Impact of ICT R&D on the deployment of electric vehicles

Digital

Agenda for

Europe

Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle

Summary Report

FINAL REPORT

A study prepared for the European Commission

DG Communications Networks, Content & Technology

This study was carried out for the European Commission by

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SMART 2011-0065

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Summary Report

Report for the European Commission,

Directorate-General for Communications

Networks, Content and Technology (DG

CONNECT)

AEA/R/ED57083 Ref: SMART 2011-0065 Issue Number 2 Date 05/11/2012


Ref: AEA/ED57083/Issue Number 2 iv

Customer: AEA Contact:

European Commission, Directorate-General for Communications Networks, Content and Technology (DG CONNECT)

Matthew Morris

AEA Technology plc

Marble Arch Tower, 55 Bryanston Street, London W1H 7AA

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e: [email protected]

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SMART 2011-0065

Contract start\end dates:

5th October 2011 – 5

th November 2012

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This report is the Copyright of the European Commission and has been prepared by AEA Technology plc under contract to the European Commission dated 6

th October 2011. The contents of

this report may not be reproduced in whole or in part, nor passed to any organisation or person without the specific prior written permission of the European Commission. AEA Technology plc accepts no liability whatsoever to any third party for any loss or damage arising from any interpretation or use of the information contained in this report, or reliance on any views expressed therein.

Authors:

Matthew Morris, Duncan Kay, Dan Newman, Lena Ruthner, Gena Gibson, James Norman, Stephanie Cesbron, Charlotte Brannigan

Approved By:

Nikolas Hill

Date:

05 November 2012

Signed:

AEA reference:

Ref: ED57083- Issue Number 2

Disclaimer:

This study has been produced by outside contractors for the European Commission

Directorate-General for Communications Networks, Content and Technology (DG CONNECT

)and represents the contractors’ views on the matter. These views have not been adopted or

in any way endorsed by the European Commission and should not be relied upon as a

statement of the views of the European Commission. The European Commission does not

guarantee the accuracy of the data included in this study, nor does it accept responsibility for

any use made thereof.


AEA 1

Table of contents

1 Project Overview ........................................................................................................ 4

1.1 Aims and Objectives .......................................................................................... 4

1.2 Methodology ...................................................................................................... 4

1.3 Scope ................................................................................................................. 5

2 Summary ..................................................................................................................... 6

3 Objective A: landscape analysis ............................................................................... 9

3.1 The ICT opportunities in the FEV system ........................................................... 9

3.2 The anticipated value chain in ICT for FEVs ......................................................10

3.3 European value chain competitiveness .............................................................14

3.4 The European market for FEVs .........................................................................17

3.5 The FEV industry in other world regions ............................................................18

4 Objective B: the enabling role of ICT .......................................................................20

4.1 Patenting activity in ICT for FEVs ......................................................................20

4.2 R&D investment in the EU and Other Regions ..................................................23

4.3 Technical capabilities ........................................................................................25

4.4 Cross-industry fertilisation .................................................................................25

4.5 Feasibility of EU manufacture of FEVs and components ...................................27

5 Objective C: hurdles and roadmaps ........................................................................30

5.1 Barriers to electric vehicle deployment ..............................................................30

5.2 Solutions to overcome hurdles ..........................................................................34

5.3 Solutions offered by ICT ....................................................................................35

5.4 Roadmaps for FEV deployment ........................................................................36

6 Objective D: environmental and health impacts .....................................................39

6.1 The vehicle life cycle .........................................................................................39

6.2 Life cycle analysis for present-day vehicles .......................................................42

6.3 Future developments in environmental & health impacts ...................................43

6.4 The role of ICT in the environmental & health impacts of FEVs .........................45

6.5 The role of FEVs in decarbonising the European transport sector .....................46

7 Objective E: analysis of socio-economic impacts ..................................................48

7.1 Qualitative assessment of the socio-economic contribution of FEVs .................48

7.2 Quantitative assessment of the socio-economic contribution of FEVs ...............51

7.3 Socio-economic contribution of potential ICT applications .................................55

8 Objective F: conclusions and recommendations ...................................................56

8.1 Overview of recommendations ..........................................................................56

8.2 Recommended objectives .................................................................................58

Appendices

Appendix 1 Expert interviews


AEA 2

List of figures

Figure 1: Applications of ICT in the FEV ...............................................................................10

Figure 2: Shifts in the automotive value chain bought by FEVs ............................................12

Figure 3: Evolution versus revolution: two contrasting views on the future of electric vehicles

.............................................................................................................................................13

Figure 4: Automotive ICT for FEVs value chain ....................................................................14

Figure 5: Key competitive strengths of the European value chain for ICT in FEVs ................15

Figure 6: SWOT analysis for European value chain competitiveness in ICT for FEVs ..........16

Figure 7: Comparison of annual sales projections for FEVs in Europe .................................17

Figure 8: Sales projections for electric vehicles across world regions (source: IEA) .............18

Figure 9: Strengths and weaknesses of the FEV industry in other world regions ..................19

Figure 10: High-value EV-ICT patent applications by region of origin, 1998-2008 ...........21

Figure 11: SWOT analysis for European companies and their intellectual property

strategies 23

Figure 12: Sales vs. R&D spend for the top OEMs (data extracted from the 2011 EU

Industrial R&D Investment Scoreboard) ...............................................................................24

Figure 13: Seven success factors for European FEV manufacture .................................29

Figure 14: Resource risks associated with FEVs ............................................................33

Figure 15: Five insights into consumer reaction during field trials ...................................34

Figure 16: The role of ICT in overcoming hurdles to electric vehicle deployment ............36

Figure 17: Comparison of FEV deployment targets from different roadmaps ..................37

Figure 18: Different approaches found in FEV roadmaps ................................................38

Figure 19: Overview of a vehicle lifecycle .......................................................................40

Figure 20: Overview of energy chain efficiency in BEVs (top) compared to diesel ICEVs

(bottom). [Source: adapted from Swiss Federal Office of Energy] .......................................41

Figure 21: External cost for whole life cycle, split by stage in 2015 (€ per 1,000v-km) ....42

Figure 22: External cost for whole life cycle, split by emission type in 2015 (€ per 1,000v-

km) 43

Figure 23: Key factors affecting the environmental and health impacts of FEVs .............44

Figure 24: The role of ICT in improving environmental and health benefits of FEVs .......45

Figure 25: Abatement potential of FEVs under three scenarios (compared with business-

as-usual) 47

Figure 26: European flagship policies considered in this study .......................................49

Figure 27: Qualitative assessment of the socio-economic contribution of FEVs through

development of a strong European FEV market ...................................................................50


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Figure 28: Qualitative assessment of the socio-economic contribution of FEVs through

development of a competitive European FEV manufacturing and service industry ...............50

Figure 29: Comparison of projections for growth in FEV registrations showing AEA’s

SULTAN scenarios ...............................................................................................................52

Figure 30: Quantitative metrics for the socio-economic contribution of FEVs in Europe ..53

Figure 31: Areas for recommended objectives and desired impacts ...............................57


AEA 4

1 Project Overview

1.1 Aims and Objectives

The European Commission, Directorate-General for Communications Networks, Content and

Technology (DG CONNECT) has commissioned AEA to undertake a service contract entitled

"Impact of ICT R&D in the Large Scale Deployment of the Electric Vehicle”. This project aims

to collate and analyse the growing body of knowledge in European efforts for the application

of ICT and smart systems in fully electric vehicles (FEVs) to support policymaking in this

area. The project started in November 2011 and is approximately one year in duration.

The objectives of this project are to:

A. Analyse the existing landscape of European R&D, manufacturing and deployment in

the domains of ICT and smart systems and architectures for the fully electric vehicle,

and draw comparisons with other world regions;

B. Assess the future potential for these domains within Europe, and the enabling role of

ICT and smart systems in the deployment of the fully electric vehicle;

C. Identify barriers and hurdles to development and deployment of the fully electric

vehicle in Europe, drawing on experience from trial deployments to date, and

evaluate roadmaps towards overcoming these hurdles;

D. Assess the environmental and health impacts of the deployment of electric vehicles

compared with other types of vehicle, assess weaknesses and threats, and evaluate

the role of ICT and smart systems in bringing about potential environmental and

health benefits;

E. Analyse the potential contribution of the fully electric vehicle towards achieving

European socio-economic goals;

F. Collate the above work in order to provide policy advice on European strategies for

R&D in the area of ICT and smart systems for the fully electric vehicle, in particular

for R&D “lighthouse” projects to accelerate the development and deployment of

electric vehicles in Europe.

The project is divided into six work packages, each of which addresses one of the six

objectives.

1.2 Methodology

The study team have the overall task of collecting and collating information from a wide

range of sources, analysing the information and presenting conclusions and

recommendations to decision makers and stakeholders. This is achieved through the

following processes:

Literature review of recent studies, publications and conference notes published by

academic, commercial and public sector sources in Europe and beyond. All literature

sources are fully referenced in this report.


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Stakeholder consultation by face-to-face and telephone interviews with key experts,

together with presentation of draft results at workshops/conferences. Further

information on the stakeholder consultation undertaken by the study team is provided

as an appendix to this report.

Analysis and presentation of the results in written reports such as this one, and in

presentations to stakeholders.

1.3 Scope

Fully Electric Vehicles (FEVs)

An increasing range of vehicle types utilise electricity for motive power and electrical storage

systems within their powertrain. This study focuses on ‘Fully Electric Vehicles’ (FEVs). The

project’s definition for FEVs as set out in DG CONNECT’s (formerly DG INFSO’s) 2011

report ‘ICT for the Fully Electric Vehicle’, as follows:

‘Fully Electric Vehicles (FEVs) means electrically-propelled vehicles that provide

significant driving range on pure battery-based power. It includes vehicles having an

on-board fuel based electrical generator (Range Extender based on Internal

Combustion Engine or fuel cells)’.

Furthermore, this study is restricted to passenger cars only. The study team have not

considered smaller (e.g. e-bikes, quadricycles) or larger (e.g. vans, trucks) vehicles.

Information and Communication Technology (ICT)

The particular technology focus of the study is on the role of ICT and smart systems in

the fully electric vehicle. We define ‘ICT’ / smart systems as any system or subsystem

utilising electrical or electronic components. This can include sensors and actuators,

electronic controllers, embedded systems, power electronics, and wireless

communications. Our study investigates the enormous scope for such systems in the

fully electric vehicle.

‘Vehicle-side’ technology

One particular feature of the fully electric vehicle is the potential for innovation and new value

chains in related areas such as smart infrastructure/grids, intelligent transport systems, and

interaction with an ever-increasing ‘cloud’. Whilst our study inevitably considers these

possibilities, the detailed technology focus is on systems and innovations within the fully

electric vehicle itself.


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2 Summary

This document summarises the research findings of the six work packages undertaken in this

DG CONNECT-funded project. Each work package also has an individual report that

provides more detail on the research and analysis undertaken. These reports are available

separately.

The project aims to provide substantiated advice on strategy for EU funding under the next

Framework Programme, Horizon 2020. Drawing on the analysis carried out under Objectives

A-E of the project, the study team arrived at twenty recommendations. The following diagram

and tables outline our headline recommendations; more detail is provided in the final section

of this report.

Desired

impacts

Recommended

objectives

ICT

for

FEVs

ICT for

FEVs

Developing

technologies

and services

Supporting

a European

value chain

Stimulating

innovation

in Europe

User

acceptance


AEA 7

Developing technologies and services

ICT in the fully electric vehicle

1 European OEMs to be amongst the leaders in the development of third

generation ‘ground-up’ designed FEVs with a revised ICT architecture

2

Maintain leadership in the research, development and manufacture of

automotive semi-conductors and power electronics for FEVs

3

Build on an existing strong communications infrastructure to become a world

leader in after-sales software and services, extracting the maximum value

from connected vehicle systems for FEVs

4

Establish a European value chain for the research, development and

manufacture of batteries, their management systems and their integration

into FEVs

5 Develop expertise in energy harvesting technologies

6 Become a leader in the application of vehicle health management for FEVs

Related technologies where ICT can play an important role

7

Become the acknowledged world leader in integrating range extender

technologies into fully electric vehicles, with advanced powertrain control

systems

8

Achieve the successful full integration of FEVs with the electricity grid

through the use of bi-directional smart charging

9 Ensure the environmental impacts of the production and disposal elements

of an FEV’s life cycle are minimised

Supporting a European value chain

1 Assist European OEMs to adapt to the electric vehicle value chain, keeping

inter-company collaboration within Europe to supply ICT in FEVs


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2 Encourage and support innovative SMEs in the field of ICT for FEVs

3 Create regional centres of excellence for key FEV technology areas,

combining research, development and commercialisation activities

4

Address skills shortages in electrical, electronic and mechatronic

engineering disciplines

Stimulating innovation in Europe

1 Create a uniform single market for FEVs, components and services across

Europe by adopting common standards and harmonising incentives

2 Support later stages in the innovation cycle

3 Co-ordinate and streamline public R&D funding at a European and Member

State level

4

Investigate the role of patenting in FEV technology, with a view to

incentivising patenting if necessary

User acceptance

1 Ensure a continued strong development of a European FEV market as a

route to securing a European value chain

2

Develop business models and technologies that reduce the upfront cost

and/or total cost of ownership for FEVs

3 Educate the mass vehicle owner market on the realities of FEV ownership


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3 Objective A: landscape analysis

The aim of Objective A: Landscape Analysis is to provide a picture of the current European

situation regarding ICT and smart systems in electric vehicles, in the context of what is

happening globally in this sector.

Three specific aims were identified within this analysis:

To examine the opportunities that exist in ICT for fully electric vehicles (FEVs), and to

review European commercial activities in this area;

To understand Europe’s current capability and global competitiveness in ICT for the

fully electric vehicle;

To identify where the strengths, weaknesses, opportunities and threats lie for Europe

when compared to other world regions.

3.1 The ICT opportunities in the FEV system

Fully electric vehicles (FEVs) offer multiple opportunities for the application of ICT. In the

drive train alone, sophisticated systems will be needed for battery management, control of

electric motors and their associated power electronics, and management of range extenders

and energy harvesting. This can be achieved using a combination of separate control units,

embedded systems or new centralised architectures. A ‘ground-up’ redesign of the electric

vehicle, particularly the ICT component, could improve functionality and efficiency, reduce

cost and lead to entirely new vehicle concepts.

Electronics has been described as the enabler and driver behind 60% of all current

vehicle innovations1 and other sources suggest that for premium vehicles the figure is

80%.2

Electric vehicles are coming to market at the same time as technologies in other sectors,

which also make extensive use of ICT. The near future will be shaped by what has been

named ‘the internet of things’. Smartphones, tablets, laptops, buildings, personal vehicles

and other mobility solutions will all be connected and will be able to share location, status

and activity information to enable smarter and more efficient use of energy.

1 Oliver Wyman, 'A comprehensive study on innovation in the automotive industry', 2007. Available online at:

http://www.oliverwyman.com/pdf_files/CarInnovation2015_engl.pdf 2 Federal Ministry of Economics and Technology, 'The Software Car: ICT as an Engine for the Electromobility of the Future', 2011. Available

online at: http://www.esg.de/fileadmin/downloads/eCar-IKT-2030_Summary_en.pdf

http://www.oliverwyman.com/pdf_files/CarInnovation2015_engl.pdf

http://www.esg.de/fileadmin/downloads/eCar-IKT-2030_Summary_en.pdf


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Figure 1: Applications of ICT in the FEV

Notes: V2G = vehicle to grid; V2V = vehicle to vehicle; V2I = vehicle to infrastructure

Photo courtesy of GM

3.2 The anticipated value chain in ICT for FEVs

The most significant change in the automotive value chain over the last two decades has

been the impact of the introduction of ICT technologies.3 Customer expectations for high

technology, combined with the need to address concerns regarding range and recharging

availability mean FEVs are likely to have the highest ICT content and connectivity of any

vehicles on the market. ICT for FEVs is therefore likely to see strong growth in value in the

future.

ICT could account for up to 40% of value in a FEV

ICT currently accounts for perhaps 15-20% of the total vehicle value in an FEV. However this

figure could be substantially higher if battery costs reduce (ICT in the battery management

system makes up only a small proportion of total battery cost). Existing batteries add around

€6,000 to €16,000 to the cost of a vehicle, but in the longer-term this could decrease to

around €3,000 to €4,000.4 If this were to happen, it is expected that ICT could account for as

much as 30-40% of total vehicle value in the future.5

3 EC JRC, 'Is Europe in the Driver's Seat? The Competitiveness of the European Automotive Embedded Systems Industry', 2010. Available online

at: http://iri.jrc.ec.europa.eu/papers/2010_JRC60284_WP7.pdf 4 ETC, ‘Environmental impacts and impact on the electricity market of a large scale introduction of electric cars in Europe’, 2009. Available online

at: http://www.europarl.europa.eu/document/activities/cont/201106/20110629ATT22885/20110629ATT22885EN.pdf 5 Figures based on stakeholder interviews

Battery management• Thermal management• Electrical management – cell balancing, monitoring, switching • Failure and crisis management• Diagnostics – state of charge, battery ageing• Super/Ultra capacitor control and integration

Range extender integration• Range extender engine control systems• Optimising integration into vehicle powertrain system

Optimising charging• Optimising charging strategy• Ensuring charging safety• Enabling contactless charging• Billing and payment systems

Powertrain efficiency• Improved inverters / converters• System efficiency &integration• Motor control optimisation

Vehicle diagnostics• Condition-based maintenance• Servicing software

Active load management• Coordination and optimisation

Energy harvesting systems• Optimised energy capture from regenerative braking systems • Optimisation and control of energy recovery from suspension, tyres, solar photo-voltaics and waste heat.

