Report: EV adoption an evolution, not revolution

BETHESDA, Md. — There is a lot of hype over electric vehicles (EVs) but it will take decades for the next generation of mobility to dominate the car parc.

Economics is the biggest driver in the adoption rate of EVs, followed by government regulations and consumer convenience and behaviors, according to a new industry report.

The 2021 Joint Electrification Forecast, commissioned by the Automotive Aftermarket Suppliers Association (AASA) and the Auto Care Association (ACA), provides projections on the growth of the EV market in North America.

The report predicts EV penetration to increase rapidly after 2030, growing to 36% of the car parc by 2045 under a base case analysis.

By 2045, 79% of all new vehicle sales are expected to be BEVs (battery-electric vehicles) or plug-in hybrid electric vehicles (PHEVs).

"We are looking at evolution, not revolution," AASA President and CEO Paul McCarthy said.

"While EV replacement parts sales will double in size between now and 2025, and again between 2025 and 2030, EVs still have a long road before they account for a large percentage of aftermarket sales," he said.

"Given we already have a fleet of over 280 million vehicles, our industry will be driven by the internal combustion engine for the next couple of decades," ACA President and CEO Bill Hanvey added.

On the maintenance side, BEVs have a estimated 15% to 20% lower cost-per-mile, compared with conventional internal combustion engine (ICE) vehicles, when comparing maintenance costs over a vehicle's life — 11 cents per mile for BEVs versus 13 cents per mile for ICE vehicles. However, any major BEV component failure narrows the gap in long-term maintenance costs, the report noted.

The total-cost-of-ownership parity without incentives will be the tipping point for large BEV/PHEV adoption, the report said.

Government regulations can impact the economics of adopting EVs, through such actions as fuel economy standards, EV incentives, ICE bans, etc.

Given total-cost-of-ownership parity and sufficient infrastructure, regulations can be implemented quickly to accelerate EV adoption, the report said.

But the EV market also must deal with consumer hesitation, such as EV travel range anxiety; availability of charging stations and networks; charger speed; and capital investment requirements.

While infrastructure needs are still in the works, vehicle OEMs are going full-speed ahead with their EV introductions. Nearly 90 new EV models are expected between 2020 and 2024 with various EV startups planning to release 10 new models during that period, the report said.

Just as in the ICE market, SUV models will dominate the EV market relative to other segments.

While EV sales will to climb over the coming years, the U.S. car parc is also expected to continue growing, albeit at a slower pace, according to the report, to 319 million units in 2045 from 283 million in 2020.

The report projected the vehicle parts market (not including tires) will grow by 2% annually through 2045 to $159 billion, driven by car parc growth, new parts and price increases.

New technology categories, such as electrification and ADAS, are major growth contributors by 2030, and even more so by 2045, the report said.

Meanwhile, EVs will provide new service opportunities for repair shops, according to the report, including:

• Range Optimization: A "range maintenance" service category could start with a diagnosis of wheel alignment, tire wear, cooling system effectiveness, motor alignment, regenerative power and other factors that may affect battery range.
• Torque Protection: Electric drive motors can provide high torque at starting speeds which may affect the life of half shafts, CV joints, tires and other undercar components. "While we anticipate vehicle designers to compensate for these high-torque characteristics, we have seen multiple reports of extremely high tire wear on BEVs," the report said.
• State of Health Reports: Diagnosing the various factors that comprise a battery's health and providing comparisons to other like vehicles can inform vehicle owners about maximizing both vehicle performance and battery longevity.
• Cooling Protection Checks: A BEV's cooling system protects high-dollar items like the battery, motors, electronics modules and inverters. The HVAC system is also more complicated with many BEVs now employing heat pumps to supply both cooling and heating to the cabin interior, the report said, adding, "Look for fluid connectors, intelligent valves and heat pumps to become new service categories."

The report offered several action points for aftermarket suppliers, including:

• Have an unbiased view about how the future will evolve and how you need to transform your business — "believe in aspirational forecasts at your own peril;"
• Determine what partnering and M&A you require — "The investment scale, risks and needed capabilities/skills imply that most traditional players cannot go it all alone;"
• Play the long game, make sure you have the right customer and program portfolio — recognize that the car parc will be fundamentally reshaped, but these changes may not materialize as/when promised;
• Change your talent model, organization and culture to support greater innovation, digitization/software, speed and flexibility. Businesses "need to provide the right training, incentives and recruiting efforts to attract the required talent to the automotive aftermarket;"
• Aggressively cut costs to help free up capital for critical technology investments;
• Make investments (internal needs, new business, M&A, etc.) objectively — assessing the true risks and uncertainty, interim versus future needs, risk-weighted investment capacity, true capabilities and "right to win" and affordability.

The research and analysis for the report was contributed by Strategy&, a division of PwC; IHS Markit; IMR Inc.; Schwartz Advisors; and YCP Solidiance.

AASA and ACA members receive complimentary access to the report; non-members can receive the report for $1,500 through the associations' websites.