Market Overview

Because of global state of affairs and growing interests in sustainable society, many countries and regions have positioned decoupling of economy and environment as a growth strategy, which indicates discarding of conventional economic development that heavily depends on energy consumption. This change has made breakaway from carbon to draw attention as a new competitive edge.

Decarbonization has not only started affecting from the environmental perspective but also from the economic aspect, because investors have begun judging the corporate values to invest in from sustainability in corporate management taking into account of climate change as well as from a long-term risk management.

Vehicles are often blamed for in decarbonization. According to IEA*, approximately 20% of global CO2 emissions come from transportation equipment, 45% of which is said to be derived from passenger vehicles. Because demand for carbon neutrality to automobiles has been increasing, together with a blow to economy by spread of new coronaviruses and speculations and concerns in each country, the automotive industry has rapidly started moving on to decarbonization.

※1. Source 1: IEA Greenhouse Gas Emissions from Energy, https://www.iea.org/data-and-statistics/data-product/co2-emissions-from-fuel-combustion. All rights reserved,

Source 2 : IEA Transport sector CO2 emissions by mode in the Sustainable Development Scenario, 2000-2030, https://www.iea.org/data-and-statistics/charts/transport-sector-co2-emissions-by-mode-in-the-sustainable-development-scenario-2000-2030. All rights reserved.

Noteworthy Topics

Key for Decarbonization Lies in Digital Transformation

Digital transformation is to redefine the conventional social systems and business models by assuming the use of latest digital technologies including internet, cloud computing, artificial intelligence, and IoT, aiming to generate new values and to improve efficiency. In order to reduce and transact invisible CO2, it is indispensable to build and enhance digital infrastructure.

When considering from the viewpoint of BEVs, BEVs can be social infrastructure with DX concentrated from an energy perspective, because in-vehicle batteries that comprise the core of BEVs can serve as the nodes (terminals) for DR (demand response) and VPP (virtual power plant).

If BEVs (in assumption of using EV batteries) become managed together with photovoltaic generation and housing equipment, etc. by means of digital transformation, BEVs can be said as they are newly equipped with value of a node (i.e. VPP, smart grip) in a digital space, in addition to the value as a hardware (i.e. mobility vehicle) in the actual world. In short, by making a BEV as a moving battery or connecting battery, the energy business, that is massive and heavy, has possibility to be transformed into more flexible business. Oftentimes, BEVs are being focused on their challenges such as traveling distance and charging time when compared to ICE vehicles, making them a matter of concerns for being widely used, but this actually is just a one-sided opinion. While performance of BEV from the mobility aspect is often pointed out to be inferior to ICE vehicles, ICE vehicles are not appropriate in value generation or CO2-based transactions in digital space. Now that shift to BEVs has been obvious due to technological regulations being forced such as by the ZEV (zero-emission vehicle) program in California and NEV (new energy vehicle) regulation in China, BEV has potential in creating tremendous economic effects when considering its role of generating HR employment in production and maintenance support for in-vehicle batteries, battery chargers, etc. in real world, as well as the roles as an energy system in digital world.

Future Outlook

The global vehicle sales in 2021 totaled 76,800 thousand units, of which BEVs accounted for 4,650 thousand units, or 6.1%. While the entire vehicle sales were sluggish due to shortage of semiconductors in the coronavirus crisis, the BEV sales expanded to 2.3 times larger than the previous year, indicating how strong the BEV sales were.

In 2022, automakers are likely to take a strategy to prioritize the production of BEVs, which is expected to continue increasing the BEV sales, in contrast to overall shrinkage in global vehicle sales. However, in the mid-to-long term forecast until 2030 and 2035, according to aggressive forecast, the time to cross so-called chasm (i.e. 16%* or more) in the Diffusion of Innovations Theory would be in 2025 at 16.1%, and the share of BEVs to expand to occupy 24.7% by 2030.

On the other hand, BEVs have an issue of low profitability, which has suffered automakers. As the recent conspicuous shift from profitable mass-produced cars to low-price small cars, low unit price per purchase is lowering the profitability even though the sales volume is increasing. In addition, automakers are likely not to be able to avoid from being exposed of cost pressure in 2022, due to soaring prices of natural resources. How far the influence of soaring battery cost stemming from skyrocketing prices of rare metals, especially cobalt and nickel, has been a significant concern. Also, the issue of cost rise caused by disruption of supply chains from decoupling of the US and China may further become conspicuous.

*2. The Diffusion of Innovations Theory is a marketing theory that new products and services have a chasm between initial and diffusing stages in the process of how they spread, proposed in 1962 by Everett Rogers, a professor of rural sociology in the US. This research has used this concept of chasm into the future forecast.

Research Outline