Grid integration (V2G)•Bi-directional charging•Grid communication

Drive by wire / safety• Intelligent cruise control• Autonomous braking systems• Collision avoidance systems• Advanced driver assistance• Dynamic light assist• Pedestrian and cyclist protection systems• Fully autonomous operation

Transport system integration (V2V & V2I)•Cooperative driving•Integration into intelligent transport system

Driver interface• Intelligent routing / navigation• Range management information• Pre-booking recharging infrastructure• Infotainment systems / WiFi / 3G• User definable seating / control feel

http://iri.jrc.ec.europa.eu/papers/2010_JRC60284_WP7.pdf

http://www.europarl.europa.eu/document/activities/cont/201106/20110629ATT22885/20110629ATT22885EN.pdf


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Almost all FEVs will be ‘connected’ vehicles’

Plug-in electric vehicles are expected to lead the way in terms of use of telematics in the

automotive sector. Purchasers of FEVs in the next 5-10 years are likely to be more affluent

and technologically aware. 80% of FEVs are expected to offer connected vehicle telematics

with services such as live traffic information, weather, streaming of information from the

internet and cloud computing.6 Whilst connectivity of all vehicle types is expected to increase,

some connectivity opportunities are unique to FEVs – for example, communications for range

management and the location, reservation and use of charging infrastructure, and managing

the vehicle’s relationship with the electricity grid.

FEVs change the automotive value chain: from mechanics to electronics

FEVs introduce substantial changes in the value chain. The added value associated with the

conventional internal combustion engine and transmission – a key area of strength for

Europe’s OEMs – is significantly reduced or removed. At the same time, FEVs introduce a

new high-value electric powertrain that utilises many technologies outside OEMs’ traditional

core competences.

In an FEV, the battery is key for customer satisfaction

At present, the biggest single cost of a battery electric vehicle (BEV) is the battery itself.

Customer satisfaction will be strongly influenced by the performance of the battery. It is

fundamental to vehicle performance, range, reliability, degradation over time and resale

value. This is unlike the situation with conventional vehicles, in which petrol and diesel fuels

conform to universal quality standards, and owners can expect vehicle performance to be

largely independent of the fuel they use and its storage system (the fuel tank). As a result,

electric vehicle batteries could represent a severe reputational risk for OEMs.

OEMs must decide which key FEV components to bring in-house

The powertrain of a vehicle has traditionally been a key brand differentiator and source of

value for OEMs. Some have argued that for FEVs, this value may shift to battery

manufacturers and other suppliers of electric powertrain components, with global mega-

suppliers selling standardised products to multiple OEMs.7 It is important that OEMs build up

a detailed understanding of electric powertrains in order to ascertain which areas they wish

to develop in-house and which they can safely outsource without risk to their brand.

It is not clear which elements of FEVs will be standardised and which will be bespoke

FEVs could present a change in the balance of using large-scale standardised components

and subsystems and engineering bespoke elements using in-house know-how. It is not clear

which elements of FEVs will be used to differentiate the vehicle, or whether suppliers or

OEMs will provide these differentiating features, but the outcome will help to define the new

value chain.

New participants will enter the automotive sector value chain through FEVs

New participants will be attracted into the automotive sector by the growth in FEVs. This may

be particularly true in three areas:

6 Pike Research, ‘Electric Vehicle Telematics’, 2011. Available online at: http://www.pikeresearch.com/research/electric-vehicle-telematics

7 Deloitte, ‘Charging Ahead: Battery electric vehicles and the transformation of an industry’, 2010. Available online at:

http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Deloitte%20Review/Deloitte%20Review%20-

%20Summer%202010/us_DeloitteReview_ChargingAheadBatteryElectricVehicles_0710.pdf

http://www.pikeresearch.com/research/electric-vehicle-telematics

http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Deloitte%20Review/Deloitte%20Review%20-%20Summer%202010/us_DeloitteReview_ChargingAheadBatteryElectricVehicles_0710.pdf

http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Deloitte%20Review/Deloitte%20Review%20-%20Summer%202010/us_DeloitteReview_ChargingAheadBatteryElectricVehicles_0710.pdf


AEA 12

Power electronics equipment and high voltage equipment – companies with

experience in this area will see opportunities given the existing automotive sector’s

inexperience.

Control units and modules – as these become more standardised consumer

electronics companies may be attracted to start supplying the automotive sector.

Low-cost manufacturing countries such as India and China may take an increasing

share of this market.

Vehicle OEMs – designing and developing a BEV requires little of the engineering

know-how necessary for the internal combustion engine powertrain. This reduces the

barriers to entry to this market, although existing OEM know-how in other areas

(design for safety, long-term reliability and understanding the consumer needs)

remains important.

Software and service suppliers – the move towards software- rather than

hardware-based ICT will allow more interaction between different applications within a

vehicle, and combined with enhanced connectivity, facilitate a variety of mobility-

based services. If hardware and software platforms are standardised, new, innovative

players could enter the market.

Figure 2: Shifts in the automotive value chain brought by FEVs

Large

increase

Large

decrease

Energy storage systems – up to 60% of the vehicle value for a BEV

and a key vehicle differentiator (range, charge time etc)

Power electronics and electric motors – with a high ICT content

Connected vehicle hardware and services – possible new after-

market value chains utilising connectivity, with software and services

adding value

Energy harvesting and energy management – enabled by a fully

electric powertrain and high ICT content

Internal combustion engines – still used as range extenders but

increasingly not key brand differentiator. A key strength for European

OEMs

Aftermarket components – FEVs have fewer moving parts and less

mechanical wear. Currently a significant source of income for OEMs

ICEV powertrain – gearbox, transmission etc – does not normally

feature in FEVs

The OEM landscape: Evolution or revolution?

The literature review and stakeholder interviews highlighted differences of opinion regarding

the likely nature of future uptake for FEVs. These can be broadly grouped into two

alternatives scenarios: evolution or disruption. These scenarios are described in Figure 3.


AEA 13

The future is likely to contain elements of both these scenarios, and it will be important for

Europe to ensure that it adopts policies which will allow it to remain competitive regardless of

how the market develops.

Figure 3: Evolution versus revolution: two contrasting views on the future of electric

vehicles

Evolution Revolution

Traditional OEMs continue to dominate,

leveraging their brand power and

gradually moving into the FEV market

OEMs use brand power, experience and

consumer understanding to repel

challenges from new entrants and strong

suppliers to maintain control over the

value chain

OEMs initially produce FEVs that are

adapted from existing vehicles and share

production lines to minimise risk and

maintain flexibility

As demand increases, there is a gradual

transition to fully redesigned FEVs with

their own production lines

Models evolve from hybrids to plug-in

hybrids and finally to battery electric

vehicles, as technology performance and

cost improve

New innovative vehicle concepts using

electric powertrains emerge, first in the

small city car segment

New market entrants are quick to

innovate with new business models and

novel vehicle concepts enabled by

electromobility

Innovation creates entirely new services

and value chains with a rapid pace of

development

Major OEMs struggle to keep up,

hindered by their size and large

investment in ICE technologies

Major OEMs lose significant market share

as the value chain rapidly changes

structure

A graphical presentation of the overall value chain for the ICT in FEVs sector is presented in

Figure 4 below.


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Figure 4: Automotive ICT for FEVs value chain

3.3 European value chain competitiveness

A review of the European value chain in ICT for the fully electric vehicle yielded the following

key findings:

Europe has companies operating in all sections of the FEV value chain, many of

which are market leaders or have unique added value offerings.

There are two broad categories of company in today’s value chain: major automotive

players who are moving into the sector (by technology cross-over, acquisition etc.),

and smaller companies who are currently niche players overall but who have a focus

on ICT for FEVs.

The majority of European companies involved in this sector are large enterprises

(over 1000 employees), but for most of these, FEV/ICT is only a small part of their

overall business.

There are several examples of small or medium-sized European companies that

specialise in FEV and ICT technologies and have world leading solutions.

In terms of company headquarter locations, three European countries dominate:

Germany, the UK and France. However, the majority of companies identified operate

multi-nationally if not globally.

Our research highlighted key competitive strengths that give European companies an

advantage over their international competitors in ICT for electric vehicles. However, the value

chain also has weaknesses and threats to its competitiveness. These are outlined below in

Figure 5 and Figure 6.

Tier 1 suppliers• Provide vehicle sub-

systems

• Integrate functions,

systems and

components

• Work with OEMs to

introduce innovations

• Drive out cost

Tier 2 suppliers• Provide components

for sub-systems

• Cross-fertilise

innovation from other

sectors

• Can sometimes act

as both tier 1 or tier 2

Telecoms suppliersProvide data transmission networks

Location based service suppliersProvide location-specific data to support telematics, V2I,

V2V and ADAS services

Connected vehicle service suppliersSupply services across vehicle lifetime via mobile

networks or cloud computing solutions

Semiconductor suppliersSupply semi-conductors to tier 1, 2 and 3 suppliers

OEMs• Understand

customer needs

• Specify vehicle

characteristics

• Integrate vehicle

systems

• Manage brand image

Tier 3 suppliers

• Provide specialist

components and

knowledge in niche

areas

• Highly innovative

• Smaller, regional

operators

Consumer

• Purchase vehicles &

mobility services

• Feedback

satisfaction to industry

• Ownership

experience shared

with social networks

Software suppliersSupply software products to tier 1 to 3 suppliers, OEMs and connected vehicle service suppliers

Energy suppliersProvide energy services (via charging

providers) and smart charging markets


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Figure 5: Key competitive strengths of the European value chain for ICT in FEVs

Europe

Large OEMs with powerful brands: Volkswagen Group is the

world’s second largest vehicle manufacturer

Very strong presence in the (ICT-rich) premium vehicle

segment: BMW, Mercedes-Benz and Audi are major players

Brands willing to commit to FEVs: Renault-Nissan has

shown the greatest commitment to BEVs of any major OEM

World-class Tier 1 suppliers: Bosch is the world’s largest,

Continental and Magneti Marelli are in the top five

Leading automotive semiconductor suppliers: ST Micro,

Infineon and NXP are three of the largest in the world

Five of the top 10 automotive sensor suppliers are

European

Four of the top 10 mobile phone network operators are

European


AEA 16

Figure 6: SWOT analysis for European value chain competitiveness in ICT for FEVs

Europe

Strengths Weaknesses

• Strong FEV market growth projections due to

long-term policy direction and incentives

• Strongest Tier 1 suppliers of any world region,

with higher electronics capability than OEMs

• World-leading in premium OEMs with a strong hi-

tech product offering and buoyant exports

• World-leading in automotive semiconductors and

automotive sensors

• Electricity Utility companies that understand the

potential of FEVs

• Very strong on combustion engine technology

(for range extenders) – especially diesel

• Flexible value chain with close OEM - Tier 1

relationships

• Widespread ownership of smartphones

• Automotive industry invests more on R&D than

any other world region

• Very strong academic centres leading to high

quality research and strong tech skills base

• World-leading standard in safety, quality and

reliability

• European auto market saturated so net growth

must come from other world regions

• Lagging behind in both the development and

manufacturing of battery technology

• Having to catch up or partner on hybrid

technology, particularly for intellectual property

• Most connected vehicle services are provided by

non-European companies

• OEMs are relatively weak at co-ordinating R&D

activities throughout global centres

• Extreme weakening of the small supplier network

plus the threat of further consolidation

• Weak consumer electronics industry

• Slow decision making processes (including public

strategy, regulation and technical standards)

• Low co-ordination of Member State export policies

• Non-integrated EU market; regional competition

versus complimentary networks

• Complicated and dispersed R&D funding

processes, historically not commercially focussed

Opportunities Threats

• Build on success of AUTOSAR to develop leading

position in automotive software development

• Trade/ IP and skills in ICEVs / form alliances to

rapidly gain battery capabilities

• Potential to demonstrate EVs in combination with

renewable electricity generation and smart grids

• Build on academic battery R&D to establish future

battery industry

• Supply of sensors to foreign OEMs

• Utilise EU telecoms / ICT expertise to focus on

high-value ‘connected vehicle services’ sector

• Encourage greater industry cooperation / reduce

concerns about anti-competition laws

• A healthy mix of existing experienced OEMs and

dynamic new players specialising in FEVs

• Development of new services and business

models to generate growth

• Other regions adapt, develop standards, and

support nascent industry players more quickly

• Asian consumer electronics companies acquire

significant part of EV-ICT value chain

• Locked out of key battery and hybrid technologies

due to Japanese / Korean / US patents

• Continuing reliance on importing batteries and

rare earth elements

• Chinese government encouraging foreign OEMs

to make FEVs in China (in partnership with

Chinese OEMs) leading to gradual offshoring

• Foreign OEMs targeting European market

• Foreign investment funds acquiring European

companies to gain expertise and access to the

market

• European OEMs manufacture in growth markets

and export back to the EU


AEA 17

3.4 The European market for FEVs

In 2010, FEVs plus hybrids accounted for less than one per cent of European

passenger car sales

The current market for FEVs as a percentage of total passenger car sales is very small.

Including hybrid vehicles (which dominate the figures), total 2010 sales in Europe were just

0.7%. The markets with the largest shares are Japan (11%) and USA (2.5%). China’s market

lags considerably at less than 0.1% of 2010 sales.

As with any disruptive technology that has yet to hit the market fully, predictions of future

sales are difficult as they depend on future policy support; infrastructure deployment; speed

of technology innovation and cost reduction; and economic drivers such as oil prices. Despite

these uncertainties, experts generally agree that electric vehicles will represent one of the

key options for individual mobility in the future. Where disagreements arise is in the timing of

this development.

Estimates for European sales of FEVs in 2020 vary between 0.5 and 3 million

Figure 7 compares predictions of annual FEV sales in Europe. By 2020, at the bottom end of

the scale, ACEA’s lower estimate assumes that 500,000 units will be sold. In comparison,

Roland Berger’s ‘The future drives electric’ scenario estimates annual sales could reach 3

million. This scenario foresees higher oil prices, accelerated battery cost reductions, stronger

government support and a broader product range in the next five to ten years, making

electric vehicles a very attractive alternative by 2020.

Figure 7: Comparison of annual sales projections for FEVs in Europe

Europe may account for 25% of global FEV sales in 2020

Europe’s share of the total global car sales market is expected to decline in the future due to

growth in car sales in developing regions. Its position for FEVs may be different, as electric

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Strategy Analytics (optimisticscenario)

*Potential EV customers based on car buyers who have access to infrastructure and a compatible mobility profile** "The future drives electric" scenario - higher oil prices, accelerated battery cost reduction, stronger government support and a broader FEV product range in the next five to ten years

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AEA 18

vehicle sales in the short and medium-term are more likely to be concentrated in wealthier

countries. This is in part because of their cost premium compared to internal combustion

engine vehicles, and in part because of demand-side policies driven by regulatory pressure

to address carbon reduction and air quality issues.

Figure 8: Sales projections for electric vehicles across world regions (source: IEA)8

These projections suggest that Europe will experience amongst the strongest growth in sales

for FEVs of any world region to 2020, despite stagnating growth in overall car sales. A strong

domestic market would likely benefit European OEMs and stimulate a European FEV

manufacturing capability. However the strong growth of emerging markets, particularly

China, may counterbalance this.

A conservative estimate of the global market value for ICT in FEVs is around €15

billion by 2020.

Combining the various projections of FEV sales with predictions of the expected value of ICT

content in all types of future vehicles, it is possible to derive an approximate estimate for the

market value of ICT in FEVs of around €15 billion by 2020. However, this could be

conservative. FEVs are likely to be the most connected vehicles on the road and expert

estimates of the total ICT value within a next-generation FEV range from 15% to 40% of the

total vehicle value. At the upper end of this estimate or with higher deployments of FEVs, the

total value of the sector could be several times this.

3.5 The FEV industry in other world regions

Our analysis suggests that four world regions stand to compete most strongly with Europe in

the emerging FEV market. This section gives brief summaries of strengths and weaknesses

of the FEV industry in these regions.

8 IEA, 'Technology Roadmap: Electric and plug-in hybrid electric vehicles', 2011. Available online at:

http://www.iea.org/papers/2011/EV_PHEV_Roadmap.pdf

http://www.iea.org/papers/2011/EV_PHEV_Roadmap.pdf


AEA 19

Figure 9: Strengths and weaknesses of the FEV industry in other world regions

Japan

+ Third largest producer of motor vehicles in the world, one of the most

successful exporters

+ Leads the world in hybrid vehicle systems with dominant IP,

manufacturing and brand position – particularly Toyota

+ Strong internal market for efficient vehicles and new technology

+ World leader in battery technology design and manufacture

- Strength of the yen makes inward investment unattractive

USA

+ Substantial government funding has stimulated FEV industry

+ Strong track record in high tech R&D with silicon valley hub

+ Startup OEMs and component (esp. battery) suppliers targeting FEVs

- Support at the state level is inconsistent

- Consumers still favour larger gasoline vehicles with long range

China

+ The largest global growth market for passenger cars

+ Attractive conditions for manufacturing vehicles and components

+ Strong government intent to support the FEV industry

+ Industrial policy that favours domestic producers

- Low FEV demand today with a cost-constrained consumer base

- Lower vehicle quality standards currently leads to weak exports

S. Korea

+ Strong in Li-ion battery R&D and manufacturing industry

+ Second only to Japan in Li-ion intellectual property

+ Strong government support for industrialisation of FEVs

+ Free trade agreement with the EU since 2011

- Low FEV demand today with a cost-constrained consumer base


AEA 20

4 Objective B: the enabling role of

ICT

The aim of Objective B: The Enabling Role of ICT is to build on the work in Objective A by

examining the future potential for a fully electric vehicle (FEV) industry in Europe, and the

enabling role for ICT. The specific aims were:

To understand how ICT and smart systems might feature in the future FEV industry in

Europe, both in their enabling role in vehicles and as a contribution to Europe’s

industrial economy;

To analyse the R&D spend, and emerging results, in Europe compared with other

world regions;

To investigate Europe’s potential in the future in terms of infrastructure, skills, and the

potential for cross-industrial fertilisation.

