Pause, recharge, drive on

The endeavour was worth £2 billion ($3.45 billion) and, according to Dyson, the brain behind a series of engineering marvels such as bladeless fans and bagless vacuum cleaners, his ambition was to resolve air pollution woes.

In May this year, Dyson disclosed some details on patents for the electric car and said the vehicle would be more energy-efficient than its rivals.

But, in an abrupt announcement on Oct 10, he pulled the plug on the project. “Though we have tried very hard throughout the development process, we simply can no longer see a way to make it commercially viable,” Dyson wrote in an email to his employees.

Apart from intensive research, the company had received numerous grants in support of the project. UK taxpayers had reportedly given £5 million, while the UK government had drawn down about a third of a £16 million grant to support the project.

Dyson’s U-turn, according to experts, could well be a sign of the dampening EV market. Nitin Pangarkar, associate professor at NUS Business School, notes that the car industry is becoming less attractive, owing to better public transport networks as a result of urbanisation, as well as changes in consumer behaviour — owing to concerns about climate change — and greater openness to ride-sharing.

“Dyson’s project faced stiff odds for success, even if we leave the industry challenges aside. Dyson’s resources — financial and managerial — are probably better spent elsewhere, in products similar to its current businesses,” says Pangarkar.

Slowing, not stagnant

Based on data collated by EV sales database consultancy EV-volumes, global plug-in vehicle deliveries for 1H2019 were up 46% from the preceding year at 1.13 million. However, a perusal of the study shows that, for July, the sector saw significantly slower y-o-y growth of 4%. “We expect a decline for August as well, followed by a gradual recovery to growth rates of 30% for the remainder of the year,” says co-founder Roland Irle in the report.

Online statistics portal Statista says the share of plug-in EVs in all passenger car registrations was in the low single digits in each of the world’s five largest passenger car markets in 2018: China, the US, Norway, Germany and the UK.

According to business consulting firm Frost & Sullivan, the EV market is on track to breaking new records this year, with over 2.8 million vehicles slated to be sold. “An overarching theme in 2019 will be the transition of the EV market from one propelled by incentives to one driven by regulations or mandates,” the company said in May in a report on the outlook for the global EV market in 2019.

And while Dyson has slammed the brakes on its EV venture, numerous established marques have stepped up to make commitments to the electrification of their vehicles. But will the projects succeed or are they likely to stall?

Tesla, the most high-profile name in EV, reported on Oct 2 that it had produced a record 96,155 vehicles in 3Q2019, a 10% increase from the year-earlier period. In addition, the company noted that it was entering the fourth quarter with an increase in its order backlog. But despite hitting record numbers and showing the ability to push production higher, the figures still fell short of analysts’ targets of 99,000. In addition, Tesla will still need to deliver 105,000 vehicles during the final three months of the year to hit the low end of founder Elon Musk’s sales target of 360,000 to 400,000 cars for 2019.

German automobile manufacturer Audi’s contribution to the EV scene, the Audi e-tron, has seen declining sales in the US. September sales came in at 434 cars, down from 593 in August, 678 in July and 826 in May. But the company has stood by its plans to offer 12 all-electric models by 2025.

Despite the slowing demand, car manufacturers show no signs of slowing down. Volvo, owned by Geely Automobile Holdings, said it would launch five fully electric cars between 2019 and 2021, aiming to release only purely electric offerings from 2021. As at October, there have been talks and sketches of the new fully electric XC40 SUV, which is slated to be unveiled later this month.

“We are investing more than €10 billion ($15.15 billion) in the development of our EV portfolio alone,” says Ola Källenius, who has been responsible for Daimler Group research and Mercedes-Benz car development since the start of the year.

“By 2022, we will be bringing more than 10 different all-EVs to market. We will also be electrifying the entire Mercedes-Benz portfolio and our customers will thus have the choice of at least one electric alternative in every Mercedes-Benz model series, taking the total to 50 overall.”

BMW, meanwhile, announced on Aug 1 that it was bringing forward the launch schedule of its coming portfolio of EVs. The original schedule was 25 EV models by 2025, but the luxury German carmaker wants to introduce this number by 2023 instead.

