Electric vehicles face lingering challenges: how are startups helping?
By Katerina Mansour - 08 September 2021
The market for electric vehicles has certainly faced significant growth over the years. Demand, sales and manufacturing have all been increasing. New brands, new models, new solutions – the electric vehicles market is keeping busy. However, it’s no secret that there are several challenges impacting growth in adoption.
In this article, we’ll break down some of the key challenges and opportunities for the electric vehicles market. We’ll also look at what type of solutions startups are offering market players today.
2020 was a good year for electric vehicles overall
Despite a slowdown linked to the Covid-19 pandemic, the global electric vehicles market did well in 2020. According to IEA’s Global EV Outlook report for 2021, there were over 10 million electric cars on the road worldwide in 2020. This represents a 43% increase from 2019. Europe experienced the highest volume of new electric car registrations: 1.4 million new registrations. In France alone, 110,916 new electric passenger cars were registered in 2020. While that might not seem like a huge number, it is vastly higher than previous years: 42,763 in 2019 and 31,055 in 2018. Overall, consumers spent $120 billion on electric car purchases in 2020. This represents a 50% increase in spending, a 41% increase in sales and a 6% rise in average prices compared to 2019.
What are the key market drivers?
There are many factors that help explain why electric vehicles experienced growth despite the pandemic. Growing awareness of EVs as a sustainable mobility solution is certainly key. The two factors we’ll focus on here are lower prices and government regulations.
Lower battery costs lead to lower prices
Thanks to technological advances, EV batteries now have lower costs. Indeed, batteries have been the most expensive part of an electric vehicle, driving the price up and thus hampering adoption rates. According to IEA’s report, in 2010, the price of an EV battery was around $1,100 per kWh. Yet, in 2020, their price fell to around $137 per kWh or even as low as $100 per kWh in China. As this cost continues to decrease, so will the price of EVs. In turn, these vehicles will be able to compete more directly with gas-fueled vehicles.
New laws and regulations increase adoption
Numerous countries have introduced new regulations as part of their efforts to tackle climate change. Indeed, electric vehicles are seen as one of the many critical ways we can reduce our environmental impact.
The European Union’s CO2 emissions standards limit the average CO2 emissions per kilometre driven for new cars. Several European countries have also been increasing subsidy schemes for electric vehicles within their stimulus packages in response to the pandemic.
The United States, one of the biggest markets for electric vehicles, has been using tax exemptions, tax credits and rebates to help drive adoption. On the other hand, China, another huge market for EVs, has exempted these vehicles from purchase taxes. The country has also imposed a mandate on car manufacturers that requires electric vehicles to make up 40% of their sales by 2030.
These are just a few examples of the numerous strategies countries are adopting to promote the use of electric vehicles. Indeed, governments recognize their pivotal role in ensuring more sustainable mobility becomes a reality. According to IEA, governments worldwide spent $14 billion on direct purchase incentives and tax deductions for electric cars in 2020. This represented a 25% increase from 2019.
What challenges have been identified?
While the electric vehicles market has experienced impressive growth, EVs still only account for around 3% of worldwide car sales (2.6% in 2019). As such, there’s still a lot of work to be done. Adoption rates are negatively impacted by many factors. Here we’ll look at three commonly cited hurdles for the EV market.
Lack of charging stations
One of the most commonly listed issues regarding electric vehicles is the lack of charging stations and infrastructure. If we take the United States as an example, estimates show there could be 35 million electric vehicles on the road by 2030. Yet, the country only has 100,000 charging stations. To help this market grow, President Biden wants 500,000 new car chargers to be installed by 2030. Indeed, while many are incentivised to purchase electric vehicles, significant issues will arise if there are not enough charging stations for them.
In the UK, the issue is the same. There are 25,000 charging stations available today. However, the Competition and Markets Authority estimates at least 10 times more will be needed by 2030 to meet demand. The UK also serves as an example of the disparity in available chargers. There are far more charging stations available in urban areas than in rural areas. There are four times as many chargers in London than in Yorkshire and Humber, for example.
Consumers worldwide are vocal about this issue. A US survey showed around half of those who don’t plan on purchasing an EV say inadequate charging infrastructure is holding them back. In Germany, the 2021 Mobility Monitor report showed 66% of consumers cite a perceived lack of charging stations as a deterrence to purchasing an electric vehicle. As such, to help boost adoption rates, public perception must be swayed by a change in charging availability.