4.1 Patenting activity in ICT for FEVs

Patenting activity (both applications and granted patents) in the cross-over area between

electric/hybrid vehicles and ICT (EV-ICT) was analysed. Key conclusions are presented

below.

4.1.1 Patent applications

Patent applications can take anything from three to eight years to reach grant stage. Analysis

of recent applications can be used as a measure of productive research activity. National

patent applications are influenced by many factors, including differences in culture, local

industry, government incentives, economic climate and intellectual property laws. Due to

these issues, our analysis focused primarily on high-value patent applications. These are

defined as applications that are either:

1. Made through the Patent Cooperation Treaty (PCT); or

2. Triad applications (made at the European, US and Japanese patent offices).

Figure 10 below shows the change in volume of high-value patents in EV-ICT by the region

where the patents originated, over the decade to 2008 (the latest year for which data are

available in this detail).


AEA 21

Figure 10: High-value EV-ICT patent applications by region of origin, 1998-2008

Note: The apparent drop in applications from Japan in 2008 is likely an artefact due to translation delays.

Japan accounts for 45% of high-value patent applications in EV-ICT (1998-2008)

A major portion of this activity is from Toyota, which files over a third of Japanese

applications. The other two major Japanese OEMs are some distance behind. Honda files

11% of Japanese applications and Nissan 9%.

The majority of EV-ICT applications from European companies originate in Germany

From 1998 to 2008, around 17% of high-value patent applications originated from Germany,

with Tier 1 suppliers Bosch and ZF Group registering the most applications in EV-ICT.

Despite growth in German applications, the number is on average only half that of Japanese

applications. France takes a distant second place at 5%, led by Renault, Peugeot and Valeo.

The US accounts for around 16% of applications, China for only 2%

Although US activity has shown a gradual increase, the rise has not been as steep as in

other countries. Chinese applications are mostly limited to the domestic market, and

therefore do not feature strongly in the analysis. Overall, applications from China account for

only 2% of the total high-value applications, and mostly originate from R&D facilities owned

by non-Chinese OEMs (Toyota and Mitsubishi are the top two companies). Other regions

including Korea, India and Brazil each account for less than 1% of applications.

Toyota is pursuing an aggressive patenting strategy in EV-ICT

Toyota dominates the number of patents in this area. All other applicants lag behind by a

significant margin. Honda and Bosch, in second place and third place respectively, each

have only one third of the number of applications. Toyota’s patenting strategy could create

barriers to other firms that wish to enter the EV-ICT value chain.

China has joined Europe, the US and Japan as a key market for patent applications

Between 2000 and 2004 the proportion of patent applications seeking protection in China

grew very strongly. Since 2004, China has joined Europe as the third most popular region in

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AEA 22

which to register EV-ICT patents, after the US and Japan. This reflects China’s growing

market importance.

4.1.2 Granted patents

Granted patents will have been originally filed around three to eight years ago, so do not

include the latest innovations. However, they can provide an indication of market advantage.

Triad patents (covering US, Europe and Japan) were analysed as these are typically of

higher value.

Japanese companies hold the largest EV-ICT triad patent portfolios

Toyota has accumulated a significant patent portfolio over the past two decades, which

makes it more difficult for competitors to patent similar technologies. It holds 1,500 high-

value patent family applications in EV-ICT areas. Honda is in second place, with 420 and in

third, the highest-ranking European company was Bosch, with around 380 patents. Japanese

companies hold around three-quarters of total ‘triad’ grants over the past two decades. Even

in patents covering Europe only, Japanese companies are more active than European firms,

accounting for just below 40% of total patent grants.

Germany and France have the most triad patents of European countries

German companies hold 11% of total triad grants and France holds 3%. The European

companies with the biggest portfolios are: Bosch (a supplier); Daimler (an OEM); Renault (an

OEM) and Siemens (a supplier). US companies hold around 8% of triad grants.

Number of patents held does not directly translate into market power

Large patent portfolios can be an indicator of strength in the market, but the advantages of

patenting must be considered in light of the significant costs incurred during patent filing and

prosecution, investments in research and litigation costs against infringers. It appears that

Toyota’s extensive patent portfolio has slowed or excluded other manufacturers from the

hybrid market, enabling Toyota to gain a majority market share of hybrid vehicle sales.9 It has

also enabled Toyota to license and cross-license hybrid technology. Experts we interviewed

acknowledged that Japanese firms have the strongest EV-ICT patent portfolios, but many

thought that the ability to trade IP and the fast pace of technological development would

mean that European firms would not necessarily be disadvantaged as a result.

4.1.3 Position of Europe compared to other world regions

Europe remains behind Japan in terms of patent generation, but there are other

opportunities to ensure access to intellectual property

In the automotive sector, it is very common to cross-license (trade patent rights) and litigation

over patent infringement is relatively rare (compared to, for instance, the recent spate of

high-profile mobile technology patent cases).Given the speed of technological change and

the faster rate at which competitors can bring imitations to market, it may be that firms are

choosing other strategies. Alternatives may include keeping trade secrets or public research

disclosures.

9 Griffith Hack (2009) Who holds the power?


AEA 23

Figure 11: SWOT analysis for European companies and their intellectual property

strategies

4.2 R&D investment in the EU and Other Regions

Europe has the highest automotive industry R&D spend of any world region

The European automobiles and parts sector spent almost €30 billion on R&D in 2011. Japan

is close behind with €23.6 billion and the USA is third with €11.6 billion. Figure 12 shows a

clear correlation between sales and R&D spend, but it is not clear whether there is a causal

link between the two.

OEMs spend more on R&D than suppliers; Toyota spends the most, followed by VW

OEMs spend more on R&D than automotive suppliers. Eight of the top ten automotive

company R&D expenditures globally are OEMs, Bosch and Denso being the only suppliers.

Toyota spends the most on R&D at €6.7 billion in 2011, with the Volkswagen Group close

behind with €6.3 billion. However Toyota’s R&D spend as a percentage of sales revenue is

3.8% - less than VW, which spends 4.9% of its sales revenue on R&D (see Figure 12).

It is not possible to identify private sector R&D spending on ICT for FEVs

Companies do not divulge specific information on R&D strategies or how their R&D budget is

split between different priorities. As a result of the development cost and diversity of new

technologies, OEMs are increasingly forming joint ventures.

TO

WSIP generation

Strengths Weaknesses

• European companies appear to be focussing

on their home markets, where they hold

around a third of grants.

• Germany, in particular, shows strong activity

being the country with the second highest

number of ‘high value’ patent applications in

‘EV-ICT technology’.

• European companies hold a relatively small

patent portfolio compared to Japan, both

domestically and globally.

• Recent research trends indicate that despite

increased effort, European companies

remain well behind Japanese companies in

filing patent applications.

Opportunities Threats

• Forming alliances. The Renault-Nissan

alliance is an example of past success.

• Opportunities to license or buy technology;

the market is highly dispersed, with many

small start-ups who could be open to

collaboration.

• The fast-moving technology areas of ICT

may lend themselves more to strategies

other than patenting, which may undermine

the apparent lead of Japanese companies.

• Expensive new technologies such as these

are normally first introduced in premium

brands where Europe has a strong position.

• Toyota’s extensive patent portfolio could

present a challenge for European

companies. In the past, it has slowed or

excluded other manufacturers from the hybrid

market, helping Toyota to gain a majority

market share of hybrid vehicle sales.

European companies must be mindful of

infringement risks.

• Current and past activity appears to focus

more on hybrid technology as opposed to

fully electric vehicles, which could be

problematic if the market moves towards

electric vehicles


AEA 24

Figure 12: Sales vs. R&D spend for the top OEMs (data extracted from the 2011 EU

Industrial R&D Investment Scoreboard10)

The US provides €1,658 billion public funding for automotive R&D, closely followed by

Europe at €1,611 billion

Public sector automotive R&D funding was investigated by the FP7 project, EAGAR

(European Assessment of Global Publicly Funded Automotive Research). The US spends

the most globally, followed by the Europe. Japan, China, Korea and India are far behind.

Automotive companies are locating new R&D centres in growth regions such as China

and India. Silicon Valley is becoming a focus for telematics R&D

Many automotive companies are opening R&D centres in China and India. This is primarily to

ensure they understand customer requirements in these growing markets, and not to

outsource R&D for European markets. Silicon Valley in the US is a growing location for

telematics R&D due to the existing ICT expertise located there.

Industry experts voiced a number of suggestions for improving R&D investments

The experts we interviewed believed that European R&D is world class, but is under threat

from emerging economies, which are quickly developing their capabilities. They suggested

several options for improving the quality of R&D:

Further use of public-private partnerships (PPPs) to manage public R&D funding;

The creation of regional centres of excellence for key technology areas;

‘Foundation manufacturing’ facilities for use by SMEs to reduce development costs;

Specialist research centres with close academic and industrial ties;

10 EC JRC, The 2011 EU Industrial R&D Investment Scoreboard, 2011, Available online at:

http://iri.jrc.ec.europa.eu/research/scoreboard_2011.htm

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AEA 25

Facilitate funding projects closer to market by facilitating partnerships that represent

likely supply chains rather than pre-competitive research partnerships.

4.3 Technical capabilities

Europe’s automotive industry has some of the best technical skills in the world

European automotive technical and engineering skill levels are comparable with the

developed automotive nations of Japan and Korea. Experts believe that on average, Chinese

engineers do not currently exhibit the same skill levels, but they are improving.

Some key automotive nations in Europe currently have a skills shortage in electrical,

electronic and mechatronic engineering which is expected to increase

The shift to electric vehicles will require a different skill base in the automotive industry: from

mechanical engineering to electrical, electronic and mechatronic engineering. The UK and

Germany currently have a shortage of skills in these areas; this shortage is expected to

increase as the industry develops in this direction. There are expected to be an additional

193,000 engineers employed globally in the electronics element of the automotive industry

by 2030. Some 50,000 of these are likely to be in Europe.11

Europe needs to attract young talent into automotive engineering

Europe is suffering from an ageing engineering workforce. One suggestion to combat this

trend is to adjust immigration policy to remove the barriers to allow skilled foreign engineers

to gain employment. To attract emerging talent, the automotive industry needs to become an

appealing career option for a young, diverse new breed of ‘Generation Y’ engineers.

Along with a skilled workforce, Europe possesses ‘FEV friendly’ infrastructure

Many European countries (particularly in North-western Europe) rank highly in assessments

of their ‘network readiness’.12 An existing network and communications infrastructure is a

prerequisite for ‘V2X’ (vehicle to vehicle, grid, and infrastructure) communications. This

makes it more likely for a V2X market to develop early in Europe, particularly compared with

emerging markets that have less well developed communication infrastructure, standards

and regulations.

4.4 Cross-industry fertilisation

Technological synergies exist between the automotive, aerospace, microelectronics,

microsystems and embedded systems industries. Europe is one of very few regions in the

world to have players in all these industries. Examples of potential cross-industry fertilisation

that could benefit the automotive sector include the following:

A move to a new modular architecture for ICT could improve quality and reduce costs

The aerospace industry has moved away from segregated, function-specific electronic

control units towards a new modular architecture. This move was motivated by the potential

for the use of commercial off-the-shelf components, increased reliability and fault tolerance

and reduced maintenance requirements. A similar move could benefit the automotive sector

in FEVs.

11 McKinsey & Company, 'Boost! Transforming the powertrain value chain - a portfolio challenge', 2011. Available online at:

http://autoassembly.mckinsey.com/html/resources/publication/b_Boost_Transforming_powertrain_2011-02.asp 12

INSEAD, 'The Global Information Technology Report 2010–2011, Transformations 2.0', 2011. Available online at:

http://www3.weforum.org/docs/WEF_GITR_Report_2011.pdf

http://autoassembly.mckinsey.com/html/resources/publication/b_Boost_Transforming_powertrain_2011-02.asp

http://www3.weforum.org/docs/WEF_GITR_Report_2011.pdf


AEA 26

Increased use of virtual testing could reduce vehicle development costs

Virtual testing is an industry norm within aerospace, where full physical testing is often cost

prohibitive. Advanced simulation and modelling technologies are widely used for mechanical

and electronic systems, shortening development cycles and reducing the cost of prototyping.

While virtual testing already occurs in the automotive sector, greater use could boost overall

industry competitiveness and exploit synergies with the EU computing industry.

A systems approach to diagnostics could reduce costs and address battery concerns

The aerospace industry focuses on on-board diagnostics, where an on-board maintenance

system computes information to give relevant warnings. This significantly reduces the need

for additional complex off-board diagnostic systems and services. Automotive diagnostic

troubleshooting focuses on individual components, but a systems approach could give cost

advantages, increase vehicle utility and improve the overall ownership experience. A

prognostic approach could be of particular benefit to FEVs, where the battery’s health and

future value represents a significant risk to the owner.

Further integration of ‘X-by-wire’ systems will enhance active safety capabilities

’X-by-wire’ has reached a significant level of maturity within the aerospace industry, but wide

use of control with no mechanical connection in the automotive sector still faces cost,

regulatory and acceptance barriers. Further development of steer-by-wire offers improved

crash response of vehicles, optimised design of the engine bay and improved ergonomics.

Replacing other mechanical components with electronic counterparts can eliminate high-cost

components, reduce vehicle weight and introduce active safety functionality

Improved microelectronics will increase FEV efficiency and range

The insulated gate bipolar transistor (IGBT) is a critical component for high-voltage, high-

current coupling between the power source and traction motor in an FEV. The frequency at

which IGBTs can perform high-voltage switching and the temperature limits at which they

can operate will be a key determinant of efficiency. Component manufacturers are

developing composite semi-conductor materials that offer increased thermal performance

and a reduction in energy consumption.

Multicore microcontroller units (MCUs) may simplify architectures and improve safety

Automotive microcontroller units (MCUs) for vehicle systems may be integrated into a single

controller. New functions demand greater computing power and OEMs are gradually shifting

to multicore MCUs in their electronic systems architectures. These offer the ability to

consolidate control of multiple systems, and for more segregation between safety critical

functions and general-purpose functions to enhance vehicle safety.13 A similar transition has

already been seen in the telecoms industry.

Improved MEMS technology will improve driver safety and navigation systems

Micro-electro mechanical systems (MEMS) are miniaturised sensing and actuation devices,

including gyroscopes, accelerometers and electronic compasses. The huge appetite for

smart phones and tablet devices is spurring rapid innovation and driving down component

costs, with Europe at the forefront of development. The implications of these developments

for automotive applications include enhanced offerings to predictive and adaptive cruise

control, advanced driver safety systems and navigation. However, new safety standards in

13 Monet, A., Navet, N., Bavoux, B. & Simonot-Lion, F. ‘Multi-source software on multicore automotive ECUs - Combining runnable sequencing

with task scheduling’ 2012. Available online at: http://www.loria.fr/~nnavet/publi/ECU_TIE_2012.pdf

http://www.loria.fr/~nnavet/publi/ECU_TIE_2012.pdf


AEA 27

the automotive industry means that manufacturers of MEMS for consumer electronics may

face regulatory barriers to supplying into safety-critical automotive applications.

Model-based software development can reduce development time and costs

Embedded systems are forecast to grow to 35% of total vehicle value by 2015, with

development costs outstripping all other vehicle R&D areas. Software development time is

growing because of the rising number of functions, whereas development time in all other

vehicle areas is decreasing. Model-based development has the potential to shorten

development times but large investment requirements may pose a barrier to uptake.14

4.5 Feasibility of EU manufacture of FEVs and

components

Electric vehicles will continue to be manufactured within Europe if a market exists

There is a trend for expanding vehicle assembly facilities in growth regions such as China,

but analysis suggests vehicle assembly within Europe is secure and the concern that

manufacture will move exclusively to emerging economies is overstated.15 However, the FEV

value chain shifts the value-add activities upstream, particularly with batteries, and it is not

clear how much of this will occur in Europe. Automotive manufactures increasingly aim to

manufacture vehicles in the target market. Europe’s medium-term FEV market growth is

predicted to be as strong as any world region, despite overall flattening of car sales volumes.

Europe needs to increase battery manufacturing capabilities

Most European OEMs currently import batteries. Domestic manufacturing would have the

advantage of shortening supply chains, reducing risk and the capital tied up in shipping.16 In

the long term, battery and motor production is expected to be highly automated, meaning

highly skilled labour is more important than a low cost workforce. Large investments will be

needed for Europe to become a major manufacturing centre for FEV batteries, but

participation is important to keep the FEV value chain in Europe.

European OEMs are expected to increase in-house motor production

Most European manufacturers currently outsource their electric motors from suppliers but

many are now looking to develop them in-house. Analysis indicates that about 60% of the

OEMs that are outsourcing motors are planning to bring the capability in-house.17 Examples

include a Daimler-Bosch joint venture to manufacture electric motors in Germany, and a joint

venture between BMW and Peugeot-Citroen to produce FEV components in France.18

Europe leads the automotive semiconductor industry but faces growing competition

As the home of three top suppliers, Europe has a strong position in automotive

semiconductors, holding 36% of the market in 2008. This advantage was developed due to

the presence of luxury automotive brands, which lead in introducing new ICT technology.

14 Kirstan, S. & Zimmermann, J. ‘Evaluating costs and benefits of model-based development of embedded software systems in the car industry –

Results of a qualitative Case Study’. 2010. Available online at: http://www.esi.es/modelplex/c2m/docum/Paper_ECMFA_Altran.pdf 15

IBM, 'Automotive 2020: Clarity beyond the Chaos', 2008. Available online at: http://www-935.ibm.com/services/us/gbs/bus/pdf/gbe03079-usen-

auto2020.pdf 16

Roland Berger, 'E-Mobility – a promising field for the future: Opportunities and challenges for the German engineering industries', 2011.