According to Alex Capri, visiting fellow at the NUS Business School, the EV trend is here to stay. “The EV market is definitely not an economic bubble. On a global level, we are likely to see rising demand in the long term for both electric and autonomous vehicles,” Capri tells The Edge Singapore.

Regulations to help offset high costs

Capri notes that the biggest hurdle to the EV sales’ gaining momentum in the market is the cost, which experts attribute mainly to the battery.

“While the manufacture of EVs requires fewer mechanical parts, it does require a large number of new electric and electronic components, and a battery — the most expensive part of the vehicle,” a Deloitte report reads. “So far, policy and regulation has created an environment that has allowed the EV market to grow.” The report estimates that the EV market is likely to reach a tipping point in 2022.

Capri agrees, saying companies are likely to wait for costs to dip and economies of scale to kick in before venturing into the market. But he notes that regulations and mandates from governments are likely to steer companies in the right direction, even if there is a fairly high cost involved. “Car manufacturers are likely to change if there is a good market or government policies. Even if the cost restricts companies, policy mandates will incentivise the need for change,” he says.

“Singapore will continue to lead the region in the EV trend on the back of factors such as human capital, infrastructure and tech know-how. I would continue to be optimistic because there is a lot of potential here.”

According to the International Energy Agency (IEA), 2018 was a year marked by continual policy and technology announcements as several key regions began ramping up policy efforts to electrify various transport modes.

The European Union approved a new fuel economy standard for cars and vans for 2021 to 2030 and a CO2 emissions standard for heavy-duty vehicles with specific requirements or bonuses for EVs. Policy action was also noted to be spreading to smaller markets, including countries such as Canada, Costa Rica, Chile and New Zealand.

A highly volatile market

While EVs are able to avoid volatile fuel prices at the petrol pumps, they are especially susceptible to market volatility. Experts opine that this volatility is a result of high levels of government intervention.

“The EV business is still a good one, but because there were artificial cycles created by government subsidies and incentives, there is going to be volatility — when the government pumps out subsidies and incentives, sales rocket up, and when those subsidies run out, sales go down. We are seeing the same thing in the US with EVs too,” says Andy Rothman, a strategist at asset management firm Matthews Asia. 
This is especially evident in China, the world’s largest car market, where new energy vehicle sales fell for the third consecutive month. Sales of NEVs — which include hybrid and fully electric cars — sank 34.2% in September from a year ago, according to the China Association of Automobile Manufacturers.

Although China has become the largest electric car market in the world on the back of generous government support through subsidies, this is likely to change as Beijing begins winding down support for the EV market.

In March, China announced that it would be scaling back subsidies on EVs to encourage local manufacturers to focus on innovation and better product quality rather than government assistance as the industry matures and costs dip. According to a statement by the Ministry of Finance, the subsidy for pure battery electric cars with driving ranges of 400km and above will be slashed by half to RMB25,000 ($4,834). To qualify for any subsidy, electric cars now need to have a range of at least 250km, a significant increase from 150km previously.

In addition, there will now be a higher barrier to entry for aspiring EV manufacturers, as the Ministry of Industry and Information Technology has issued a draft rule on applications to set up car manufacturing companies, including the requirement of at least RMB6 billion in capital.

“The country’s green aspirations now mean tough minimum requirements for manufacturers to produce more NEVs, including plug-in hybrids, pure-battery electrics and fuel-cell autos,” says Zehrid Osmani, co-manager of Martin Currie Global Portfolio Trust.

Yale Zhang of Shanghai consultancy Automotive Foresight says by cutting subsidies, the government is pushing automakers hard to offer better-quality electric cars at low prices. “The carrots are gone,” he says. “It’s time for carmakers to show they have the technical capabilities and can price their NEVs properly.”

China has the lion’s share of the EV market, or about 50%, so any slump in production or demand is bound to have a ripple effect on the global industry as a whole.

