 50% of total automotive sales in the USA by 2030, combining consumer policies such as tax credits, with manufacturing policies and supply chain incentives.  

According to the International Council for Clean Transportation, for light-duty vehicles, the IRA’s incentives could help reduce purchase costs by between US$3,400 and US$9,050 over the 2023-2032 period. However, rules stipulating that EVs must be ‘Made in the USA’ to receive tax subsidies have drawn criticism from Europe, with concerns that it could affect OEMs.  

The EU’s response to the Inflation Reduction Act has seen it focus on central policies to incentivise investment in the battery value chain and associated infrastructure. Additionally, on 28 March 2023, the European Council voted to approve new standards as part of its “Fit for 55” package, limiting the widespread sale of ICE cars and vans in the bloc by 2035.  

Reinboth added: “We need automotive players to think differently, and form constructive partnerships – but policy levels must be right. We also need to show that there is a market to be financed, and then regulation and policy drivers will come around it.” 

Challenges across the value chain 

The road to mass adoption of electric vehicles continues to pose challenges for OEMs.  

According to research from BNP Paribas Exane, the BEV price war already underway in China is set to go global, as increased subsidies, manufacturing scale and the easing price of battery metals drive down costs. 

Stuart Pearson, Head of Thematic and Global Automotive Research at BNP Paribas Exane explains : “As competition spreads, capacity rises and costs fall, we see a deflationary era ahead for automotive pricing, at least in real terms, as the BEV  war  shifts  to  the  mass  market and  spills  over  into  ICE. The impact on OEMs is likely to be more chronic than acute; rather than a trough for margins in 2023, we instead expect a gradual margin fade over 2024 to 2026.”   

According to Reinboth: “It is not enough to just put an electric engine in a traditional vehicle: the entire value chain must adapt to successfully stage the clean energy transition. Carmakers across the board are having to harness new technology and implement new commercial strategies in order to maintain a competitive advantage. ”  

Technological shifts underway 

Both events had insights focused on the new technologies driving the market. Many experts agreed that price remains a barrier for consumers. While government subsidies can support consumers to an extent, continued technological enhancements such as improving performance and lowering the cost of batteries, can help make EVs more affordable and efficient for consumers.