Data from Bloomberg showed that for the first three quarters of 2022, BYD, Tesla, SAIC-GM-Wuling, GAC Aion, and Hyundai Motor Group (HMG) respectively account for 16%, 13%, 5%, 3%, and 2% of the global electric vehicle (EV) sales (battery EV and plug-in hybrid EV combined). Three out of the top five EV brands are Chinese carmakers - although the order may change as we head into 2023, China's EV industry has indeed fast-tracked in the past couple of years with large production increases. In the year 2022, Chinese carmaker BYD has also unlocked many doors leading to the car market in Europe, Japan, and South America.
Going into 2023, China is expected to play a more dominant role in the EV industry guaranteed by massive domestic demand and to profit from the first-mover's advantage: having built a stable, domestic EV supply chain that manufactures from battery, car electronics, cars, to car software.
Global EV penetration is expected to rise to 40% by 2030 and the number of EVs will reach 26 million units by 2026, Delta Electronics founder Bruce Cheng said.
According to the forecasts made by DIGITIMES Research analyst Jessie Lin, global EV penetration will reach 17% by 2023, 24% by 2024, and nearly 33% by 2025. The sales volume of EVs is likely to reach 14 million units in 2023 and 28.5 million units in 2025.
Taiwan-based Yuan-ta Securities also pointed out that global EV sales are expected to reach 20.3 million units by 2025.
However, some challenges remain ahead: carmakers need to ensure data security as cars get connectivity; the public and the private sector need to work together to alleviate car buyers' range anxiety; governments also need to commit to following the roadmap towards a future with clean energy.
Software-defined vehicle (SDV)
EV represents not only a novel car culture for the coming generations. As software-defined vehicles get weaved into the Internet of things (IoT), carmakers are seeing the underlying demand for innovation in automotive solutions and the demand for cloud storage, machine learning, and edge computing.
Driver's assistance technologies, known as ADAS; e-mobility services such as goods delivery, ride-sharing, and robotaxi; enchanting in-vehicle infotainment activities; over-the-air (OTA) software updates; personalized driving control will become tangible features available in the future cars. Such a diverse sphere of in-vehicle applications is now rearranging the global automotive supply chain with startups and tech companies jumping on the bandwagon. It is also testing traditional OEMs' capability to innovate.
EVs will become people's third living space in the future. While the much-anticipated autonomous driving for non-commercial vehicles might take longer years to become a reality, it is on its way.
Vehicles, with or without an electrified motor, will rely on software. Building an automotive operating system (OS) is a shortcut for technology companies to get ahead of traditional carmakers. For example, it was no secret that Xiaomi, Huawei, Baidu, Google, and Apple are, reportedly, building either car OS, smart cockpit solutions, or autonomous driving tech.
DIGITIMES researcher Jasper Jiang said that tech companies have the advantage of owning the big data and having the capability to write software, while OEMs try to build in-house OS or collaborate with tech companies mentioned above.
Jiang described the relationship between tech companies and OEMs as a co-opetition, noting that "those offering the better user experience will win more market share."
A well-developed car OS enables the vehicle to operate on cloud, connect with the Internet of Vehicle (IoV), manage in-vehicle applications, and even control the movement of the vehicle and chassis. In a word, OS is the glue between hardware and software that keeps the connectivity intact. It also is the differentiator between low-priced and high-end vehicles, Jiang said.
Software-defined vehicles with connectivity are believed to improve people's lives – they are fundamentally a supercomputer on wheels. It is exciting, but there are still many issues to be resolved: How should battery makers and carmakers prevent thermal runaway in the batteries? How much more time do AI developers need to train computers to prevent car crashes? How should software companies provide a certain degree of standardized cybersecurity and privacy protection while analyzing people's driving behavior?
Like almost every new technology, the regulators need to work closely with the private sector to sort out these problems that we may have to face as EVs generalize.
Ban of ICE cars
Following the European Union (EU)'s announcement that it will ban sales of new internal combustion engine (ICE) vehicles in 2035, Mercedes-Benz said it is already preparing to sell 100% EVs by 2030. BMW, though criticizing the ban, said it will launch at least six pure EV models by the end of the decade.
The two high-end OEMs, notably, also focus on developing a general-purpose OS that enhances the infotainment capabilities in cars.
OEMs like them still bear the responsibility to provide after-market, customer services for existing customers of ICE vehicles, so the transition needs to be gradual; emerging carmakers, on the contrary, such as China's BYD and Vietnam's VinFast, were able to halt production of ICE cars early on. There are also many EV startups growing steadily in the industry.
Whereas expediting the transition to EV requires investment and commitment from the industry, policy support from governments seems to be even more pivotal.
Providing incentives for both car buyers and carmakers, as China has successfully set the example, subsidizing the construction of charging infrastructures, and having a clear roadmap to reach carbon neutrality are proven to be the key measures that can help EVs become more broadly favorable.
For the first eleven months of 2022, BYD delivered 1.6 million EVs in China. Thanks to extended national subsidies, the Chinese carmaker has seen domestic sales volume more than tripled from one year ago. Externally, it is expanding its sales network all over the world – BYD EVs can now be found in India, Japan, Norway, Germany, France, Brazil, Columbia, and more countries to come. As the company recently disclosed, from July to November of 2022, it has sold 38,701 units of EVs outside China.
Tesla, one of the top EV makers, delivered 908,573 units for the first three quarters of 2022, and it is ramping up production in Shanghai, Berlin, and Texas.
Other OEMs are also announcing more EV lineups. Volkswagen (VW) said it is preparing for the unveiling of a new EV model ID.4 in 2023. General Motors (GM) said its portfolio of EVs will be solidly profitable in 2025 in North America as the company scales EV capacity in the region to more than one million units annually.
GM added that it will have multiple entries in pickup, SUV, and luxury segments in the next three years; five assembly plants in the US, