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Announcer

Welcome to the EY Advanced Manufacturing and Mobility Business Minute podcast series, where EY professionals explore the critical business issues impacting our industry today.

Moderator

For today's topic, we are going to discuss the recently released EY Electric Vehicle Country Readiness Index study. Using proprietary EY data and analysis, the Index assesses 14 key automotive markets covering over 90% of the global vehicle production — to determine each country's readiness to launch electric vehicles (EVs) based on supply, demand and regulatory factors.

Here with us today to discuss the report and its findings are Gaurav Batra, EY Global Advanced Manufacturing and Mobility Analyst Team Leader, and Anuj Chandna, EY Global Advanced Manufacturing and Mobility Analyst.

Gaurav and Anuj, thanks for joining us today to share your insights on the challenges that countries are facing as they look to transition their motor vehicle fleets from internal combustion-powered to electrically powered vehicles.

Gaurav Batra

Thank you for having us.

Moderator

Well, let's jump right in. Gaurav, what is the EY EV Country Readiness Index and how did it come about?

Batra

Sure. With the global automotive industry continuing to witness this transformative shift toward electrification, EY clients have been asking us our perspective on the EV readiness across the key markets and really seeking support to steer through this disruption. Through this work, we also learn how the individual national markets are in varying different stages of preparedness toward that EV transition, with the varying legislative priorities, different supply chain capabilities and vulnerabilities, and gradually evolving patterns of demand. We feel that while the key global auto markets may be heading toward the same end goal, some obviously commenced their journey earlier, while others are proceeding more quickly or slowly now.

In essence, the EY EV Country Readiness Index has been devised as an analysis tool to help provide insight into and the context around this complex global EV picture — but at a national level. Through this, we are also looking to determine which countries are the closest to reaching the tipping point — basically, at which point, the EV ecosystem will hopefully become self-sustaining — and which countries still have a way to go.

The Index analysis considers three fundamental areas of the ecosystem: supply, demand and regulatory; and has been designed to help automakers, battery suppliers and other industry players, such as utility players, grid companies and governments, to better understand the dynamics of the EV transition — both globally and within their own specific markets.

Moderator

Anuj, Gaurav has indicated that three elements make up the models: supply, demand and regulatory. How does this analysis bring those together?

Anuj Chandna

Sure. As a part of the EV Country Readiness Index, we looked at 14 key markets which cover about 90% of the global electric vehicle volumes. We assess each country's capabilities and progress, relative to the three pillars of supply, demand and regulatory. Within each of these pillars, we analyze a variety of variables to come up with a weighted numerical score. For example, for supply factors, we include parameters, such as battery-manufacturing capacity, charging infrastructure and energy supply maturity.

Demand factors include affordability, fleet and consumer demand, and also consumer behavior data sourced from the EY Mobility Consumer Index report. Regulatory factors include parameters, such as monetary and usage incentives for EVs, and disincentives for internal combustion engine (ICE) vehicles — including ICE freeze-out timelines.

Toward the end, each country has a score on all the pillars. We then assign weightages to these scores to come up with an overall score that gives us the country rankings from one to 14. So, quite a comprehensive analysis process is there.

Moderator

Interesting. Gaurav, how do the countries follow up? Were there any surprises?

Batra

No surprise that China came out on top. But interestingly, Norway ranked second in the study. So, coming to China itself. As we all know, it is the clear leader when it comes to the supply. It is the home to 120 out of the 200 lithium gigafactories globally, and has further investments planned both from domestic and international players in the years ahead. Now, if we look at the battery minerals space, the country has a “ready and secure access” to raw materials and is essentially forecasted to have a capacity to produce nearly 1,000 GWh of lithium batteries by 2025, which is more than twice the capacity Europe would have by that time.

When it comes to the investments across Europe and the US, we all know that there is a growing momentum around new investments planned in these geographies. But we need to be mindful of the fact that there is a lead time of up to 10 years on new lithium-processing plants, which essentially means that China already has a head start and its dominance of the battery supply chain is likely to continue for some years yet. If you now look at the charging infrastructure space, again, China has the most well-developed “public charging infrastructure” and it plans to deploy nearly 20 million EV charging stations by 2025.

When it comes down to the demand perspective as well, it remains the world's largest single market for EVs. If you look at the findings from the latest EY Mobility Consumer Index, over 50% of the Chinese consumers said they intend to purchase a battery electric vehicle (BEV) or a plug-in hybrid electric vehicle (PHEV) as their next vehicle, which is the highest score recorded in the study across key markets. In fact, the country has also achieved early traction in the fleet market, which you would know is particularly significant in the nascent stages of the EV transition. Because fleet purchasers are more inclined to look past the higher up-front cost for EVs, they appreciate the total “cost of ownership benefits.”

