SIMI Insights: Electric Vehicle Trends

Trends in electric vehicle markets

In recent years, there has been a shift towards cleaner engine technology in cars with the traditional Internal Combustion Engine (ICE) being re-engineered or indeed being replaced altogether. Globally, car manufacturers have invested billions of Euro in Research and Development in engine technology, and this has resulted in the introduction of mild-hybrid electric vehicles (MHEV) and plug-in hybrid electric vehicles (PHEV) while battery electric vehicles (EVs) are gaining significant growth in new electric vehicle market trends around the world. Manufacturers have recognised that EVs are the future for many of the big car brands. There is already a push by governments around the world to promote EV sales, so investment will become necessary to ensure the long-term survival of car manufacturers and dealership networks. What about electric vehicle trends?

An MHEV has a petrol or diesel engine with an electric motor. The battery is charged by the engine. A PHEV has a petrol or diesel engine, as well as an electric motor but the battery can be plugged in and charged like a fully electric car. An EV is powered by an electric motor and rechargeable batteries which are charged by plugging it in to a charging point either at home or by using the national charging network.

Petrol and diesel cars account for 20% of Ireland’s energy use and CO2 emissions, with CO2 widely acknowledged as being a major contributor to climate change. However, EVs and variations thereof are responsible for 58% less CO2 emissions than their traditional ICE counterparts.

Figure 1.1 below shows the sale of new petrol and diesel cars in Ireland from 2007 to 2020 and the tail off in sales in the last few years is evident, particularly for diesel engines.

Figure 1.1 New Diesel and Petrol Cars sold in Ireland 2007 to 2020. [Source: adapted from SIMI Motorstats, 2021]

Figure 1.2 below shows the rapid increase in EV, MHEV and PHEV sales since 2015.

Figure 1.2 New MHEV, PHEV and EV sales in Ireland. [Source: adapted from SIMI Motorstats, 2021]

Electric cars and their market share

The number of EVs sold in Ireland has been increasing steadily, particularly in the last three years. There were 1,233 EVs sold in 2018 with a market share of 0.98%, 3,444 units sold in 2019 with a market share of 2.94% and 4,013 units in 2020 with a market share of 4.54%. There were 6,927 petrol MHEVs sold in 2018, with a market share of 5.51%, followed by 10,193 units in 2019 with a market share of 8.70%, and 10,474 units in 2020 with a market share of 11.86%. Given the fact that the new car market declined year on year in 2019, by 7%, and in 2020, by 24%, this is all the more impressive and is a significant indicator of the switch from the traditional ICE.

In terms of new engine technology, Tesla has been the major disruptor to an electric vehicle industry trends which had not seen any significant innovations in engine technology in 100 years. Many of the major vehicle manufacturers are now fully committed to the development of EV engine technology. It is expected that EVs will represent 30% of the European new electric vehicle market trends by 2025, as increased production volumes coupled with growing demand is leading to lower priced EV models. While EVs do cost more than petrol or diesel cars, the acquisition price gap is narrowing, and, along with government grants and tax incentives, the price gap is getting smaller. In Ireland, these incentives include a purchase grant of up to €5,000, VRT relief up to €5,000, home charger grant, low motor tax, reduced road tolls and zero BIK on company cars. In addition, EVs are 70% cheaper to run than diesel or petrol cars. Routine maintenance costs are also lower.

Impact for Motorists

What about trends in electric vehicle markets? As the market segment grows, the selection of EVs also grows to suit most driving needs. Gradually, consumers’ concerns about price and so-called ‘range anxiety’ are being allayed by improving consumer information and battery technology. According to the Sustainable Energy Authority of Ireland (SEAI), driving range was a significant concern of motorists 10 years ago, but now most new EVs can travel between 300 kms and 500 kms on a full charge. A typical EV must be charged two to three times a week, depending on mileage driven. The average commute for drivers in Ireland is 50km per day, so switching to an EV in Ireland is arguably an easier transition than in countries with more congested traffic routes and longer commuting times. Charging an EV in the home is the simplest and most cost-effective way to charge. In addition, there are more than 1,200 public EV charge points available across the country. This charging infrastructure will increase as demand for EVs increases in the coming years.

Impact for Motor Dealership

While EVs are becoming more desirable for motorists, there will be significant implications for the business model of vehicle manufacturers and associated dealership networks. Just as the need for innovation in engine technology has been jolted, out of sheer necessity, the traditional dealership business model will be disrupted in the years to come as the demand for EV trends increases. For many brands, this change has already started. An EV does not need service and maintenance like a car with a traditional ICE does; there is no oil to change and there are far fewer moving parts. Generally, EVs have less wear and tear, less servicing requirement, less warrantable repairs – all representing a huge challenge for automotive companies. Dealerships that make much of their net profit on vehicle service works, will find greatly reduced net profits in the age of EVs and digitally connected vehicles. The biggest disruption will be a reduced opportunity for after sales revenue and the biggest challenge will be to find replacement revenue streams. As part of this, dealership management will have to understand the impact of selling EVs on customer retention rates; anecdotal debate suggests that reduced traditional service revenue opportunities may be offset by greatly improved retention rates, which would have a positive impact on after sales revenue. Further research is required on this latter point but ultimately dealerships will have to learn and adapt. It will be imperative that dealers become product experts, knowing all the vehicle functionality etc. and how it interacts with the consumer because so much of the new engineering and technology in cars will be new to motorists. Learn more about electric vehicle trends. Dealership sales personnel will have to be familiar with and explain to customers the various incentives and reliefs which are available for the acquisition of EVs. Motor dealers will therefore have to invest in new equipment and technical training and this change will be largely driven by the manufacturers.

Electric vehicle market trends

Dealerships will need to adapt and revise their business model in tandem with their franchise partners and with the additional investment required and changes to the variable operations of a dealership, there will be a renewed focus on margins and KPI dashboards. Businesses will have to be set up to handle increased online sales, to deal with the changes to recurring revenue from service and parts, and marketing and sales strategies will have to be fully aligned with those of their franchise partners. As part of any change strategy, there will be an inherent need for information and new insights from a growing number of new data sources. Successful businesses will adapt quickly and understand new customer needs, business processes, associated data flows, revenue generators and cost drivers. More important than ever before will be the critical need to have pertinent business information in real time to enable timely and effective decision making.