Headwinds and tailwinds facing EVs

The year 2020 will go down the annals of history for many reasons. This is the year when the Covid-19 pandemic not only posed an unprecedented public health crisis in modern times, but it also brought the global economy to its knees. This year also witnessed oil prices dropping below zero due to decreased energy demand. The IMF predicts a deeper recession in 2020 and a slower recovery in 2021. Global growth is projected at -4.9% in 2020 with a gradual recovery in 2021 with predicted growth at 5.4%, 6.5% lower than pre-Covid 19 projections.

EVs not immune

Although market analysts believe that low oil prices will not derail the shift that has started towards clean mobility, the automobile sector including EVs has not been immune to the impact of Covid-19.  The drop in EV sales has exceeded the drop in all car sales in major markets like China, when in the grip of the pandemic. According to China Association of Automobile Manufacturers (CAAM)¹, new electric vehicle (NEV) production decreased by 36.5% y-o-y between January and June, while production of all passenger cars declined by 22.5% during the same period.

Favourable tailwinds

But the dampening of consumer spending due to Covid-19 is not the only headwind that the EV sector is facing. It is also battling issues around cost, range, as well as safety. While automakers are tweaking technology and launching mass market EVs to cater to the right mix of the cost-range-safety triad, policy and incentives continue to play a vital role. It is because of favorable tailwinds provided by collaborative efforts of government and automakers as well as public-private partnerships across the value chain, for instance in deploying charging infrastructure, that the long-term outlook for EVs remains energized.

Regional responses vary

Overall, market analysts have observed that the reaction to Covid-19 has varied across countries and regions. China, Europe and the US which together constitute 75% of the global EV market, have responded differently to the impact of the pandemic.

While China has extended the deadline for rolling back its subsidies to the EV sector until the end of 2022, it is now promoting EVs in rural areas whereby local governments will be required to publish supportive policies, with ten Chinese NEV OEMs also required to offer their promotional policies in rural areas.

In Europe, during the pandemic, EVs have an increased market share albeit facing a sales decline. Data from European Automobile Manufacturers Association² (ACEA), shows EV market share rising from 2.5% in Q1 2019 to 6.8% in Q1 2020 against the backdrop of an overall decline in passenger car registrations. ACEA also reports fiscal measures³ to stimulate EV sales and mentions that the tax benefits and/or purchase incentives are available in nearly all EU member states but the nature and monetary value of these benefits and incentives still varies widely across Europe. Both Germany and France, the two largest EU automotive markets, have extremely generous incentives for the purchase of EVs whereas Lithuania is the only country that does not provide any incentives or tax benefits.

In the US, the Corporate Average Fuel Economy (CAFE) and greenhouse gas emissions standards for passenger cars and light trucks were amended which established new less stringent standards, covering the next five years. The CAFE requirement to bring about fuel efficiency has been reduced from 5% a year to 1.5% a year until 2026. This hinders the biggest driver for electrification in the US as without this, the incentive for automakers to electrify is reduced.

These regional developments make the market environment for EVs highly dynamic, but the vicissitudes of Covid-19 are likely to be felt in terms of a double digit global EV sales decline.

The outlook for nickel

EV’s are an important market for nickel. Nickel-containing lithium-ion batteries with several variants of NMC and NCA provide horsepower to EVs from the world’s most innovative automakers such as Tesla. Nickel is a preferred material for use in lithium-ion batteries due to high energy density. With EV sales remaining under 3% of global car sales in 2020, as some analysts have predicted under Covid-19 circumstances, the market may appear to be small for nickel to those unacquainted with the market environment. However, to put things into perspective, this segment of the market for nickel has grown at the rate of 10% in the past decade. Of the total nickel use in the lithium-ion battery industry of around 87kt in 2019, more than 80% is used in automotive applications. By 2029, the energy capacity requirement by the automotive industry is expected to reach 1,560GWh, from 100 GWh in 2019, of which passenger EVs will account for 74%. The implications of this for the nickel market will consequently be unprecedented.

Although non-nickel battery chemistries may hog the limelight due to lower cost, nickel-containing lithium-ion batteries are inimitable due to higher energy density, translating into longer driving range with smaller sized and lighter weight battery packs. In addition, it is the presence of elements like nickel which makes recycling of these batteries an economically viable proposition.

Million mile battery

Current nickel-containing EV batteries last for around 1000 cycles, easily fulfilling the current requirements of 600 cycles. More recent improvements in nickel-based technologies are now resulting in the ‘million-mile battery’. This battery is based on a single crystal that does not experience microcracking and hence minimizes degradation. It is highly stable and capable of over 3000 cycles with the ability to power an EV for a million miles, lasting the entire lifetime of the car without replacement. But that’s not all.

This new battery creates a whole new application, enabling EVs to be used as energy storage devices for the grid. Grid-connected systems require greater than 3000 cycles and the million-mile battery with a stable cathode material which does not degrade during high cycling allows this. The high cycling capability of this single crystal technology is making V2G (Vehicle to Grid) and VPP (Virtual Power Plant) a reality. By 2030, about 250 million EVs will be on the road. This is equivalent to 16,000 GWh of battery storage, assuming average energy capacity of EVs around 65 KWh. Most electric vehicles sit idle for 95% of the time which presents a huge energy storage capability. Daily charging and discharging enable the EV to store and supply energy to the grid without impacting the life of the battery for the purpose of personal transport. Also, technology exists to manage aggregates of all types of energy storage that can power whole communities.

This unique value proposition only exists with the high cycling capability of single crystal nickel technology.

_{1. http://www.caam.org.cn/chn/21/cate_463/con_5231064.html ; http://www.caam.org.cn/chn/21/cate_463/con_5231067.html}

_{2. https://www.acea.be/press-releases/article/fuel-types-of-new-cars-petrol-52.3-diesel-29.9-electric-6.8-market-share-fi}

 _{3. https://www.acea.be/publications/article/overview-of-incentives-for-buying-electric-vehicles}