Survival of the fittest

Undeniably, electric mobility has been growing rapidly. IEA notes in its global EV outlook for 2019 that the global electric car fleet exceeded 5.1 million, up two million from the previous year. It expects global EV sales to hit 23 million. And, according to Capri, some winners will emerge in the EV scene, while others are likely to drop out along the way. “It all boils down to who can last the longest in a highly competitive and fast-paced race,” says Capri. “Some things that companies need to pay attention to are specialising in particular technologies, expanding horizontally and engaging in rigorous R&D efforts.”

Recently, Tesla has been at risk of losing its top spot to other established competitors such as Volkswagen. In May, the German carmaker announced that it was building two plants in China to produce a total of 600,000 vehicles on its dedicated battery-car platform, MEB. There were also talks of building 16 EV plants by 2025 across Europe, China and the US, nine of which were expected to be in operation by 2020.

“Based on current forecasts, the number of EV manufacturers appears to be unsustainable,” says Deloitte in its report. “Indeed, it is not inconceivable that some incumbent original equipment manufacturers [OEMs] will be out of business by 2030 or shortly thereafter.”

Deloitte adds that these EV manufacturers will need to invest in and advance their businesses by implementing new business models and partnering with or acquiring companies that offer the right capabilities.

Start-ups and new entrants are likely to emerge — Deloitte is quick to caution that specific areas of strength such as capital flexibility and experience will be required to compete with existing OEMs and other new entrants.

Singapore a perfect test bed for EV technology

Although Dyson’s decision to pull out of the EV sector in Singapore is a setback, experts emphasise that this does not point to a catastrophic end for the market. “Singapore just needs to wait for other companies like Dyson to enter the market,” says Capri.

A recent analysis by Reuters notes that EV-related investments currently total some US$90 billion ($123.5 billion). Evidently, several global carmakers are continuing to place their hopes in the market.

“Simply put, the EV market is at a ‘no turning back’ inflection point — manufacturers have already committed dollars to battery and component-making plants, as well as R&D facilities; so I believe we will see these cars hit our roads,” says Manfred Schmoelz, president, Asia-Pacific at Assurant.

But there are still some hurdles for Singapore to cross if it is to successfully make the shift towards electrification. First, Schmoelz notes that local consumers remain fairly hesitant about the switch to EVs, owing primarily to the high costs involved, which results in a negative response, especially at the initial stage of purchase.

In Singapore, EVs go for a considerably high price compared with a fuel alternative. Currently, the cheapest electric car, the Renault Zoe, costs about $126,999. At the other end of the EV spectrum, the Jaguar I-Pace would set a buyer back by $354,999.

Second, while Singapore boasts a vast network of roads and top-notch infrastructure, it just does not have enough charging stations, and this is quickly proving to be a problem. “Despite great infrastructure, Singapore doesn’t yet boast enough charging stations — and given that most people live in HDBs, condominiums and apartment complexes, would-be EV users aren’t able to install their own spot at home. So, while you’re unlikely to cover that much mileage in one day, it’s certainly not a convenient transport option at the moment,” says Schmoelz.

However, research from Bloomberg suggests that by 2030, consumers will be able to buy EVs for 30% less than conventional cars, and this does not take into account the potential rebates from the government.

Kelvin Lim, CEO of battery maker Durapower Technology Group, says existing government regulations and incentives are not strong enough to spur the adoption of EVs in Singapore. “At the moment, the only advantage that [somewhat] applies to EVs is the carbon emissions-based vehicle scheme (CEVS), which should be good for EVs since they supposedly have zero CO2 emission at the tailpipe. But at the same time, the Land Transport Authority applies a CO2 emission factor to the electricity that is generated from the power source that is used to charge the EVs,” says Lim.

“Unless the government implements stronger regulations to prohibit or limit the use of conventional fuel vehicles — like in Europe and other countries — the business case for the adoption of EVs by public transport and transport fleets is better than that for the adoption of EVs by private passenger car owners.”

Schmoelz says Singapore remains the perfect test bed for EV technologies. “It’s more a question of time — not if, but when,” he points out. — With additional reporting by Pauline Wong