Available online at: http://www.rolandberger.com/media/pdf/Roland_Berger_E_Mobility_E_20110708.pdf 17

Frost and Sullivan. ‘Hybrid and Electric Vehicles to boost market for Electric Motors’ 2011. Available online at:

http://www.frost.com/prod/servlet/market-insight-top.pag?docid=226755664 18

PSA Peugeot Citroen. ‘BMW Group and PSA Peugeot Citroën to Invest 100 Million Euros in Joint Venture on Hybrid Technologies’ 2011.

Available online at: http://www.psa-peugeot-citroen.com/en/psa_espace/press_releases_details_d1.php?id=1226

http://www.esi.es/modelplex/c2m/docum/Paper_ECMFA_Altran.pdf

http://www-935.ibm.com/services/us/gbs/bus/pdf/gbe03079-usen-auto2020.pdf

http://www-935.ibm.com/services/us/gbs/bus/pdf/gbe03079-usen-auto2020.pdf

http://www.rolandberger.com/media/pdf/Roland_Berger_E_Mobility_E_20110708.pdf

http://www.frost.com/prod/servlet/market-insight-top.pag?docid=226755664

http://www.psa-peugeot-citroen.com/en/psa_espace/press_releases_details_d1.php?id=1226


AEA 28

However, competition is increasing as new players enter the market, stimulated by sales

growth in China and India. Much of the hardware is small enough to be shipped economically

across the globe, so production could move to lower-cost regions. Semiconductor suppliers

have tended to keep their hardware and first level software in the same region. However,

beyond 2015 European suppliers could move their hardware design out of Europe to reduce

costs. There is a further risk that the embedded software competence will follow.19

Europe’s automotive telematics sector is under threat

The telematics market is changing rapidly, with the consumer demanding the same

functionality from their car as they can get in the consumer electronics products. Consumers

are used to smart products with common operating systems, and expect automotive

telematics to work in this way. The greatest added-value will be in the services that can be

accessed, hardware specification being less important to consumers than the software

interface.20 US companies are producing some of the most advanced telematics systems.

New entrants into this market include connectivity companies such as Airbiquity, Qualcomm,

and Hughes Telematics. Hughes Telematics is currently producing the telematics for some of

the major German OEMs - Daimler, Volkswagen and Audi. If Europe is to succeed in this

sector, it is likely that this success will come from new automotive industry players such as

TomTom / Octo Telematics or WirelessCar, rather than the traditional Tier 1 suppliers. These

companies are flexible and entrepreneurial enough to adapt to the marketplace and can

produce products within short timescales.

Success factors for European FEV manufacture

Collating opinion from industry stakeholders and automotive literature, a number of potential success factors for European manufacture have been established. These are shown in Figure 13 below.

19 EC JRC, 'Is Europe in the Driver's Seat? The Competitiveness of the European Automotive Embedded Systems Industry', 2010. Available

online at: http://ftp.jrc.es/EURdoc/JRC61541.pdf 20

Tech Crunch. ‘The Death of the Spec’ 2011. Available online at: http://techcrunch.com/2011/11/14/rip-spec/

http://ftp.jrc.es/EURdoc/JRC61541.pdf

http://techcrunch.com/2011/11/14/rip-spec/


AEA 29

Figure 13: Seven success factors for European FEV manufacture

Factors that can help secure a European FEV manufacturing industry

1

Europe must ensure that it retains its position at the top of global automotive

R&D; the industry must invest heavily in new FEV technologies, and public

R&D spending should be comparable with, if not leading, the other major

automotive regions.

2

Europe needs to create a strong single market for electric vehicles by

harmonising incentives and acting to address the barriers to their

deployment (discussed in more detail in Objective C - barriers to FEV

deployment). This includes issues with market and regulatory fragmentation

in Europe due to varying Member State regimes.

3

Europe needs economic stability, and the Eurozone to remain in place, to

create the right conditions for private investment in the region.

4

Europe needs to support SMEs that specialise in electric vehicle solutions.

These small companies are sufficiently flexible and innovative to adapt to the

new mobility challenge and are likely to drive growth into new value chains.

Support could be in the form of early or late-stage investment project

financing.

5

To be able to compete with the low labour cost economies, Europe must

ensure that its factories are highly automated and supplied with highly-skilled

labour that cannot easily be found in emerging economies.

6

To close the skills gap, Europe needs a recruitment drive to encourage

students to study engineering, in particular electrical, electronic and

materials engineering. This could also involve employing skilled non-

European engineers.

7

Europe should aim to create favourable conditions for automotive companies

looking to develop manufacturing facilities in Europe (likely if the European

FEV market is strong). This may include financial incentives, as offered in

the US and China.


AEA 30

5 Objective C: hurdles and roadmaps

The aim of Objective C: Hurdles and roadmaps is to identify barriers and hurdles to

development and deployment of the fully electric vehicle in Europe – drawing on experience

from trial deployments to date – and evaluate roadmaps towards overcoming these hurdles.

The specific aims are to:

Identify barriers to development, industrialisation and deployment of electric vehicles,

both in terms of their successful deployment on Europe’s roads and the forming of a

competitive electric vehicle industrial value chain in Europe.

Identify and assess possible solutions with a particular focus on the potential role of

ICT and smart systems in mitigating or overcoming the hurdles identified;

Review existing roadmaps to overcome the identified hurdles, prioritizing solutions

with realistic targets, milestones and timescales.

5.1 Barriers to electric vehicle deployment

Many independent research studies foresee a major role for electric vehicles in the long-term

decarbonisation of the road transport sector, reducing dependence on fossil fuels and

meeting local air quality targets. However, without government support, electric vehicles are

unlikely to gain significant market share. There are a number of barriers that prevent mass

uptake; some of the most important factors are discussed here, including:

Vehicle costs;

Battery charging solutions;

Standards and regulations;

Access to raw materials; and

Consumer expectations

5.1.1 Vehicle costs

The biggest barrier to consumer take up of electric vehicles is the high upfront cost

Current FEVs are substantially more expensive to buy than an equivalent petrol or diesel

vehicle. However, studies have found that few private car purchasers are willing to pay a

significant premium for an FEV.21,22 For fleet managers, who have a higher focus on the total

cost of ownership, high capital cost is a less significant barrier.

Higher upfront costs for FEVs are primarily due to the current cost of batteries

For current FEVs, the battery can represent up to 50% of the cost of the vehicle.21,23,24 Future

reductions in battery costs may be hampered by the high cost of skilled labour for

21 Deliotte, 'Unplugged: EV realities versus consumer expectations', 2011.

22 CENEX, 'The Smart Move Case Studies', 2011. Available online at: http://www.cenex.co.uk/consultancy/vehicle-deployment-trials/smart-move

23 An exchange rate of 0.76 has been used throughout the report to convert US$ into €.

24 AEA (2010), Market outlook to 2022 for battery electric vehicles and plug-in hybrid electric vehicles (report for the Climate Change Committee)

http://www.cenex.co.uk/consultancy/vehicle-deployment-trials/smart-move


AEA 31

manufacture and the rising cost of material inputs. Expected reductions in battery unit costs

may also be offset by manufacturers offering larger batteries to increase vehicle range.

The total cost of ownership (TCO) for an FEV is expected to reach parity with

conventional vehicles in between one and five years’ time in some regions.

Studies of vehicle TCO indicate that in some countries, the higher purchase cost of FEVs

could be offset by lower running costs compared to a conventional ICE vehicle in one to five

years’ time without subsidies.25,26 More conservative estimates indicate TCO may not be

comparable for electric and conventional vehicles before 203027. Calculations depend on the

future prices for fossil fuels, electricity, and FEV batteries, all of which are highly uncertain.

Private consumers do not consider the total cost of ownership, are concerned about

depreciation and expect FEVs to have high running costs.

Private car buyers typically only take the first three years of fuel use into account when

making purchase decisions.28 This means that they are less likely to purchase vehicles with a

higher upfront cost, even if the total cost of ownership is lower. Uncertainties about long term

value and depreciation are mentioned as a barrier for purchasing an electric or plug-in hybrid

car. Consumers also tend to assume the maintenance costs of electric cars to be higher,

although experts anticipate the contrary.29

5.1.2 Charging solutions

Successful business models for charging infrastructure need to be developed

Financing charging infrastructure (particularly in public places) is a major challenge.

Significant capital expenditures are needed to provide sufficient density of charging points.

The high capital costs, low energy prices and initial low utilisation for FEV charge stations

require a completely different business model to petrol refuelling stations. The payback time

can exceed the lifetime of the outlet (typically 10 years).30

Total grid capacity is not a major issue, but unmanaged peak loading could be

Even a complete electrification of the European vehicle fleet (which is not predicted in even

the most optimistic scenarios to 2050) would only result in additional electricity demand of

10-15%. It is very likely that generating capacity will be able to meet the additional demand,

at least in the short to medium term.27 However, uncontrolled charging can significantly

increase peak load, with effects at the distribution and generation level. In member states

with relatively weak electricity infrastructure, even small scale EV introduction can cause

local power-outages if charging is uncontrolled. Fast charging applications, which place

greater strain on electricity grids, could lead to bottlenecks in all Member States.31

25 The Boston Consulting Group, 2011: Powering Autos to 2020: The Era of the ElectricCar? Available online via:

http://www.bcg.com/documents/file80920.pdf

26 International Energy Agency’s EV Technology Roadmap

27 CE Delft, 'Impacts of Electric Vehicles (5 separate deliverable reports + summary)', 2011. Available online at:

http://ec.europa.eu/clima/news/articles/news_2011051701_en.htm

28 EU DG for Internal Policies, 'Challenges for a European Market for Electric Vehicles', 2010. Available online at:

http://www.icarsnetwork.eu/download/NewsEvents/itre_ep_report_electric_cars.pdf

29 LEI, CE Delft, Fraunhofer ISI 2011: Behavioural Climate Change Mitigation Options Domain Report Food 30

Electrification Coalition (ELCOA). Economic Impact of the Electrification Roadmap

31 Grid for Vehicles (G4V), Work package 3 / Deliverables 3.3. List of identified barriers and opportunities for large scale deployment of EV/PHEV

and elaboration of potential solutions. Available online under:

http://www.g4v.eu/datas/reports/G4V_WP3_D3_3_list_of_barriers_for_deployment.pdf



http://ec.europa.eu/clima/news/articles/news_2011051701_en.htm

http://www.icarsnetwork.eu/download/NewsEvents/itre_ep_report_electric_cars.pdf

http://www.g4v.eu/datas/reports/G4V_WP3_D3_3_list_of_barriers_for_deployment.pdf


AEA 32

There are technical and cost barriers to smart charging of FEVs

Smart charging of FEVs, where charging is automatically scheduled to take place at an

optimum time for grid energy and power balance, faces several barriers in Europe according

to stakeholders. This includes technical barriers to implementing the required market

systems, and high costs preventing a viable business model from being developed.

5.1.3 Standards and regulations

Further work is required on standards and regulations for data protection and safety

European standardisation and regulation for vehicle charging and type approval has made

significant progress but there is still work to do in areas such as data protection, safety

requirements; communications between vehicles and the grid; and other communications

standards. Industry experts were concerned that overregulation and slow progress could

hamper European competitiveness.

5.1.4 Raw materials

FEV motors and batteries currently utilise materials that could pose resource risks. In

particular, rare earth elements are only mined in a few locations, and supply is expected to

outstrip demand in the future, leading to significant price rises. Figure 14 describes the

resource risk for four materials used in FEVs. Advanced manufacturing techniques may be

able to limit the amount of rare earth elements needed, but to date it has been challenging to

eliminate them entirely.


AEA 33

Figure 14: Resource risks associated with FEVs

Material Application Risk

Most

critical

Least

critical

Dysprosium

High efficiency

permanent

magnet motors

Limited substitutes currently exist. Demand

expected to grow strongly due to FEVs.

Current reserves mainly in China; other

mines due to come on stream around 2015

but add less than 15% to current

production. China is restricting exports.

Neodymium

High efficiency

permanent

magnet motors

Limited substitutes currently exist. Demand

expected to grow strongly due to FEVs and

other motor/generator applications (e.g.

wind turbines). Demand likely to exceed

production in the short term. Current

reserves mainly in China; other mines due

to come on stream around 2015, but supply

will remain tight. China is restricting

exports.

Lithium Li-ion batteries

Sufficient reserves exist, but supply may

not be able to scale as quickly as demand,

leading to short-term price rises.

Cobalt Battery

cathodes

Sufficient reserves exist, but supply may

not be able to scale as quickly as demand,

leading to short-term price rises.

5.1.5 Consumer expectations

Surveys of consumer attitudes towards FEVs21,32 typically find that expectations on range,

charge times and purchase price far outstrip the current reality. However, evidence from field

trial results suggest that consumer views change when they participate in FEV trials. Some

key insights reported by field trials are shown in Figure 15.

32 TSB, 'Initial findings from the ultra-low carbon vehicle demonstrator programme', 2011. Available online at:

http://www.innovateuk.org/_assets/pdf/press-releases/ulcv_reportaug11.pdf

http://www.innovateuk.org/_assets/pdf/press-releases/ulcv_reportaug11.pdf


AEA 34

Figure 15: Five insights into consumer reaction during field trials

Consumer views: insights from field trials

1

Consumer perceptions are changed by practical experience of FEVs. Initially

trialists have concerns on range, reliability and safety – but post-trial surveys

reveal that these concerns are significantly reduced by the end of the trials.

However, private consumers remain unwilling to pay a significant price

premium for an FEV.

2

Whilst few faults are reported in the vehicles themselves (and significantly,

no safety issues), problems were reported with the integration of

communications between vehicle, charging infrastructure and support

services. This undermined consumer confidence.

3

Most trialists had access to home charging, and typically relied on this to

recharge the vehicle. Despite this, survey results show that they still view

public recharging infrastructure as an essential requirement.

4

A strong motivator for both private and commercial trialists to try electric

vehicles is their perceived ‘eco friendliness’. For this reason, there was a

strongly positive response when vehicles were provided with a ‘green’

electricity tariff so that they were charging on low-carbon electricity.

5

In general, fleet operators were more open to FEVs than private individuals

because they placed more emphasis on total cost of ownership (over capital

cost), they saw marketing benefits in the green image of FEVs, and they

were willing to modify their management processes to accommodate the

charge and range restrictions.

Inconvenience of charging is cited as a main barrier to buying an FEV.29

Most consumers expect an electric vehicle to recharge its battery in two hours or less.21 This

is substantially shorter than today’s typical charge times of 6-8 hours. However, practical

experience can shift expectations: after a three month trial, three quarters of consumers felt

charging speeds suited their daily routine.22 Most charging currently occurs at homes and

workplaces; however users appreciate the security and flexibility offered by public recharging

stations.

5.2 Solutions to overcome hurdles

A number of technological solutions to the hurdles of FEV cost and performance are detailed

in Objectives A and B. In addition to these, there are a number of business models that seek

to address the key barriers of vehicle cost and availability and use of recharging

infrastructure.

Leasing of vehicles \ batteries could insulate the consumer from the high capital costs

Leasing avoids both the high up-front costs of purchasing an FEV and the risks associated

with ownership. Vehicles can be leased under a service contract for a fixed rate; this model is

already employed in the commercial fleet segment but is uncommon in private vehicles.


AEA 35

Alternatively, the battery can be leased and the rest of the vehicle sold as normal. A

subscription service model, where the lease includes access to charging infrastructure or

swap stations (and possibly electricity), is another option. The service provider has full

control over the maintenance of the batteries, reducing the risk of unreliability and

depreciation to the consumer. The hurdle to both leasing systems is developing a business

model where the service provider takes on an acceptable risk for the return, whilst providing

the service at an attractive price for consumers.

A range of business models will be needed to give comprehensive charging

infrastructure coverage

Public infrastructure requires significant upfront investment for the purchase and

installation of charging points, and will have an extended payback period as the

charging price needs to be kept low to guarantee usage. Infrastructure usage is likely

to be unpredictable and the model could increase the peak load on the local

distribution grid, which could cause problems if the network is close to capacity.

Private infrastructure represents an investment decision and, therefore, seeks a

return. The cost to the consumer will be at a higher price over public charging, but is

expected to offer additional benefits such as convenience of location and/or

integrated IT services.

End-to-end or network operator solution offers the consumer a single point of

contact and provides the full service from the vehicle purchase through to its

operation (charging) and maintenance (battery and vehicle). Consumers are offered a

contract where they will pay a set fee each month for the running and maintenance of

their vehicle. Contracts vary but can include in-vehicle services, managed charging

and battery swap.

5.3 Solutions offered by ICT

ICT applications offer a range of solutions to overcome hurdles to FEV take-up. ICT can

facilitate technological enhancement, or facilitate new business models or value chains in

FEVs. Figure 16 summarises the ICT applications that contribute to overcoming hurdles.


AEA 36

Figure 16: The role of ICT in overcoming hurdles to electric vehicle deployment


5.4 Roadmaps for FEV deployment

Europe, along with many other world regions, has developed a number of roadmaps for

overcoming the barriers to FEV deployment. The study team reviewed and compared a

range of roadmaps from the major automotive markets.

All roadmaps target a very significant acceleration in deployment rates around 2020

Figure 17 compares deployment targets from different roadmaps. The period around 2020 is

almost universally seen as a key milestone, when deployment of FEVs enters the mass

market. This has implications for the Horizon 2020 programme: it will need to prepare

European industry for mass production of FEVs, not only to achieve European targets but to

be positioned for the growing export potential.

The roadmaps agree on the main barriers and technology areas for development

The consensus from roadmaps was that battery cost is the main barrier to deployment, and

accordingly battery technology development is one of the key focus areas. This is also seen

as a key strategic technology by many regions. Other common themes include provision of

public charging infrastructure, development of standards, and improvement of components

including motors and power electronics. ICT, and the development of a revised vehicle

architecture, are also commonly referenced.

