Electrification: where are we?

The automotive industry is undergoing a profound period of disruption. Four concurrent megatrends under the acronym CASE are shaking up business strategies – connected cars, autonomous vehicles, shared mobility services, and electrification. In addition, the industry is still reeling from the impact of the global COVID-19 pandemic, which has put unprecedented pressure on company finances, infrastructure and supply chains.

Of the four megatrends, this is arguably the most critical at this moment in time. Across the industry, automakers and suppliers are announcing bold strategies to pivot away from producing combustion vehicles and toward electric models.

This has seen many companies race to secure vital supplies of batteries, EV components, and the raw materials needed to create them.

For the legacy auto industry, we expect stress and strain on companies and their profit margins as the cost of converting their lineups to electric power begin to bite. Some are further hamstrung by awkward strategies that have seen them release uncompetitive ‘compliance’ EVs adapted from existing combustion-powered models.

However, startups that began with ‘clean sheet’ designs for their EV and don’t have legacy costs from years of engine production have become overnight market leaders. The most prominent of these is Tesla – the Californian automaker started selling its first volume-production car, the Model S, in 2012. Annual sales were 22,000 units in 2013 but had soared to 499,550 in 2020.

Nevertheless, all companies are still under pressure to ramp up electric vehicle supply. Governments around the world are beginning to announce cut-off dates for the sale of combustion-powered light vehicles, and consumer demand is beginning to shift, driven by new, desirable models from Tesla and Porsche.

In 2015, 433,000 BEVs were produced worldwide according to GlobalData figures. By 2020, this number rose dramatically to 2.36 million units. We expect dozens of new BEVs to go on sale as legacy automakers ramp up their BEV strategies – most will have volume BEV production by 2025. This brace of new options means we foresee BEV production continuing to rise, hitting 10.65 million units in 2025 and 34.12 million units by 2035.

Batteries: LG Energy Solution (formerly LG Chem), CATL, Panasonic, Samsung SDI, and BYD. Solid-state startups including QuantumScape, Solid Power, SES and Blue Solutions could also disrupt this field.

Electric powertrains: Tier-1 suppliers such as Bosch, Delphi, Denso, Continental AG and GKN for electric powertrains. NXP, Infineon, ST Micro and TI lead in power and battery management systems.

Assembly: Tesla is dominant here but faces big challenges from Toyota, GM, VW and Daimler. Chinese players including Wuling, SAIC, Geely and Great Wall are likely to have a big impact on the sector.

Charging networks: Tesla, ABB and ChargePoint. In addition, oil companies such as BP and Shell have been investing in charging networks.

There are three main types of vehicles powered by electric motors:

Battery electric vehicles (BEVs)

• These use one or more electric motors to move the vehicle
• The motors draw their power from an integrated battery pack
• Power is generated externally on the national grid and used to charge the BEV
• System energy efficiency is very high, but range and refueling times lag behind combustion cars
• Invariably, EVs use lithium-ion rechargeable batteries
• Examples include Tesla Model 3, Chevrolet Bolt, Polestar 2

Hybrid and plug-in hybrid electric vehicles (HEVs, PHEVs)

• These use a combination of one or more smaller electric motors alongside a combustion engine
• The motors can move the car around at low-to-medium speeds
• The engine is engaged when charge is low to supplement the motors
• Conventional hybrids recharge their small battery packs using the engine or while braking
• PHEVs can also be externally charged like a BEV, and have more electric-only range than hybrids
• Can be efficient if used effectively, but powertrain cost, weight and complexity is an issue
• As BEVs improve in performance and price, we expect HEVs and PHEVs to become less common
• Examples include Toyota Prius, Mitsubishi Outlander PHEV, Honda Insight

Fuel cell electric vehicles (FCEVs)

• Like BEVs, these use one or more electric motors to move the vehicle
• However, the power is generated on board using a fuel cell stack
• Fuel cells most commonly use hydrogen and can be refueled rapidly like a combustion car
• A small battery may be used to store power generated by the fuel cell or recaptured under braking
• Hydrogen infrastructure is not well developed so FCEVs are still a niche product
• The cost of fuel cells and hydrogen generation means FCEVs are not yet cost competitive with BEVs
• Heavy-duty and commercial vehicles are likely to be the first applications for fuel cells
• Examples include Toyota Mirai, Honda Clarity, Hyundai Nexo

BEVs are by far the fastest growing of the three types, easily accounting for the majority of electrified vehicle sales. This is because hybrid and PHEV models can be seen as a stop-gap between combustion-powered cars and battery electric vehicles, and they will become less necessary as battery technology improves.

