Electrification
Back to Overview

Electrification

Back to Overview

Electrification

We help leaders in the mobility industries, others along the value chain, and public sector develop a deeper understanding of electric-vehicle challenges and opportunities.

Electric vehicles (EV) are nearing an inflection point as changing consumer attitudes, improved battery economics, broader access to charging infrastructure, and stricter regulatory policies all present growth opportunities. Our research focuses on the transition to electric propulsion with insights on technologies and trends set to transform mobility industries and the public sector globally.

Leaders in mobility-related industries and the public sector should focus on areas such as short-term e-mobility profitability, manufacturing versus buying EV components, manufacturing production plants, switching investment from internal combustion engines (ICE) to EVs, investing in EV-charging infrastructure, and use cases for electrified medium and heavy-duty trucks.

Projected impact

As automotive technologies advance, new use cases for electric vehicles will emerge for passenger vehicles, light-commercial vehicles, and medium to large trucks. These use cases will be influenced by factors such as geographic location of vehicle use (that is, dense urban city versus suburban city), vehicle ownership model (shared versus privately owned), and city, state, and national regulations.

In the short term, automakers face the challenge of selling enough electric vehicles to comply with tightening regulatory fleet emissions and fuel-economy targets while remaining profitable despite costly battery packs. It’s important to keep focus on ICE models, which are the profit engine for today’s business.

In the long term, we expect significant disruption from e-mobility due to four trends today:

Lowered costs from technology improvements

Battery prices have decreased by about 80 percent since 2010, bringing an estimated pack cost down to around $227 per kilowatt.

Shifting consumer demand

30 to 45 percent of vehicle buyers in the United States and Germany, respectively, consider an EV purchase today.

Increased urbanization

1.1 billion new urban residents by 2030 are expected to have created greater demand for e-mobility solutions.

Accelerated regulatory forces

Stricter emissions and fuel-economy targets at national, state, and city levels are expected to continue.

Client impact examples

Client impact examples

Developing charging infrastructure

An automotive supplier creates and prioritizes a suite of charging use cases to assess revenue potential from physical hardware and new business models.

Establishing an investment plan across the value chain

A private equity firm runs a series of market scans for emerging electrified vehicle technologies.

Assessing impact on electricity grids

A national utility company determines potential impact from electric car uptick on national and local electricity demand.

Cross-industry perspectives

As electric vehicles come to market, we anticipate disruption across multiple sectors and industries. We have identified critical areas of focus for incumbents and new entrants in these particular sectors wanting to keep pace amid the changes ahead:

Automotive

There will be emerging use cases and business models around charging infrastructure, supplier changes across the powertrain value chain, and greater development of fully electrified platforms.

Travel, transport, and logistics

Emerging use cases for electrified trucks (medium duty and heavy duty) and last-mile delivery with electrified vehicles will gain prominence.

City, state/region, national governments

There will be greater emphasis on partnership models and investments for charging infrastructure.

Utilities

Changes to local and national grid loads from electrified vehicle rollout will be seen, along with new business models related to grid storage and load balancing.

Proprietary assets

Proprietary assets

Our research has helped us develop extensive insights and tools to address critical electric vehicle topics that include:

Component demand and investment strategy

Our Electrified-Vehicle Component Market Model offers insight into component take rates through 2035. It predicts market size for components (units, revenue, and profits) and helps define where to compete across the electrified vehicle value chain, determine the appropriate business models, and develop a plan to address capability and technology gaps.

Electrified-vehicle growth strategy

Our Powertrain Scenario Model leverages a forward-looking view of vehicle total cost of ownership to simulate multiple forecasting scenarios based on consumer preferences and regulatory environments. It shows anticipated vehicle sales through 2030 by powertrain type (for example, internal combustion engine, hybrid electric vehicle, plug-in hybrid electric vehicle, battery electric vehicle) and vehicle segment (for example, compact, sedan, premium, and SUV/light truck) for China, Europe, and the United States.

Battery-cost development

Our Battery Cost Model provides a bottom-up analysis of current costs and future development based on demand, technology, and supply scenarios. It simulates effects of technological improvements (for example, improved cathode chemistry), material price effects (shortage of cobalt supply), and learning and scale effects (increased EV adoption).

Consumer beliefs about electrified vehicles

Our 2016 Global Survey of EV Consumer Preferences Database includes findings from a consumer panel of about 3,500 consumers across the US, Germany, and Norway, and about 3,500 consumers in China. Select findings are available in the 2016 report How Automakers Can Drive Electrified Vehicle Sales and Profitability.

Electrified Vehicle Index

Our Electric Vehicle Index (EVI) analyzes the development of electric mobility in 15 selected countries. The EVI helps companies, governments, and the public understand two critical dimensions of e-mobility in each country: the market side (for example, EV share in overall light-vehicle market, government subsidies, charging infrastructure) and the industry side (for example, local OEM production of EVs, local production of EV components).

Featured insights

Article

Dynamics in the global electric-vehicle market

– New research on electric mobility reveals Chinese OEMs produced 43 percent of EVs worldwide in 2016 and highlights other trends... in supply and demand.
Article - McKinsey Quarterly

China’s electric-vehicle market plugs in

– China has emerged as a leader in both the supply of—and demand for—electric vehicles.
Article

The future(s) of mobility: How cities can benefit

– Autonomous vehicles, electric powertrains, vehicle sharing, and other advances are transforming urban mobility. Planning ahead... can help cities capture the benefits of the shift, from cleaner air to easier journeys.
Article - McKinsey Quarterly

Three game changers for energy

– New sources, mobility, and industry fragmentation are set to disrupt the system.
Report

Electrifying insights: How automakers can drive electrified vehicle sales and profitability

– Automakers face a difficult challenge: They must strike the right balance between selling enough electrified vehicles (EVs) to... comply with tightening regulatory fleet emissions and fuel economy targets, while preventing the incremental cost of adding costly battery packs to their vehicles from cannibalizing corporate profits. To compound matters, automakers cannot afford to lose focus on combustion engine models, which are often more profitable. Against this backdrop, our latest report provides fresh insights and potential solutions.
Report

Disruptive trends that will transform the auto industry

– Technology-driven trends will revolutionize how industry players respond to changing consumer behavior, develop partnerships,... and drive transformational change.

Connect with the McKinsey Center for Future Mobility®