Smart battery control• Helps to reduce battery cost by

maximising potential of cells

• Helps to improve battery

depreciation through increased

battery lifetime

• Could also facilitate battery

leasing models by feeding back

battery health informationRange extender

integration• Reduces range anxiety by

improving the driving range of

the vehicle

Optimising charging• Improving the ease and

convenience of charging, and

reducing charging times, will

improve consumer acceptance

Powertrain efficiency• Helps reduce the size and cost

of the battery (for a given vehicle

range) by improving vehicle

energy efficiency

• New motor designs using ICT

can reduce the reliance on rare

earth elements

Active load

management• Helps reduce the size and cost



energy efficiency

Energy harvesting

systems• Helps reduce the size and cost



energy efficiency

Grid integration (V2G)• Could reduce running costs of FEVs, by charging

at off-peak rates and/or generating revenue through

demand-side management; alleviates grid capacity

concerns

Drive by wire / safety• Battery safety systems help

address concerns over battery

stability and crash safety

Driver interface• Helps reduce range anxiety by

providing drivers with intelligent

information on vehicle range and

recharging options


AEA 37

Figure 17: Comparison of FEV deployment targets from different roadmaps

2015 2016 2018 2020 2025 2050

IEA, 2011 (global) 1.1m

EV/PHEV sales

7m

EV/PHEV sales

18m

EV/PHEV sales

106m

EV/PHEV sales

ERTRAC / EPoSS,

2010 (EU)

1m

EV/PHEV on the road

5m

EV/PHEV on the road

ICT4FEV, 2012

(EU)

1m

EV/PHEV on the road

20m

EV/PHEV on the road

USA, 2011 1m

EV on the road

Canada, 2010 0.5m

EV on the road

South Korea, 2010 1.2m

EV/PHEV produced

EU roadmaps are strong on technology development, but other world regions more

openly target commercial imperatives

The European roadmaps reviewed gave a comprehensive and detailed view of the technological development needed, and identify R&D needs. However, there is less emphasis on maintaining Europe’s competitive position. Roadmaps from other regions were more explicit in this area, as described below in Figure 18. In the future, European roadmapping exercises could integrate technology roadmaps with roadmaps for value chain development and securing a competitive industrial position, drawing closer links between technology and competitiveness.


AEA 38

Figure 18: Different approaches found in FEV roadmaps

EU

- The roadmaps reviewed were strongly focused on technology

- R&D needs are identified in detail by technology domain

- Technology maturity targets are set by technology

- Deployment targets are set by number of vehicles on the road

USA

- Sets targets for the cost, power density and specific power of battery

systems, and the efficiency of the electric drive train

- Similar technological focus to EU roadmaps

Canada

- Sets a target for the Canadian content (in parts and manufacture) of FEVs

- Sets targets for factors influencing uptake, e.g. cost of ownership

- Specific chapters on new business opportunities and new business

models

S. Korea

- Has roadmap targets for production as well as R&D

- Socio-economic impacts estimated including job creation and domestic

and export sales value

China

- FEV strategy integrated into industrial policy (e.g. move towards high

value manufacturing activities)

- Identifies FEVs as one of seven ‘strategic emerging industries’

- Environmental benefits seem secondary to strategic importance


AEA 39

6 Objective D: environmental and

health impacts

The aim of Objective D: Assessment of Environmental and Health Impacts is to assess the

environmental and health impacts of the deployment of electric vehicles compared with other

types of vehicle. The specific aims were:

• To assess the environmental and health impacts of the widespread deployment of

electric vehicles vs. petrol, diesel and hybrid vehicles

• To identify weaknesses and threats to the potential environmental and health

benefits of electric vehicles

• To investigate the role of ICT and smart systems in overcoming these

weaknesses and threats

6.1 The vehicle life cycle

Emissions of greenhouse gases (GHGs) and air pollutants have harmful effects on human

health and the environment. These emissions are produced at various stages of a vehicle life

cycle, from its manufacture to its disposal or recycling. Figure 19 shows the vehicle life cycle.

Our lifecycle analysis compares four types of vehicle:

Petrol internal combustion engine vehicle (ICEV): A car utilising an internal

combustion engine fuelled by gasoline;

Diesel ICEV: A car utilising an internal combustion engine fuelled by diesel;

Petrol hybrid electric vehicle (HEV): A ‘full hybrid-electric’ car utilising an internal

combustion engine fuelled by petrol in parallel with an electric motor and battery,

allowing for limited vehicle operation in pure electric mode and regenerative braking

but not external charging of the battery;

Battery electric vehicle (BEV): A fully electric car utilising an electric motor powered

exclusively by a rechargeable battery.

We compared the impacts of each vehicle over the life cycle, in the following areas:

Global warming potential due to the emissions of greenhouse gases;

Acidification potential, eutrophication potential, photochemical pollution, and

particulate matter concentrations due to the emissions of air quality pollutants.

The impacts were monetised using well-established estimates of their external costs, in order

to compare the complete impacts of each vehicle and life cycle stage on a like-for-like basis.


AEA 40

Figure 19: Overview of a vehicle lifecycle

During vehicle manufacture, the type and size of battery is likely to be the most

important factor influencing differences between vehicle types

ICEVs typically have a relatively small lead-acid battery, whereas BEVs have a much larger

battery to provide motive power. The extraction and processing of the various raw materials

needed to make the battery can lead to significant emissions; therefore in general BEVs

have higher “embedded” emissions compared to ICEVs. External costs from the

manufacturing stage of a BEV could be over 75% higher compared to a conventional ICEV,

and around 11% higher compared to a HEV.

Based on a typical European electricity generation mix, the fuel production impact for

BEVs is higher compared to impacts from petrol or diesel production.

The impact of the fuel production stage for BEVs is heavily influenced by the electricity

generation technologies used. Electric vehicles use electricity from the grid to recharge their

batteries, which leads to emissions of air pollutants upstream at power stations. These

emissions can vary widely depending on the electricity generation mix. Based on the present

day EU-wide mix, the fuel production impact from BEVs is around 15-30% higher than for

ICEVs. As the grid decarbonises, the impact of electricity production is expected to

significantly reduce.

BEVs are significantly more energy efficient than ICEVs over the full fuel cycle

In a typical fuel cycle for a diesel ICEV, only around 15-20% of total primary energy is turned

into motive power, whereas for a BEV around 40% is turned into motive power. Figure 20

shows the energy losses over the fuel cycle, from fuel production to motive power.

Reductions of in-use emissions are an important advantage of using electric-powered

vehicles – even compared to the strictest tailpipe emission standards ICEVs

The by-products of combustion in ICEVs include many harmful pollutants that are expelled

through the vehicle’s exhaust pipe. In contrast, the in-use (tailpipe) emissions of BEVs are

zero, so their only impact arises from particulate matter generated by tyre/road wear (non-

tailpipe emissions). This means that the external costs from the in-use stage are reduced by

over 90% for BEVs compared to ICEVs.

Vehicle production

• Raw materials

• Assembly

• Transport

Fuel production

• Production

• Processing

• Transport & distribution

Vehicle operation

• Tailpipe

• Tyre & brake

End of life

• Disposal


AEA 41

Figure 20: Overview of energy chain efficiency in BEVs (top) compared to diesel

ICEVs (bottom). [Source: adapted from Swiss Federal Office of Energy33]

The treatment of batteries is a key difference between the end-of-life impact of ICEVs

and BEVs

However, vehicle disposal accounts for only a small percentage of overall lifecycle impacts.

Some studies also include the impacts of recycling, as this could offset emissions during the

manufacturing stage. Battery recycling in particular could significantly reduce the lifecycle

impacts of electrically-powered vehicles with a large battery.

33 Swiss Federal Office of Energy, 2011. Accounting for EVs in EU CO2 regulation from cars: a Swiss Perspective.

En

erg

y I

np

ut

100%

Useful work

~40%

~5%: Elec. transmission

~6%: Battery

~4%: Electric motor

~4%: Mechanical drivetrain

~36%

Power generation~8%

Fuel production

CO2

En

erg

y I

np

ut

100%

Useful work: ~15-20%

~7%: Mechanical drivetrain

~64%

Diesel engine~9%

Fuel production

CO2

Ele

ctr

ic V

eh

icle

Die

se

l V

eh

icle


AEA 42

6.2 Life cycle analysis for present-day vehicles

Our analysis compares vehicles in 2015, once the Euro 6 vehicle emission standards

come into force.

In 2015, all new vehicles sold in the EU will have to comply with stricter Euro 6 standards on

emissions of air quality pollutants. Since these vehicles will have a significantly lower

environmental impact than older vehicles, it is appropriate to compare electric vehicles with

ICEVs complying with this standard for a clear view of future benefits.

The total life cycle external costs are lower for a BEV than other vehicle types.

External costs (for impacts covered in this study) for BEVs are 28% lower compared to a

petrol HEV, and around 40% lower compared to petrol and diesel ICEVs. HEVs achieve

around 10-20% lower impacts than ICEVs. FEVs are likely to be between these two

extremes, depending on the configuration and electric-only range.

In-use emissions have historically had the largest impact; however for BEVs the

manufacturing stage is more significant.

Traditionally, the in-use emissions are responsible for a large proportion of a vehicle’s overall

environmental impact. However, as in-use emissions are very low for BEVs, the other stages

of the life cycle become more important. Around half of life cycle external costs from a BEV

arise during the vehicle manufacture. In the future, with the decarbonising of electricity

production leading to a reduction of in-use emissions in particular, this share is likely to

increase.

Figure 21: External cost for whole life cycle, split by stage in 2015 (€ per 1,000

vehicle-km)

Notes: All vehicles are assumed to meet or exceed Euro 6 emission limits. Non-tailpipe emissions include

particulate matter generated by tyre, road and brake wear.

Greenhouse gases (GHGs) are the largest external cost for all vehicle types.

49%

33%

16%

17%

42%

19%

19%

23%

43%

56%

51%

0 5 10 15 20 25

BEV

HEV Petrol

ICE Diesel

ICE Petrol

Impacts from all stages of life cycle (€ per 1,000 vehicle-km)

Vehicle manufacture Fuel production In-use (Tailpipe) In-use (Non-tailpipe) End of life

19.2

20.5

16.7

12.0


AEA 43

For BEVs, GHGs account for 49% of external costs; this rises to 56-60% for HEVs and

ICEVs. Historically it has been the air pollutant emissions from vehicle operation that have

received the most attention, due to the visible impacts they had in surrounding areas (e.g.

smog and poor air quality in cities), but tighter emission standards have dramatically reduced

the emissions of air pollutants from modern vehicles.

Figure 22: External cost for whole life cycle, split by emission type in 2015 (€ per

1,000 vehicle-km)

The lifecycle GHG emissions are lower from a BEV than other vehicle types

Life cycle GHG emissions from a BEV are 45% lower than an ICEV running on petrol or

diesel and 37% lower compared to a petrol HEV. BEVs have far higher GHG emissions from

vehicle manufacture – around 70% higher than ICEVs – but this is more than compensated

for by the lower in-use emissions.

6.3 Future developments in environmental & health

impacts

The lifecycle analysis found that BEVs are expected to have smaller environmental and

health impacts compared to other vehicle types. Figure 23 outlines five key factors that could

affect the net costs and benefits of electric vehicles in the future.

49%

59%

56%

60%

23%

15%

9%

10%

18%

17%

26%

20%

0 5 10 15 20 25

BEV

HEV Petrol

ICE Diesel

ICE Petrol

Impacts from all stages of life cycle (€ per 1,000 vehicle-km)

Global warming Acidification Eutrophication Photochemical oxidation Particulate matter

19.2

20.5

16.7

12.0


AEA 44

Figure 23: Key factors affecting the environmental and health impacts of FEVs

Key factors that will affect net costs and benefits of FEVs

Electricity generation

The EC aims to reduce of GHG emissions from electricity production

by 54-68% by 2030, and 93-99% by 2050 relative to 1990 levels. If

these targets are achieved, in-use GHG emissions of an electric

vehicle would be dramatically reduced. Even if manufacturing and

end-of life GHG emissions remained constant, the planned

electricity decarbonisation would reduce the lifecycle GHG

emissions of a BEV by 18% in 2030 and 43% in 2050.

Optimized recharging

Optimized recharging is central to the environmental case for FEVs.

Without recharging optimisation, FEVs could cause an increase in

net emissions, since higher emission generating sources would be

needed to meet the additional peak electricity demand. Optimized

recharging would decrease net emissions for all levels of FEV

penetration, and could improve the utilisation of intermittent

renewables by charging during periods of over-supply.

Additionality of GHG reductions

The European Commission has mandated that from 2020 onwards,

the average emissions from a new car fleet will not be more than

95g CO2/km. This will mean that car manufacturers will have to

implement numerous technologies to achieve these fleet wide

reductions. The introduction of some FEVs into the fleet would allow

manufacturers achieve this target in a more cost effective manner

(particularly with super-credits), but may not lead to GHG reductions

beyond that which would have been achieved anyway.

Shared vehicle ownership and mass integrated public transportation

offer alternatives to vehicle ownership that could improve societal

health and makes efficient use of space. Therefore it is important to

understand what type of transport is being displaced by electric

vehicles to assess the net impacts.

Battery production & lifetime

The vehicle battery accounts for over 40% of the embedded

emissions of an EV, and over 40% of emissions from battery

production are from electricity consumption during manufacture.

Replacement batteries (if more than one battery is required during

the vehicle lifetime) significantly increase the lifecycle GHG

emissions of an EV, in the order of 20%.

Utilising the BEV battery for bi-directional charging for grid balancing

could also have a detrimental impact on the battery life due to the

additional charge/discharge cycles the batteries would undertake.

Performance and uptake of biofuels

There is significant uncertainty as to the volumes of sustainable

biofuel that may be available in the future and the net GHG savings,

primarily due to issues surrounding indirect land use change. If low-

carbon biofuels are available in large quantities at low cost, the

environmental benefits of electric vehicles over ICEVs will be

eroded.


AEA 45

6.4 The role of ICT in the environmental & health impacts

of FEVs

ICT can improve the environmental performance of FEVs in a number of ways, as shown in

Figure 24:

Figure 24: The role of ICT in improving environmental and health benefits of FEVs


ICT is needed for smart charging to improve emissions from electricity generation

The optimal charging strategy to minimise emissions is through a controlled or bidirectional

strategy that maximises the use of charging at times of low demand / high supply, and that

can be to inject energy into the grid for local load balancing.

ICT can maximise the battery life and usable capacity through thermal and electrical

management

ICT can monitor and respond to temperature changes in different cells of the battery, to

maintain an environment that is optimal for battery life and energy release. The battery

management system can preserve cells by charging and discharging them more evenly.

A centralised ICT architecture can improve vehicle efficiency and simplify

manufacture and recycling

Different functional systems could installed as software, as opposed to being managed by

separate control units. This would increase the efficiency of the vehicle and also reduce the

manufacturing and recycling needs caused by multiple control units.

Battery

managementMaximising the utilisation,

lifetime and performance

of batteries to reduce the

environmental footprint of

battery manufacture

Vehicle efficiencyImproving the overall

efficiency through

advanced control and

power management and

a centralised architecture

Smart chargingTo ensure that low-carbon

electricity can be used,

and as part of a strategy

to facilitate a low-carbon

grid mix

Driver aidsOptimising route and

driving style decisions to

reduce energy

consumption

Advanced &

regen. brakingMore precise control

could mean that the level

of tyre wear could be

reduced through the

development of specific

FEV traction control

system that minimise

some of the causes of

tyre wear, such as

skidding or wheel

spinning.


AEA 46

ICT can provide driver aids to improve driving efficiency

When driving a vehicle, the largest variable impacting on vehicle efficiency is the driver; by

helping the driver through various ‘nudges’, the in-use efficiency can improve. This could

extend to semi-autonomous or autonomous driving.

Advanced regenerative braking would reduce in-use energy consumption and also

reduce the PM emissions from tyre and brake wear

If utilising an electric motor and electric steering, an FEV offers an additional level of control

over that of an ICEV. More precise control could mean that the level of tyre wear could be

reduced through the development of specific FEV traction control system that minimise some

of the causes of tyre wear, such as skidding or wheel spinning.

6.5 The role of FEVs in decarbonising the European

transport sector

To assess the role of FEVs in wider attempts to decarbonise the EU transport sector, several

scenarios, adapted from previous European Commission scenario modelling, were

compared. AEA’s Sustainable Transport (SULTAN) Illustrative Scenarios Tool has been

used to perform this analysis. Scenarios run to 2050, and all modes of transport are included,

though only passenger cars are analysed in detail.

Three scenarios were investigated, all compared with a business-as-usual (BAU) scenario

where no further policies or measures are implemented. The scenarios were:

Core GHG reduction scenario: This scenario is consistent with achieving the target

of 60% reduction in GHG emission included in the 2050 Roadmap and the Transport

White Paper. In passenger cars, FEVs account for 5% of new vehicle registrations in

2020, rising to 23% by 2030 and over 50% by 2045. This scenario is broadly

comparable with European Commission scenarios published as part of the Transport

White Paper analysis.

Low biofuel performance scenario: This scenario investigates the risk the

availability of, or GHG reductions achievable from, biofuels is lower than currently

anticipated. The scenario assumes that both biofuel deployment levels and GHG

reduction potential stay at the level attained in 2020 through to 2050. This leaves a

significant shortfall in GHG reductions; this gap is closed by increasing the

penetration of FEVs to 13% of new vehicles in 2020, 62% by 2030 and virtually all

new vehicle sales in 2040. This represents a likely upper case for FEV deployment.

Low electricity decarbonisation scenario: This scenario investigates the risk that

European policy to reduce the GHG emissions from the electricity sector is partially

unsuccessful, achieving a 65% reduction on 1990 levels rather than the planned 93%

reduction. As a result, FEVs will achieve less GHG emission savings than in the core

scenario.