Moderator

So, no surprise that China came in at number one. But Norway at number two is really interesting. What were some of the factors that led Norway to end up at the second ranking?

Batra

Completely agree. This was an interesting revelation that Norway came out second, considering it has no original equipment manufacturer (OEM) EV-manufacturing presence and currently, there are even no battery gigafactories as well in the country. However, Norway does plan to build one gigafactory by 2023, which will be entirely powered by the wind energy. So, Norway obviously has a mature hydroelectric infrastructure. It scores top on this sustainable energy — with about 99% of its electricity produced from renewable sources in 2021 — which makes it score well in that domain.

However, the real story for Norway comes from the demand and the regulatory sides. Norway had the highest EV penetration in the Index, with 72% of the cars sold in 2021 being EVs. This exceptional figure is largely driven by the regulatory environment. Norway's mobility policy has been built on a consistent vision of a green and sustainable approach, and the country obviously has invested large sums of public money in the form of EV incentives to influence consumer behavior. So, the sale of new ICE cars in Norway is due to cease by 2025, which is 10 years ahead of the EU target. In fact, the Norwegian government plans that by 2023, all taxis in Oslo will only be EVs.

Moderator

Anuj, the Index has China as number one and Norway number two. But what about the US? What does the index say about where the US stands?

Chandna

The US is an interesting one. While it is the second-largest market for cars in the world, it is however an aspirant rather than a leader in the EV Country Readiness Index. It ranks seventh overall.

The country ranks respectably on regulation and supply, but demand is lagging. It had an EV penetration of just around 4% in 2021. When it comes to greener personal transportation, US OEMs have traditionally favored the hybrid power train, but a shift toward BEVs and plug-in hybrids is starting to gather pace. There have also been issues around availability of models that appeal to the US buyers, with sport utility vehicles (SUVs) being the preferred vehicles by Americans. It is only now that we are seeing OEMs focus on electrified SUV models.

The US is now also starting to see a shift toward electrification, with regulatory actions, such as Biden's executive order on 50% target for EVs by 2030, the Infrastructure Bill, and more recently, the Inflation Reduction Act and California's ban of ICE cars by 2035. We are also seeing investments in EV battery production, with around 13 new gigafactories planned by 2025. This also includes investments by several OEMs. 

Moderator

Interesting. While the US is currently considered a middling in the rankings, it seems to be taking some positive steps to improve its readiness. Anuj, there seems to be a variety of actions that countries could take across the three pillars to accelerate their readiness for EVs. Is there a single lever that a country or OEM can pull to really speed up the process of EV adoption?

Chandna

Sure. The key insight is that this is an ecosystem play, where consistency is essential. What we have observed is that countries may have standout scores in one or more pillars, but supply, demand and regulation are highly interdependent; and the group of five leader nations have consistently high scores across all three.

Winners do play to their natural strengths. For example, China in battery production, and Norway and the UK in regulation. But they also take care to identify and fill in the gaps where they exist.

Also, what this points us to is that while all the three pillars are broadly equal in importance, the regulatory pillar — at least for the time being — seems to be the key lever or the first among equals.

Transitioning to an EV future requires stimulus to disrupt the status quo. It is clear that the leader group are leaders because they have regulatory regimes in place which have consistently primed the EV pump, that in turn stimulates demand and supply.

Moderator

Interesting. Gaurav, in summary what do you think are the key takeaways from this EV readiness analysis?

Batra

There are several takeaways that could be considered here. First and foremost, we think the onus is on the government to set out and pursue a consistent policy that really lays out a long-term vision, and provides the private sector players with the confidence to invest. This needs to be coupled with continued R&D support for battery technology and production in particular, which may need a strong public and private sector collaboration. Finally, securing the access to raw materials will be critical, along with strategic cross-sector partnerships around the charging infrastructure and the emerging business models.

Moderator

Gaurav and Anuj, thanks for joining us today and sharing some of the key insights from the EY EV Country Readiness Index. It is a really compelling look at the global EV transition, and the growing and evolving EV ecosystem needed to support it.

Batra

Thank you for having us.

Chandna

Thanks for having us today.

Announcer

Thanks for listening to today's EY Advanced Manufacturing and Mobility Business Minute podcast. We hope you found it engaging and informative. To listen to other Business Minute podcasts, you can find them at ey.com/AMMpodcasts.

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