FCEVs, on the other hand, are still too early in their development cycle to have a significant impact on the global vehicle market. Their role may grow over time but, currently, the majority of funding and R&D energy for electric vehicles is being devoted to battery-powered models. In addition, the infrastructure investments needed to bring FCEVs to the mainstream are not prioritized as highly as expanding BEV recharging networks.

Lithium-ion is the leading battery technology for BEVs

There are several reasons why lithium-ion (Li-ion) battery technology – the same technology that powers smartphones – has been chosen by every major manufacturer of electric vehicles so far.

First, lithium is the lightest known metal. Second, it holds a charge well compared to heavier elements such as lead, zinc and nickel-cadmium. Plus, Li-ion cells have twice the energy density by weight of their nearest rival, nickel-cadmium cells. Finally, Li-ion has nearly 30 years of development behind it since Sony first introduced it in 1991.

However, lithium-ion technology is expensive and has been a limiting factor in the rollout of electric vehicles. It’s no coincidence that the first commercially successful Li-ion-powered EVs were premium models that could build the high cost of a battery pack into their purchase price. To reach the mainstream, the industry needs to see costs fall below $100 per kWh – commonly held to be the inflection point where EVs will be more cost effective than combustion cars.

In addition to cost, lithium-ion cells are also quite heavy and bulky, blunting performance and efficiency. This has improved significantly in recent years but still falls far short of the theoretical amount of potential energy that can be stored in a tank of fuel. Reducing the weight and size of an EV’s battery pack is the most direct way to improve range and performance.

Efficiency is critical for lithium-ion cells due to the need to combat the issue of range anxiety. This is a stumbling block for potential EV buyers worried that the vehicle will not be able to perform all the duties asked of it because it lacks the range to cover all possible journeys. While most EVs have more than enough range to cover the majority of journeys, challenging the perception with high range figures is necessary to convince on-the-fence buyers that EVs are a viable transport option. This will be critical to bring in urban buyers who may not be able to recharge their EV outside their house and will, instead, have to regularly visit public charging stations.

Lithium-ion cells also present slightly different safety concerns compared with combustion-powered vehicles. There is no data to suggest that battery-powered EVs catch fire more frequently than fuel-powered cars. However, if a BEV does ignite, the resultant fire tends to be quite aggressive and dramatic, causing dramatic news headlines and leading to a false perception among some buyers that BEVs are less safe than combustion vehicles. This happens because lithium is a highly reactive element and can combust readily in air or water so, as a result, it can catch fire if the battery pack is pierced or damaged in a vehicle crash. This echoes the problems Samsung faced with the Galaxy Note 7 smartphone when it turned out there was an issue with the battery design, leading to a number of fires.

Despite its shortcomings, lithium-ion is still the best and safest technology we currently have for high-capacity energy storage. Alternatives exist and may become more relevant in the future but there is still room for improvement in existing Li-ion chemistry so we don’t expect many major automakers to abandon it any time soon.

When looking at the new Muster 2.0 drill process in the context of Royal Caribbean’s digital transformation, it is a natural development for a company striving to reduce passenger friction on board.

“The innovative programme is the first of its kind and reimagines a process originally designed for larger groups of people into a faster, more personal approach that encourages higher levels of safety,” says Royal Caribbean’s vice president of sales Ben Bouldin for Europe Middle East and Africa.

Over the last few years reducing friction has been the focus of Royal Caribbean’s digital department and the goal of the Royal app, which, among other features, allows guests to avoid queues by finding out information and booking dinner tables, activities, excursions and shows online.

In 2018, at the launch of Symphony of the Seas, Royal Caribbean’s senior vice president of digital Jay Schneider explained to Future Cruise that building guest products that “get people out of lines and let people enjoy their vacation first and foremost” has been one of his main missions.

Recently he said that: “Muster 2.0 represents a natural extension of our mission to improve our guests’ vacation experiences by removing points of friction.”

Schneider and Nick Weir, the senior vice president of entertainment at Royal Caribbean were instrumental to the development of Muster 2.0. Weir is behind some of the most original and innovative entertainment experiences guests can have at sea and has successfully mixed and transitioned formats and blended technology into traditional structures, such as turning an on-board ice rink into laser tag, back again into an ice show with synchronised drones and moving image effects such as those that transform the ice into an emotive Arctic whale scene.

“The safety drill has always put a pause on the cruise experience, and I felt like it could be more efficient,” explains Nick. When he was a cruise director he explains how he was responsible for the welcome party as well as drill announcements which always brought a halt to the fun as guests were starting to enjoy themselves.

“I happened to be outside on one hot, sweaty day during the drill, and I thought why not put it all on a device so it can be done individually and monitored? Technology naturally played a big part, location services on smartphones is essential, and a big team at Royal Caribbean came together to make it happen.”