The results are summarised in Figure 25:

The blue line shows the total abatement achieved in the passenger car sector under

the core GHG reduction scenario.

Core GHG reduction scenario (solid green line): Under this scenario, FEVs could

contribute to GHG emission reduction of approximately 889 MtCO2e across the


AEA 47

period 2010 to 2050. This equates to around one quarter of all GHG emissions

reduction from the passenger car sector, or around 9% of the total abatement from

the transport sector as a whole. The resultant savings in monetised external costs

provided by FEVs is estimated to be €7.4 billion per annum by 2050.

Low biofuel performance scenario (upper dashed line): The significant increase

in FEV deployment compared with the core scenario (114% between 2010 and 2050)

means that they account for 90% of the total savings resulting from passenger cars

between 2010 and 2050, and nearly one third of the savings achieved from the entire

transport sector.

Low electricity decarbonisation scenario (lower dashed line): Total GHG

emission savings from FEVs in the period 2010 to 2050 are approximately one third

that of the savings achieved in the core GHG reduction scenario. In this scenario,

FEVs account for around 5% of total abatement in the transport sector in 2050.

Figure 25: Abatement potential of FEVs under three scenarios (compared with

business-as-usual)

Comparing our results with other market deployment projections, our central “core GHG

reduction” scenario appears to be a conservative estimate for the deployment of FEVs, and it

seems likely that FEVs will provide over a quarter of the total abatement from passenger cars

in the period between 2020 and 2050. This equates to around 9% or more of the abatement

needed from the transport sector as a whole to achieve 2050 targets.

Total abatement from cars to

meet 60% reduction target

Abatement from FEVs: “core

GHG reduction” scenario

Abatement from FEVs: “low biofuel

performance” scenario

Abatement from FEVs: “low electricity

decarbonisation” scenario


AEA 48

7 Objective E: analysis of socio-

economic impacts

The aim of Objective E: Analysis of socio-economic impacts is to assess the potential

contribution of fully electric vehicles towards achieving the objectives set out by flagship

European socio-economic policies.

Three specific aims were identified within this analysis:

To qualitatively examine the potential contribution of FEVs towards European flagship

socio-economic policies;

To provide quantitative estimates of the potential socio-economic contribution of

FEVs through the use of related metrics;

To assess the role of specific ICT applications in the future socio-economic benefits

of FEVs using a multi-criteria analysis (MCA).

7.1 Qualitative assessment of the socio-economic

contribution of FEVs

Electric mobility has the potential to make a strong contribution towards Europe’s socio-

economic vision in the medium term (to 2020) and the long term (to 2050). A number of

flagship socio-economic policies are in place in Europe that target development over these

timescales. The main objectives of these policies are outlined in Figure 26.


AEA 49

Figure 26: European flagship policies considered in this study

European flagship policies

Resource Efficient Europe

“To support the shift towards a resource efficient and low-carbon

economy that is efficient in the way it uses all resources. The aim is

to decouple our economic growth from resource and energy use,

reduce CO2 emissions, enhance competitiveness and promote

greater energy security.”

Innovation Union

“To improve framework conditions and access to finance for

research and innovation so as to ensure that innovative ideas can

be turned into products and services that create growth and jobs.”

Industrial Policy for the Globalisation Era

“To support entrepreneurship, to guide and help industry to become

fit to meet these challenges, to promote the competitiveness of

Europe’s primary, manufacturing and service industries and help

them seize the opportunities of globalisation and of the green

economy.”

Digital Agenda for Europe

“to deliver sustainable economic and social benefits from a digital

single market based on fast and ultra-fast internet and interoperable

applications.”

2050 Low Carbon Economy

“To present a Roadmap for possible action up to 2050 which

could enable the EU to deliver GHG emission reductions in line

with the 80 to 95% target.” (2050 roadmap)

“Set out the EC vision for the future of the EU transportation

system and defines a policy agenda for the next 10 years to

move towards 60% reduction in CO2 emissions.” (Transport

White Paper)

FEVs can provide socio-economic benefits through market and industry development

A qualitative view of the potential socio-economic benefits of FEVs finds that they can

produce benefit in two ways:

1. FEV deployment in Europe (wherever the FEVs are produced) has the potential to

benefit Europe, for example by improving energy efficiency, energy security, local air

quality and reducing greenhouse gas emissions;

2. A strong European FEV manufacturing and service industry, where a large

portion of the FEV value chain is situated within Europe, has the potential to benefit

Europe’s economy by providing economic growth, employment and a platform for

wider innovation and technology cross-fertilisation.

Figure 27 and Figure 28 below outline the potential socio-economic benefits of FEVs in each

of these areas.


AEA 50

Figure 27: Qualitative assessment of the socio-economic contribution of FEVs

through development of a strong European FEV market

Potential contribution of FEVs – development of market Relevant flagship

policies

Reduced reliance on fossil fuels by increasing energy

efficiency and offering primary energy flexibility (i.e. electricity

generation mix), resulting in enhanced energy security.

Resource Efficient

Europe; 2050 Roadmap;

Transport White Paper;

Energy Roadmap

Reduced / zero tailpipe emissions of GHGs whilst also having

co-benefits, including improved local air quality and reduced

noise and resulting a reduction in the negative impacts of road

transport on public health.

Resource Efficient

Europe; Industrial Policy

for the Globalisation Era;

Transport White Paper

Contribution to achieving GHG reduction targets for 2020,

2050 (though unlikely to be deployed in significant numbers by

2020 to make a large contribution, their contribution in 2050

could be significant).

Resource Efficient

Europe; 2050 Roadmap;

Digital Agenda for Europe;

Transport White Paper;

Energy Roadmap

Improved energy efficiency leading to reduced energy

consumption from the transport sector.

Resource Efficient Europe

Deploying FEVs with ICT offering the potential for more

efficient and less energy-consuming intelligent transport

systems.


Figure 28: Qualitative assessment of the socio-economic contribution of FEVs

through development of a competitive European FEV manufacturing and

service industry

Potential contribution of FEVs – development of industry Relevant flagship

policies

Creation of (net) new value chains, jobs and wealth,

particularly in ICT and smart systems.

Innovation Union

Maintaining technological leadership in Europe in a market

segment that is predicted to grow strongly in the EU and

globally.

Industrial Policy for the

Globalisation Era

Generation of new EU industry in technologies and products

that are likely to see significant market growth in Europe and

internationally, e.g. telematics, automotive batteries

Industrial Policy for the

Globalisation Era

FEVs offer a digital platform for a range of ICT and smart

system innovations, drawing on developments in other sectors

– potential for wealth creation and social benefits.



AEA 51

7.2 Quantitative assessment of the socio-economic

contribution of FEVs

This section provides quantitative estimates for some of the potential socio-economic

benefits of FEVs. Quantitative estimates are taken from the literature where available, and

from analysis of a number of scenarios for future deployment of FEVs. The following

scenarios were developed and analysed using AEA’s SULTAN illustrative scenarios tool:

Business-as-usual (BAU) scenario: This scenario assumes no new policies or

measures are implemented, and is consistent with the European Commission’s BAU

developed in the modelling for the Transport White Paper. This is the baseline

against which other scenarios are compared.

Core GHG reduction scenario: This scenario is consistent with achieving the

transport sector target of 60% reduction in GHG emissions included in the 2050

Roadmap and the Transport White Paper, and is broadly comparable with European

Commission scenarios published as part of the Transport White Paper analysis.

Low biofuel performance scenario: This scenario investigates the risk the

availability or GHG reduction potential of biofuels are lower than currently anticipated.

It assumes that both biofuel deployment levels and GHG reduction potential stay at

2020 levels through to 2050. This leaves a significant shortfall in GHG reductions; this

gap is closed by increasing the penetration of FEVs. This represents a likely upper

case for FEV deployment.

Low electricity decarbonisation scenario: This scenario investigates the risk that

European policy to reduce the GHG emissions from the electricity sector is partially

unsuccessful, achieving a 65% reduction on 1990 levels rather than the planned 93%

reduction. As a result, FEVs will achieve less GHG emission savings than in the core

scenario.

Figure 29 shows the levels of FEV deployment projected under the FEV scenarios, and

compares them with other projections. It can be seen that both scenarios fall within the range

of market estimates for FEV deployment between 2015 and 2020, and the ‘core GHG

reduction’ scenario is at the conservative end of these estimates.


AEA 52

Figure 29: Comparison of projections for growth in FEV registrations showing

AEA’s SULTAN scenarios

Notes:

Universität Duisburg Essen (2012) figures taken from a 2012 study carried out for DG ENTR34

.

Range of market estimates taken from AEA literature review; more details are in the Objective A report (landscape analysis)

Notes for Figure 30 (overleaf)

a – GHG emissions are measured on a lifecycle ‘well-to-wheel’ basis, i.e. including both direct emissions at the point of use (e.g.

engine exhaust) and indirect emissions from fuel extraction, processing and delivery to market.

b – The SULTAN energy security metric is a semi-quantitative measure of energy security on a scale of 0-100 (100 is highest

energy security). It is an average of six metrics that impact on energy security: oil cost factor, fleet readiness, cost, surplus

capacity, supply resilience, and resource concentration.

c – Value is 0.017; total change in energy security metric to 2020 is very small (0.839) so this is a non-trivial percentage.

d – Due to the sources and assumptions used to produce this estimate, this figure is likely to be conservative.

e – Figure is for direct employment (vehicle manufacturing and R&D) only. Indirect employment includes the supply chain and

aftermarket services.

34 Universität Duisburg Essen (2012), Competitiveness of the EU Automotive Industry in Electric Vehicles, Final Report for European Commission

DG Enterprise

-

5

10

15

20

2015 2020 2025 2030 2035 2040 2045 2050

New

FE

V v

eh

icle

reg

istr

ati

on

s i

n t

he E

U-2

7 (

millio

n v

eh

)

SULTAN - 'low biofuel performance' scenario

SULTAN - 'core GHG reduction' scenario

Universität Duisburg Essen (2012)

Range of market estimates(Objective A)

Market saturation reached


AEA 53

Figure 30: Quantitative metrics for the socio-economic contribution of FEVs in Europe

Metric Relevant flagship

policies Impact in 2020 Impact in 2050

Climate change

mitigation

GHG reductions achieved

due to FEV deployment in

the European passenger

car sector

2050 Low Carbon

Economy

FEVs will be responsible for GHG

emission reductionsa of 1.6 MtCO2 eq per

year by 2020

(range of estimates: 1.4 - 6.5)

FEVs will be responsible for GHG

emission reductionsa of 68.0 MtCO2 eq per

year by 2050

(range of estimates: 41.5 – 240.0)

Energy security

Reduction in final energy

consumption achieved due

to FEV deployment in the

European passenger car

sector

2050 Low Carbon

Economy; Resource

Efficient Europe

FEVs are expected to lead to final energy

consumption reductions of 23 PJ per year

by 2020

(range of estimates: 23 - 82)

FEVs are expected to lead to final energy

consumption reductions of 757 PJ per

year by 2050

(range of estimates: 757 – 1,469)

Change in SULTAN

energy security metric due

to FEV deployment in the

European passenger car

sector

2050 Low Carbon

Economy; Resource

Efficient Europe

FEVs are expected to lead to an

improvement in the SULTAN energy

security metricb of 0.01

c (2% of total

improvement) by 2020


FEVs are expected to lead to an

improvement in the SULTAN energy

security metricb of 10.3 (44% of total

improvement) by 2050


Industrial

competitiveness

Projected annual sales of

FEVs in Europe

Industrial Policy for

the Globalisation Era

FEV sales in Europe are predicted to be

900,000 per year by 2020 (5% of total

sales)

(range of estimates: 0.9 – 2.5 million)

FEV sales in Europe are predicted to be

13.7 million per year by 2050 (63% of

total sales)

(range of estimates: 13.7 – 21.6 million)

Projected value of ICT in

FEVs, in Europe and

globally


the Globalisation Era;

Innovation Union

The global market value for ICT content in

FEVs is predicted to be €13 billion per

year by 2020 (€1.7 billion in Europe) d

The global market value for ICT content in

FEVs is predicted to be €198 billion per

year by 2050 (€26 billion in Europe) d

Net gains in employment

due to FEVs in Europe


the Globalisation Era;

Innovation Union

Deployment of FEVs in Europe is expected to lead to net gains in direct employment of

100,000 jobs between 2010 – 2030e

(range of estimates: 63,000 – 126,000)


AEA 54

Under our scenarios, the socio-economic impact of FEVs is modest to 2020, but

increases significantly thereafter

Figure 30 provides a summary of the metrics used to provide a quantitative estimate of the

socio-economic impacts of FEVs to 2020 and 2050. It can be seen that all of the impacts

estimated for 2020 are relatively modest; this reflects the low penetration of FEVs projected

in the EU by 2020 (our ‘core GHG reduction’ scenario assumes FEVs will account for around

5% of new passenger car registrations in 2020). However, as Figure 29 shows, a marked

acceleration in FEV deployment is expected between 2020 and 2030, and as a result the

socio-economic impacts of FEVs are much higher in later time periods.

FEVs make little contribution to GHG emission reductions to 2020 but could account

for a quarter of the GHG reductions achieved in passenger cars from 2020-2050

Low deployment levels under our core scenario mean that in 2020, FEVs contribute around

15% of the total GHG abatement achieved in cars (vs. business-as-usual). However, from

2030 onwards the significant acceleration in deployment, coupled with a decarbonising

electricity sector, mean that FEVs account for around a quarter of total reductions from cars,

or around 9% of the total GHG reductions needed in the transport sector. However, under

the more aggressive ‘low biofuel performance’ scenario, FEVs account for around one third

of the total transport sector abatement over the same period.

FEVs could account for over a third of the total reduction in final energy consumption

achieved in the passenger car sector

FEV deployment forms a major part of the overall reduction in passenger car final energy

consumption between the business-as-usual and ‘core GHG reduction’ scenarios; around

17% in 2020, rising to 60% in 2030 and levelling off at just under 40% of the total reduction

between 2030-2050. Under the ‘low biofuel performance’ scenario, energy savings from

FEVs are more than double those in the core scenario.

FEVs could account for over a third of the total improvement in energy security

achieved in the passenger car sector after 2030

FEVs have little impact on energy security (as measured through a semi-quantitative metric)

to 2020 under our scenarios. This is partly due to low deployment levels, and also because

until beyond 2020, petrol and diesel supplies are not considered critically unsecure under our

metrics. However, from 2030, FEV deployment accounts for over a third of the total

improvement in energy security compared to the business-as-usual scenario.

The total size of market for ICT in FEVs that is accessible to European companies

could be several billion Euros per year by 2020, and tens of billion Euros by 2050

A conservative estimate for the market value of ICT in FEVs puts the European market at

around €2bn per year in 2020, and €26bn per year by 2050. However, if European

companies can access growing export markets, they could take a share of a global market

that is worth around ten times this in total.

Net employment gains are predicted in the literature, but no comprehensive study was

found that assessed all the indirect impacts on employment

The transition of the European automotive industry from combustion engines to FEVs is likely

to have complex and profound impacts on the number and type of jobs available. In addition,

the change in trade flows (less European imports of oil for gasoline and diesel, but more

demand for electricity and FEV materials and parts) will have secondary impacts on


AEA 55

employment. The studies found in the literature in general found that a successful transition

would lead to net job creation, but a thorough assessment of the economic impacts, though

difficult, would be a valuable addition to the body of evidence.

7.3 Socio-economic contribution of potential ICT

applications

In general, future ICT applications for the FEV were found to contribute towards European

flagship socio-economic policies through a combination of four main impacts:

• Improving vehicle uptake. ICT applications can increase the uptake of FEVs by

making them more attractive to consumers, either by decreasing the price (the

most significant factor determining uptake, according to our research) or

increasing the utility (i.e. the ‘usefulness’) of the vehicle. ICT applications that

reduce the battery requirement, through increased energy efficiency or by

integrating energy harvesting or range extenders, can help to bring down FEV

costs in the near term.

• Opening new markets or value chains. ICT applications can create new

platforms that provide opportunities for businesses to offer products and services

to add value to the consumer experience and the wider economy. In particular,

ICT that facilitates ‘V2X’ communications is seen to offer the potential for entirely

new services.

• Increasing EU manufacturing. ICT applications that are commercialised in

Europe can increase the value of goods that are manufactured in the EU - either

by increasing the volume of existing products manufactured in the EU, or by

manufacturing new products in the EU that were not previously manufactured

there. ICT applications where Europe has an existing strength, such as power

electronics, semiconductors, electric motor control and combustion engine control

and integration (for range extenders) are seen as key areas with potential to boost

EU manufacturing. In other domains, whilst other world regions have a strong

position at present, innovations in technologies that are not yet mature could lead

to opportunities for European companies that can act quickly to commercialise

them.

• Reducing vehicle energy intensity. ICT applications can reduce the amount of

energy needed to transport passengers on a given journey, either by increasing

the vehicle energy efficiency or improving the efficiency of the transport system in

general (e.g. intelligent route finding). The main benefit of improved FEV energy

efficiency is the reduced battery requirement for a given vehicle range, which has

a significant impact on vehicle cost.


AEA 56

Objective F: conclusions and

recommendations

The aim of Objective F: Conclusions and Recommendations is to draw together evidence

from the previous objectives in the study and to arrive at conclusions on future objectives and

actions that can be used to inform strategy under the next Framework Programme, titled

Horizon 2020, which runs from 2014 to 2020.