Charging time is another factor that hampers adoption of electric vehicles. A gas-fueled vehicle simply requires pulling into a gas station, which there are many of, and taking a few minutes to fill up your tank. The convenience is hard to beat considering the state of EV charging stations and charging times today in most countries.
As humans, we tend to opt for the most convenient and simple option. If electric vehicles are to become the norm, they’ll need to become as convenient and efficient as gas-fueled vehicles. Today, this is far from being the case.
Depending on the vehicle’s battery, charging an EV can take around 30 minutes, even at one of the fastest charging stations available. In most cases, it can take hours. Furthermore, while many brands like Tesla are building fast charging stations to try and fix this issue, this places strain on the grid. If driving an EV becomes the norm and everyone expects fast charging, that strain could become problematic.
High initial cost
There are few consumers that are willing to pay a premium cost for an EV. Indeed, a global survey showed 67% of consumers would buy an EV for the same price as an ICE vehicle. Only 16% said they’d pay a 25% premium. A US-based survey showed only 18% of consumers would be willing to pay more for an EV. Furthermore, the survey showed the maximum amount consumers would be willing to pay for an EV was $25,000. Yet, the national average is $40,000.
While the cost of maintenance for EVs is said to be much lower than for gas-fueled cars, the initial cost is higher. This price disparity will need to be reduced if more consumers are to purchase electric vehicles.
What are startups bringing to the table?
Now that we’ve gone over some of the challenges the EV market faces, let’s look at startups that are offering solutions.
Early Metrics has rated three interesting projects that help tackle issues related to car charging:
Etrel develops interactive smart charging stations. The startup uses technology that respects a balance between vehicle charging and grid demand. Its charging stations use AI to learn from consumers’ charging habits and prevent grid overloads.
Freshmile develops an all-in-one charging solution. Consumers purchase a charging pass in the form of a card or a fob. They download the startup’s app and can find 100,000 charging stations throughout Europe. The startup manages these charging stations, from maintenance to tariffs and customer service. It also deploys new charging stations for clients via its partners.
Clem’ develops a car sharing and car charging app. Consumers can use the app to rent an electric vehicle or charge one easily. The app enables users to find charging stations nearby and reserve them.
The hope here is that deploying more charging stations throughout urban and rural areas and making it easier for users to find stations and charge their vehicles will help solve the issue of access to charging infrastructure.
Startups are also developing new charging technology. For example, Easelink develops matrix charging: automated conductive charging technology. Vehicles equipped with the technology will charge automatically when parked over a matrix charging pad.
Effects on the grid
Ferroamp, one of Early Metrics’ highly-rated startups, tackles the grid issue. The startup’s EnergyHub solution connects solar cells, electric car charging and energy storage with the other electricity consumers in a property. The startup’s phase balancing technology enables more efficient use of a property’s electricity grid connection. Energy can be shared between different properties via a local DC network. Solutions like these help reduce the stress placed on grids due to the added needs of electric vehicle charging.
Evenate develops silicon-dominant Li-ion battery technology. The startup’s batteries aim to help electric vehicles charge faster. Enevate’s high-density battery technology is able to charge a vehicle in five minutes, making EVs as convenient as gas-fueled cars.
Echion Technologies is another startup tackling the charging time issue through battery technology. It has developed niobium-based anode materials that enable cells to safely charge in six minutes.
Lastly, regarding the cost of electric vehicles, the focus seems to be on batteries. Indeed, as previously stated, the cost of an EV’s battery has already lowered considerably. Further reducing its cost is the goal of many companies to help make EVs more affordable. Elon Musk’s efforts in this arena have led him to state new battery technology could lead to a $25,000 Tesla vehicle. If that were to be achieved, EVs would certainly be a far more competitive alternative to gas-fueled vehicles.
As efforts to tackle climate change continue, more regulations regarding electric vehicles are sure to emerge. Furthermore, as awareness continues to grow, so will the demand for sustainable products like EVs. Startups can play a pivotal role in helping both businesses and consumers adopt EVs as a sustainable means of transportation and transform the mobility sector.