7.4 Overview of recommendations

This section identifies 20 objectives that the study team have identified as signposts to

success in the field of ICT for the fully electric vehicle over the next two decades. These can

be grouped into four categories:

1. Developing technologies and services: recommendations on technological areas

of focus over the next two decades, divided into ICT for the fully electric vehicle, and

related technologies where ICT can play an important role ;

2. Supporting a European value chain: recommended objectives for ensuring a

strong, globally competitive European value chain in ICT for FEVs;

3. Stimulating innovation in Europe: recommended objectives to create an

environment where innovation in ICT for FEVs can flourish in Europe, leading to

value creation;

4. User acceptance: recommended objectives to ensure that Europeans understand

the benefits (and drawbacks) of FEVs, in order to create a strong FEV market.

In addition, we have identified four cross-cutting impacts that are the overarching aim of all

the recommendations:

1. Industrial competitiveness is the cornerstone of the ‘Industrial policy for the

globalisation era’ flagship policy, recognising the socio-economic benefits that a

competitive European industrial sector can provide.

2. Value creation / growth is also at the centre of both the ‘industrial policy for the

globalisation era’ and ‘innovation union’ flagship policies, and underpins economic

development.

3. Market development is important as many of the potential socio-economic benefits

of FEVs are not realised until they are deployed at a large scale. In addition, a strong

European market is likely to positively impact on industrial competitiveness.

4. Sustainability is the underlying theme of Europe’s plan for a 2050 low-carbon

economy. Sustainability is one of the key policy drivers behind the introduction of

FEVs, and as such should remain a focus.

Figure 31 provides a graphical overview of the recommendations.


AEA 57

Figure 31: Areas for recommended objectives and desired impacts

Desired

impacts

Recommended

objectives

ICT

for

FEVs

ICT for

FEVs

Developing

technologies

and services

Supporting

a European

value chain

Stimulating

innovation

in Europe

User

acceptance


AEA 58

7.5 Recommended objectives

This section describes each of our recommended objectives in more detail.

7.5.1 Developing technologies and services – ICT in the fully electric vehicle

1

European OEMs to be amongst the leaders in the development of third

generation ‘ground-up’ designed FEVs with a revised ICT architecture

A ground-up redesign of the electric vehicle, taking advantage of all of the design

freedoms and opportunities for centralising the architecture, has not yet been achieved

by any OEM. Attempting this will require substantial investment in R&D and

manufacturing facilities, but could yield a revolutionary new FEV concept and/or

substantially reduce vehicle costs. ICT4FEV refer to this as the ‘third generation FEV’.

The European industry should work towards this goal with a view to being an early

player in the third generation FEV market. This could include radical new mobility

solutions as well as conventional vehicle concepts.

In particular, the third generation FEV concept will require a new ICT architecture, with

the goal of reducing complexity and number of components and interconnections,

whilst improving modularity. This goal is well defined in the ICT4FEV roadmap.

Advantages of this revised vehicle concept include the potential to reduce cost,

improve reliability and serviceability, and facilitate upgrade and eventual recycling of

components and systems. It is an enabler of many other potential innovations in FEVs

that are best implemented in this revised platform.

Achieving a revised ICT architecture is likely to require co-operation between a number

of industry players, as well as input from complementary industries (e.g. IT, industrial

automation and avionics). Europe is well positioned in this respect as one of the few

world regions that has world class R&D capability in all of these industries. It is also

likely to require new standards for communications and interoperability. Some experts

we interviewed believed that such standards will be needed in the next 5 years.

The ICT4FEV roadmap sets the goal for mass production on the third generation FEV

in 2025. This would indicate that the Horizon 2020 programme should focus on

developing the technologies, standards and value chains for delivering this concept at

scale beyond 2020. In particular, we believe that there is a role for the Framework

Programme and its PPP initiatives in bringing together different industry players to

develop a standardised architecture for the third generation FEV. Expert interviewees

cited AUTOSAR as a good example of how this could be done; they viewed the

process of developing AUTOSAR as difficult but with worthwhile outcomes.


AEA 59

2

Maintain leadership in the research, development and manufacture of

automotive semi-conductors and power electronics for FEVs

There is a need to develop more efficient power electronics components in order to

maximise the range of FEVs. Research continues into the use of new materials to

create more efficient power electronics which can operate at ideal voltages.

Power electronics has been identified as a key strength for European companies, and

is a complex, high value-add technology which means barriers to entry are high and

low labour costs are less of an advantage. Europe also has a dominant position in

automotive semiconductor manufacture, which is likely to feature prominently in the

FEV value chain. However, this position is under threat from new market players, and

European suppliers are considering moving downstream manufacturing and hardware

design out of Europe to reduce costs.

There is a large and prosperous market for the semi-conductor industry, including

applications in power transmission and distribution, smart grids, wind and solar energy,

road and rail, and consumer electronics. The worldwide market is valued at €229

billion (Europe €29billion) in 2010. In the automotive sector, both FEVs and

conventional vehicles are expected to utilise an increasing level of ICT, with FEVs

leading in advanced content. Overall, the market for semiconductors and power

electronics is projected to remain very strong in Europe and internationally.

Experts we interviewed expressed the view that R&D in Europe is currently well

supported and delivering good results. They felt that the high investment cost needed

for production facilities was the main concern for companies looking to manufacture in

Europe. With this in mind, our recommendation for future European R&D is that the

existing strength in R&D projects is maintained, but that support is also offered to

assist the downstream value chain and encourage them to stay in Europe.


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3

Build on an existing strong communications infrastructure to become

a world leader in after-sales software and services, extracting the

maximum value from connected vehicle systems for FEVs

Europe is well placed to capitalise on the potential new value creation in after-sales

software and services, using ICT, connectivity and complementary technologies such

as smart phones. Europe has the necessary ingredients to achieve this:

• A large, relatively affluent, educated, customer base

• High levels of smart technology penetration (e.g. smart phones)

• Widespread and well-established wire and wireless communications

infrastructure

However, the US currently dominates the ‘connected vehicle’ marketplace, with many

European OEMs using US companies to supply vehicle telematics solutions. In this

area, software is the major value-add, as hardware is often standardised and not used

for brand differentiation. Therefore barriers to new entrants are relatively low.

Creating a strong FEV communications ecosystem, encompassing communication with

power networks and transport infrastructure, would create new value chains in

vehicle/transport system integration and vehicle/grid integration. Companies looking to

participate in these value chains would be very likely carry out research and

development in Europe. There are few other world regions with the necessary

ingredients to begin implementing these services.

European roadmaps indicate that first generation V2X technology should be

commercialised by 2016, with second generation technology being developed to be

implemented in the next generation of mass-produced FEVs in 2020. Therefore, the

objective during the Horizon 2020 programme would be to commercialise existing

technology in Europe at the same time as developing the next generation technology.

Experts identified standards as being key to developing ‘V2X’ (vehicle to vehicle,

infrastructure, grid, etc.) communications. They also felt that regulations, particularly on

safety and security, would need to be monitored to ensure that they are appropriate

and do not put unnecessary barriers in place of technology development. The EU has

a role to play in working with industry to develop standards and update regulation, and

ensuring that the regulatory framework ensures quality and safety for transport users

whilst providing a competitive environment in which to develop products and services.

Another key issue identified by experts was the need for co-operation amongst a large

number of players in the ‘V2X’ space in Europe. In one dimension, the complete

vehicle communications value chain encompasses hardware providers, telecoms

providers and telematics service providers. In another dimension, each country in

Europe has a number of charging service providers, road infrastructure operators etc.

A single European solution will require many of these players to work together.

Roaming and clearing house solutions are being addressed under the ‘Green eMotion’

project, but it is highly likely that development will need to continue beyond this project

and this would have the value of bringing the large number of vehicle, charging

infrastructure and utility providers together.


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4

Establish a European value chain for the research, development and

manufacture of batteries, their management systems and their

integration into FEVs

While Europe does have companies designing, developing and manufacturing electric

vehicle batteries, it does not appear to be challenging the dominant position of Japan

and South Korea in this area. However, only limited participation in this value chain

(i.e. most battery packs are imported into Europe, having been designed and

manufactured elsewhere) would mean significant revenues leaving Europe. This has

implications for the value of the European automotive industry.

Our analysis suggests that it will be difficult for Europe to gain a significant foothold in

the li-ion battery manufacturing value chain for current generation batteries. This is due

to the substantial know-how and IP held by other regions, notably Japan and South

Korea, and the very large sums of money already invested in manufacturing facilities in

these and other regions such as the USA. However, FEVs designed from the ground

up with a centralised control architecture will require very close co-operation between

the battery manufacturer and the OEM.

In addition, it is considered that manufacturing batteries in the target market will be

preferable due to the costs, risks and uncertainties in shipping full battery packs.

Therefore, we expect that a strong European FEV market would lead to batteries

packs being manufactured in Europe (though it is not clear how much of the upstream

activity will take place here). We would also expect an opportunity for OEMs to

contribute to the development of holistic power management systems that integrate

vehicle, infrastructure and battery control strategies. For the current generation of

batteries, our view is that Europe should aim to create favourable conditions for non-

European manufacturers selling batteries into Europe to locate manufacturing plant

here.

Some experts we interviewed believed that, whilst Europe has missed the opportunity

to lead the development of first-generation batteries, the world-class R&D that takes

place in Europe means that new technological breakthroughs in next generation

technology could be achieved and then commercialised in Europe. We feel that

Europe should target additional funding specifically at promising battery technologies

that are ending pre-competitive R&D to support their development into marketable

products. Some experts also recommended that Europe support R&D into production

techniques and investment in plant.


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5 Develop expertise in energy harvesting technologies

Technologies to improve energy recapture will be an essential part of increasing the

overall efficiency of future FEVs. Given the cost challenges facing battery technology,

affordable energy harvesting systems may be a more cost-effective way of extending

vehicle range in the medium term. In addition, if European-developed energy

harvesting technology reduces the need for batteries that are not produced in Europe,

the ‘made in Europe’ value of the FEV can be increased.

The primary opportunity is regenerative braking, where existing systems are often

unable to recapture all the available energy due to limitations in the speed at which the

battery can be recharged without overheating or sustaining possible damage.

However, combining effective recapture, storage and control technologies can

overcome this problem. In the medium term, energy harvesting from photovoltaics and

low-grade heat (e.g. from combustion engine exhausts) could also feature in FEVs.

Experts we interviewed reported that the inability to fully utilise regenerative braking

energy is one of the biggest losses of efficiency in current generation battery electric

vehicles. Whilst Japanese companies have developed extensive know-how through

leading hybrid powertrain development, some EU companies also have expertise from

their involvement in Formula 1 kinetic energy recovery system (KERS) technology.

Interviewed experts had the opinion that, at present, a range of technologies are being

developed through R&D, but that in the next 5 years the most promising technologies

need to be brought through to commercialisation. The ICT4FEV roadmap sets the goal

of optimised regenerative braking being ready for commercial use in 2nd generation

FEVs in 2016. This would indicate that developing the supply chains to bring energy

harvesting technologies to market should take place in the early part of the Horizon

2020 programme.


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6

Become a leader in the application of vehicle health management for

FEVs

Vehicle prognostics and health management (PHM) has a high relevance for FEVs,

particularly if a centralised architecture is preferred, where monitoring of the vehicle

battery, motor, software etc. can all be integrated to provide holistic health

management. Health management and prognostics for vehicle batteries offer a way to

reduce the risk to battery owners, whether they are individual FEV drivers or mobility

service providers. De-risking battery ownership would help to overcome one of the key

barriers to FEV deployment.

Interviewees active in this discipline stated that there is no single European

organisation or roadmap for prognostics and health management. This is a key area

for potential cross-fertilisation with the aviation industry. Some co-ordination exists at

the Member State level, but co-ordinated European planning could help to drive

development and foster links between industries that could make use of PHM,

including automotive, aviation and industrial automation companies. Some

interviewees speculated that the PPP model may work well for this purpose.


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7.5.2 Developing technologies and services – related technologies where ICT

can play an important role

7

Become the acknowledged world leader in integrating range extender

technologies into fully electric vehicles, with advanced powertrain

control systems

The European automotive industry leads the world in the design of small, efficient

combustion engines. It is projected that over half of the new vehicles sold in 2050 will

feature a combustion engine. However, the majority are expected to act as range

extenders in FEVs, gradually replacing conventional and hybrid powertrains. A more

gradual transition away from internal combustion engines to battery electric vehicles,

by the phased introduction of hybrids, plug-in hybrids and range-extender electric

vehicles, fits many experts’ view of the evolution of the passenger car market and may

suit European OEMs, who are heavily invested in internal combustion engine

technology.

In addition, range extenders help to overcome some of the key barriers to uptake of

FEVs today – namely, the high cost and low energy density of present-day batteries. In

this way, range extenders can be an enabler for mass-market uptake of FEVs.

Minimising the battery requirement also reduces the environmental impacts of vehicle

production and disposal, where batteries have a high impact due to the materials and

manufacturing processes used.

Europe has much proprietary technology in combustion engine design, and it is not

suggested that further pre-competitive R&D is needed in this area. However, the

control and integration of combustion engine range extenders into FEVs requires

integration into a vehicle powertrain management system. Europe could leverage its

existing strong position in internal combustion engine control to take a leading role in

the development of advanced control systems to integrate range extenders into FEVs.

This would include strategies for the control and optimisation of range extenders in an

overall power management strategy.

The ICT4FEV roadmap envisages several generations of range extender design, from

an optimised combustion engine to a highly integrated, modular design suitable for a

revised FEV architecture. It anticipates the first generation being market-ready by

2018, and development continuing into the 2020s. Therefore, Horizon 2020 would

need to support commercialisation of early range extenders in conjunction with

supporting development of next-generation technology.


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8

Achieve the successful full integration of FEVs with the electricity grid

through the use of bi-directional smart charging

Smart charging is pivotal to the environmental case for FEVs. Flexible scheduling of

vehicle charging to match demand and network capacity can avoid the need to use

expensive and carbon-intensive spinning reserve, and can reduce demand on

electricity distribution networks. This requires some level of communication between

vehicle and grid to determine when charging should take place. A market-based

solution would be a good end objective. Smart charging will become an important

requirement once FEVs achieve mass take-up, to prevent excessive peak loading. Our

research indicated that most spectators anticipate a significant increase in FEV uptake

between 2020 and 2030, therefore these solutions will likely need to be in place in the

2020s.

In the longer term, smart charging could become bi-directional, which can bring

additional benefits. Vehicles capable of feeding energy back to the grid could be used

for power balancing and grid stabilisation. One interviewee postulated that a group of

vehicles, aggregate into a single ‘virtual powerplant’, could potentially replace fixed

infrastructure in the EU energy market. This could allow FEV users to gain financial

returns by effectively increasing the utilisation of their battery. It is considered unlikely,

however, that FEVs could be used for larger scale energy storage, since the total

energy capacity would not be very large even with a relatively high penetration of

FEVs.

Managing the interaction between FEVs and the grid requires co-ordination and co-

operation between numerous participants in the value chain, including vehicle

manufacturers/mobility service providers, charging infrastructure providers, utilities,

grid infrastructure operators and consumers. It also requires the establishment of many

standards to ensure consistent operation between utilities and Member States. The

CARS21 consortium recently recommended that an EU platform be launched to

exchange information on best practice between companies and Member States. Co-

ordination and development of standards will also need to happen at a European level.


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9

Ensure the environmental impacts of the production and disposal

elements of an FEV’s life cycle are minimised

One of the primary motivations for incentivising the uptake of FEVs in Europe is to

reduce the environmental impact of road transport. Our analysis suggests that towards

2030, as the electricity mix undergoes significant decarbonisation, vehicle production

and disposal activities begin to dominate life cycle environmental impacts from FEVs

(particularly battery electric vehicles). At the same time, a surge in the uptake of FEVs

is expected between 2020 and 2030, meaning that FEVs account for a significant part

of overall vehicle production for the first time. It is therefore important to develop ways

of reducing these environmental impacts to ensure that FEVs continue to improve their

environmental performance. Minimising energy and material consumption in the

production stage and optimising material recovery and recycling at disposal can benefit

the automotive industry as well as helping to pre-empt potential criticism of FEVs in

comparison to conventional vehicles.

During our research, it became clear that the majority of work on quantifying the

environmental impacts of FEVs (particularly greenhouse gas emissions) has focused

on the use phase. As FEVs enter mass production, a more comprehensive life-cycle

analysis of FEVs, examining the supply chain, manufacturing and end of life, would be

a useful activity to understand the real environmental benefits of FEVs.

Our research indicates that the main production and disposal impacts of electric

vehicles are associated with the battery. Europe is developing promising technical

capability in battery recycling, which will be important as the batteries from first-

generation vehicles approach retirement in the next decade. A promising nascent

industry, coupled with an increasing supply of end-of-life batteries, presents an

opportunity for a strong future European industry.

Evidence gathered from field trials and consumer surveys indicates that early adopters

highly value the sustainability aspect of FEVs, including the use of renewable

electricity. Experts we interviewed also highlighted the importance of generating

positive stories around FEVs and sustainability as a way to improve their appeal. A

flagship “greenest FEV” demonstrator that prototyped the technologies capable of

improving the environmental performance of FEVs could help to highlight the

environmental benefits to consumers.


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7.5.3 Supporting a European value chain

1

Assist European OEMs to adapt to the electric vehicle value chain,

keeping inter-company collaboration within Europe to supply ICT in

FEVs

European OEMs face a shift in the value chain from ICEVs to FEVs that sees the value

move away from their core competencies (e.g. ICEV powertrain and after sales

components) to new areas (e.g. battery and mobility-related services). This is largely

being driven by legislation designed to reduce the environmental impact of road

transport. European OEMs have significant investments and know-how in ICEV

technology. In addition, they lag Japanese OEMs, who have built up significant IP and

know-how in electric powertrains through development and successful marketing of

hybrid vehicles. Overall, our assessment is that European OEMs are not particularly

well placed to make a swift transition to FEVs. OEMs from other world regions may see

this as an opportunity to challenge for market share in the European passenger car

market, which is unlikely to see overall growth in the next few decades.

Therefore, European OEMs will need to decide on strategic moves to protect their

position – either developing new skills, acquisition of key technologies, strategic

alliances or broadening their business model (e.g. moving into mobility services). In

particular, the ICT component of FEVs is expected to be significant, up to 40% of the

vehicle value, but presently it is the supply base rather than European OEMs

themselves that has competence in this area. It may be that even closer collaboration

between OEMs and existing suppliers skilled in vehicle ICT content will be needed.

Whatever their strategy, supporting European OEMs in adapting to vehicles with high

ICT content reduces the risk of them losing market share to non-European

manufacturers. Our research indicates that other world regions are increasingly

adopting a strategy of supporting domestic industry, rather than allowing market forces

to determine winners from a global pool of competitors. In this context, targeted, smart

support is important in maintaining a strong value chain within Europe.

Policymakers face the difficult challenge of creating a framework that stimulates the

huge changes in the transport system needed to meet environmental goals, whilst

ensuring that European industry can keep up with the pace of change and adapt their

business models to remain competitive. Experts we interviewed stated that the scale of

transition is so great that it can only be made by involving the large companies as well

as small, agile companies.


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2 Encourage and support innovative SMEs in the field of ICT for FEVs

In order to secure growth in the EV-ICT sector, particularly in new value chain areas,

Europe should support SMEs operating in this area. Due to their size and flexibility,

SMEs are able to develop new business models and services rapidly, particularly in

markets where entry barriers are low and there is scope for innovation. This is

highlighted by a number of industry reports, most recently the CARS21 final report. In

this way, SMEs can help to drive change either by competing with, or collaborating

with, established players. SMEs have a high propensity to manufacture in Europe, as it

is easier and less resource intensive for them to establish quality assurance and

minimise supply chain risk.

SMEs face a number of barriers in Europe, which are reasonably well documented.

Challenges include access to affordable finance, access to R&D funding and the

resources to scale up their manufacturing activity. Experts we interviewed were clear

that SMEs struggle to access European R&D funding at present. The complexity of the

application process, partnering requirements and time to grant are all prohibitive.

However, some experts question whether European R&D projects are an appropriate

route to fund SMEs in any case, when Member State and even regional funding can be

much simpler, more tailored and easier to access.

There are a number of ways in which SME involvement in the automotive value chain

can be encouraged. Further research could be conducted to better understand the

specific problems SMEs face in the FEV value chain, and the best ways in which

support can be provided. It will also be necessary to understand the interactions

between SMEs and the large OEMs, to ensure that supporting one group does not

undermine support for the other. The objective should be to foster working

relationships between European SMEs and larger companies to promote a European

value chain.

In our interviews, experts cited a number of possible routes to supporting SMEs:

Simplified or fast-track EU funding for R&D, or smaller-scale projects with less

requirements for pan-European collaboration, would be easier for SMEs to

access. This was highlighted in the recent CARS21 final report.

Assisting SMEs with the means to bring promising products to commercial

manufacture, for example by assisting with access to finance or even by

providing common prototyping or “foundation manufacturing” facilities (the

example of the CMP (Circuits Multi-Projets) in France was given).

Co-ordination between national/regional programmes that support SMEs and

European programmes, so that SMEs can develop Europe-wide networks and

so that larger organisations can more easily locate SMEs to bring in to

European project consortia.

Assisting SMEs in protecting intellectual property through the European patent

system, which some experts believe is prohibitively expensive and complex for

SMEs (although work is underway to address this).


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3

Create regional centres of excellence for key FEV technology areas,

combining research, development and commercialisation activities

Creating a region with a particular specialism and strength in a key area of technology

for FEVs will help to attract further investment and generate additional expertise.

Silicon Valley is a good example of the way in which ‘agglomeration’ benefits are

valued. In addition, the recent CARS21 final report highlighted that regional clusters

“demonstrate a higher resilience to economic crises, resist delocalisation of industries

and play a key role in anticipating technological change”. In other industry examples,

regional clusters also provide conditions for small, innovative companies to achieve

rapid growth.

The ingredients for good regional clusters are well defined: they should include large

and small companies, research centres and world-leading universities, and be

supported by strong public and private sector financing and favourable framework

conditions. Experts we interviewed generally supported the idea that concentrated

funding was more effective than dispersed funding, with one OEM expert going as far

as to say: “The worst thing is to spread money thinly and wide”.

Whilst the benefits of regional specialisation are generally acknowledged, it is also

clear that there are barriers to establishing regional centres of excellence in Europe. In

particular, the Member States which make up Europe have their own priorities and

compete internally for investment, finance, skills and growth. This makes it difficult to

choose a single area to target funding, as it will inevitably benefit one Member State at

the perceived expense of another. Particularly in the case of ICT for FEVs, it would

likely involve concentrating funding in the few areas that already show some strength

in this area (e.g. Germany, France, the UK).

Previous attempts to circumnavigate this issue have met with mixed results, experts

say. An example given in interviews was the EIT-ICT (European Institute of Innovation

and Technology) lab, which comprises six locations around Europe. One expert we

interviewed was not convinced this approach was working because of conflicting

national interests.

However, experts cited aviation as an example where Europe has successfully

developed regional specialisation. One possible approach could be to agree on

national specialisations and then encourage tailoring of national and regional level

funding to establish centres of excellence.

Despite the barriers that exist in Europe, the universal support for centres of

excellence in the literature and with the experts we interviewed is clear. Therefore, we

recommend that this option is investigated thoroughly with a view to identifying routes

to establishing regional clusters within Europe.


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4

Address skills shortages in electrical, electronic and mechatronic

engineering disciplines

Both the literature and expert interviews highlighted an increasing shortage of

engineers skilled in mechatronics. Similarly, the CARS21 final report specifies a need

for labour with ‘polyvalent qualifications’ such as me-chem-tronics. The integration of

electronic, chemical and mechanical functionality is becoming increasingly prevalent in

the automotive industry in general, and particularly in electric vehicles. Europe should

consider action to improve the supply of labour skilled in this discipline, to complement

world-leading quality of skilled labour elsewhere in the automotive industry. In addition,

the possibility for radical new vehicle architectures in FEVs means that training specific

to FEV design may be required in the longer term.

There is little specific information in the literature on steps that need to be taken to

address this need for a change in the skills in the automotive workforce. The FP7-

funded project ‘JobVehElec’ is intended to further research in this direction, but had not

produced results at this time this project was concluding its research.

Experts we interviewed identified several areas where action could be taken:

Industry should take part of the responsibility to make a career in automotive

engineering more attractive for young engineers.

There was a general consensus that the education system needed to produce

more engineers with polyvalent ‘mechatronic’ and ‘me-chem-tronic’

specialisation in addition to more traditional mechanical, electrical and materials

disciplines.

Some industry bodies stated the belief that the engineering profession does not have sufficient social status, in particular blue-collar skilled manufacturing engineers.

To continue Europe’s world-leading academic research into FEV-related

technologies, Europe should continue to attract the best academic and

research scientists from around the world.


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7.5.4 Stimulating innovation in Europe

1

Create a uniform single market for FEVs, components and services

across Europe by adopting common standards and harmonising

incentives

The development of European standards is progressing but is widely thought to be

slow compared to other world regions. One reason for this is the governance system of

the European Union, with no single entity having full executive power, compared with

single nation states in other regions. In addition, liberalised markets and multiple

Member States mean that standards need to be agreed between a large number of

stakeholders spanning the automotive, electricity and ICT industries.

However, as one of the largest FEV markets in the world, with one of the largest

forecast growth rates to 2030, the European market has significant power to impose

standards that suit its industry. These need to be formulated and adopted quickly to

prevent other standards from penetrating the market. There are likely to be a host of

new standards required in FEVs in the coming years as new technologies reach

commercialisation, for example in V2X communications, smart grid functionality, and

internal wired and wireless architecture. The adoption of technical standards can lower

barriers to entry for new players and reduce development times, presenting both

opportunities and risks to the European automotive industry.

Along with standards, legal and regulatory changes may be needed in some areas to

facilitate technological development. One of the most commonly cited examples is in

the domain of driver assistance and autonomous driving. Advanced panning is needed

between industry and government to ensure that new technologies ready for

commercialisation do not have unnecessary legal barriers (whilst protecting the

interests and safety of European citizens). The need for advanced planning in Europe

is particularly acute, as regulatory changes need to be implemented across Member

States.

In view of the critical nature of standards and regulation, and learning from the

experience with charging connector plug standards, experts we interviewed felt that

the process of agreeing standards and changing regulation should be reviewed and

improved where possible. In addition, whilst European roadmaps already look at

standards, a more detailed road mapping process to understand which standards are

needed at what time could be a useful exercise.


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2 Support later stages in the innovation cycle

Current funding focuses on supporting early stage R&D. While it is to be expected that

a significant proportion of advanced research work will not lead to technologies which

are suitable for mass production and marketing, industry has asked for more to be

done to ensure that there is better support for suitable innovations to be progressed

through the mainstream development process and thus to production. This has been

made clear through our expert interviews, the CARS21 report and is also reflected in

the stated aims of the Horizon 2020 framework programme. This could include product

development, production of test fleets, and demonstration activities. In addition, it has

been suggested that other EU instruments such as the EIB, CIP and Structural Funds,

and their Member State equivalents, could be used in a co-ordinated effort to stimulate

innovative activities.

Experts we interviewed universally supported the idea of supporting closer to market.

Specific ideas for implementation included:

Basing collaborative partnerships for R&D projects on a viable supply chain,

avoiding competitors gaining proprietary knowledge.

Providing fast-track funding where time to grant is much shorter, for high tech

areas where research is time critical.

One expert highlighted that privately funded R&D projects would often have 6-

monthly or annual milestone review points where the project could be dropped

if results are not promising, and suggested this approach could be applied to

publicly funded projects.

Providing a process whereby projects that have been successful in one stage

of the R&D process can gain follow-on funding for the next stage of

development quickly and simply.

Using other, non-R&D funding instruments to support high investment costs in

manufacturing and production of newly developed technology (e.g. EIB lending,

CIP, Structural Funds, Member State support).

Using public procurement to provide an early market for technologies

approaching commercial readiness.

Our research into support regimes in other countries, particularly China and the USA,

found examples where close-to-market support was provided. Further research into

global examples could inform European actions.


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3

Co-ordinate and streamline public R&D funding at a European and

Member State level

Many major automotive companies are global in their scope, and most activities are at

least on a European level. Therefore, the most efficient co-ordination of R&D strategy

would also be on an EU level. In addition, strong co-ordination between European and

Member State efforts would benefit the industry. Interviews with experts, in addition to

recommendations in the CARS21 final report, indicate an industry view that presently

funding at EU and Member State levels can work at cross-purposes. A further

recommendation from the CARS21 final report is to concentrate funding, as they view

the more concentrated efforts of other world regions as a competitive benefit.

Some experts highlighted the important and differentiated role that Member State

funding can play; it can be more tailored to local needs, more flexible, and often has

shorter time to grant. This can suit different types of project with different partner

organisations, for example smaller companies.

In addition, some co-ordination already takes place, for example under the EGCI and

ERA-NET Transport (ENT) programmes. The information exchange that is facilitated is

considered beneficial, and some experts believed it should be strengthened. Co-

ordination between Member States could also take the form of national specialisations,

in line with another recommendation from this project.

4

Investigate the role of patenting in FEV technology, with a view to

incentivising patenting if necessary

Our analysis has indicated that Europe is significantly behind Japan and Japanese

companies in both applications and granted patents in the domain of ICT for the

electric vehicle. Some experts have said that this is not an issue, due to the ability to

trade patents or circumvent patented design features, and because patents have less

value in the fast-moving world of EV ICT. However, others feel this is a problem that

could build into a competitive hindrance in the future. Therefore, we feel that work is

needed to better understand the role of patenting in innovation and industrial

competitiveness in the automotive industry, and to assess whether action is needed to

incentivise patenting in Europe.

One particular area that has been highlighted in expert interviews is software patenting

in Europe. Several experts said that their organisations had found software patenting

in Europe more difficult than in the USA and Asia, which is an advantage for

companies operating there. This could also be investigated in future research.


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7.5.5 User acceptance

1

Ensure a continued strong development of a European FEV market as

a route to securing a European value chain

Our research indicates that one of the key factors that influence automotive

manufacturers in deciding where to locate product development and manufacturing

facilities is the future market potential within a region. This is due to a number of

factors: the cost, risks and uncertainties in shipping products long distances; currency

and import regime shifts; and the ability of the supply chain to tailor their products to

the market. The increasingly globalised nature of the automotive industry means that

OEMs nominally registered in one world region can have very significant operations in

another region, based on their view of the market outlook.

As a result, it is very important that European policy works towards stimulating a strong

market for FEVs in Europe, in order to secure a strong Europe-based value chain. This

is particularly important in the context of strong growth in private car sales in other

world regions due to economic growth and demographic shifts, meaning that there is a

strong pull to shift development to these regions.

Experts we interviewed highlighted that European governments have a significant role

to play in providing stable conditions for investment in the FEV industry. Commitments

in policy, incentives etc. of at least 5 years are needed to allow significant investment

decisions in new manufacturing capacity to be made.

2

Develop business models and technologies that reduce the upfront

cost and/or total cost of ownership for FEVs

One of the key barriers to uptake of FEVs in Europe is the significant price premium of

an FEV compared with an equivalent conventional vehicle. Reducing this price

premium will have a significant impact on private users in particular, who are extremely

sensitive to capital cost. Business vehicle owners are more likely to take a holistic cost

of ownership approach, therefore efforts to reduce the total costs of owning and

operating an FEV will also stimulate uptake in this market.

Currently some European Member States are using purchase subsidies to reduce the

vehicle capital cost in an attempt to stimulate market uptake. However, these are not

sustainable in the long term, and do not help European businesses to develop new

technologies or business models that reduce the cost to consumer once the subsidy is

removed. Some new business models are emerging; in particular rental schemes that

attempt to overcome the capital cost premium. In addition, new value areas such as

vehicle-to-grid can generate a revenue stream for the vehicle owner that can offset the

cost of ownership. These types of development will be very important as long as FEVs

continue to be more expensive than their conventional counterparts. European R&D

programmes could provide funding for large-scale demonstrations that trial new

business models (e.g. mobility as a service) or the technology that enables them (e.g.

ICT for remote battery health monitoring).


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3

Educate the mass vehicle owner market on the realities of FEV

ownership

Users who participate in trials of FEVs generally experience a shift in attitudes

compared with their preconceptions before trying the vehicles. In the period from 2020

to 2030, FEVs need to make the transition from being a niche technology taken up by

early adopters to a mass-market product. Therefore, work needs to be done before

2020 to educate mass-market consumers so that they become comfortable with the

concept of owning an FEV.

Field trial results generally show a shift in attitude triggered by actual first-hand

experience of using and FEV. One way to change public perception, therefore, is to

facilitate exposure to FEVs. This could be through incentivising rental companies and

car clubs to offer FEVs, using FEVs in driving lessons or tests, or public schemes like

the Parisian ‘Autolib’.

In addition, experts we interviewed suggested that there is a need to develop projects

and trial deployments of FEVs that demonstrate the benefits and potential of the

technology, in particular the advanced ICT elements. In addition, some experts

emphasised that the biggest undercurrent of negativity centred on power station

emissions, so demonstrations where FEVs are integrated with green

electricity/renewables generate positive examples for the public.

Finally, field trial interviewees stated that most trials to date involved early adopter

demographics: typically male, well educated, above average income and with a high

affinity for new technologies. Therefore, whilst OEMs have gathered data about early

adopter responses to their vehicles, they have not trialled with mass market

demographics to a significant extent. A dedicated study and/or larger trial involving a

wider demographic may provide useful data in this area.


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Appendix 1: Expert interviews

A vital element of this study has been obtaining expert opinions from within the automotive

industry. The ICT and FEV sector is fast evolving and so it is vital to gather up-to-date

information. In addition some of the data necessary for the specific requirements of this

project may not have been available within the public domain. Stakeholder interviews have

also provided a means of validating and cross-checking the findings from the literature

review.

For this task, a number of interviews were undertaken with experts across the FEV industry.

A broad range of organisations, sections of the value chain and levels of engagement with

European R&D programmes were covered. Stakeholders were guaranteed anonymity in

order to obtain their full and honest opinions. While it is not possible to reveal names of the

individuals, we can provide some non-specific information on the experts. The following is a

non-exhaustive list of the interviewees:

Job title Organisation type

Former head of R&D OEM

Senior expert Aerospace industry

Director Automotive industry body

EV technology lead Utility company

Research co-ordinator Automotive services provider

Vice president, marketing Telematics service provider (SME)

Director of business development, EVs OEM

Head of digital technologies (IEEE member) European university

Project developer EV service provider

Research co-ordinator Automotive industry body

Head of future technologies OEM

Head of funding strategy OEM

Vice president, vehicle design OEM R&D centre

Head of electric mobility Engineering company

Project leader, EV research projects OEM

CEO Tier 1 supplier (SME)

Chief marketing manager OEM

Research co-ordinator Automotive service provider


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Job title Organisation type

Policy manager EV service provider

R&D project lead, embedded systems Tier 1 supplier

R&D project lead, system integration Engineering company

Interviews were conducted both face to face and over the phone (depending on locations),

with the typical interview lasting between one to two hours.

The interviews represent the personal opinions of the individual experts and do not

necessarily reflect company positions.

European Commission

The Impact of ICT R&D on the large-scale deployment of the electric vehicle

Luxembourg, Publications Office of the European Union

2012 – Pages: 77

Impact of ICT R&D on the deployment of electric vehicles

Automotive

ghg emission reductionsa

transport white paper

swiss federal office

ghg emission savings

air quality pollutants

separate control units

uniform single market

fully electric vehicle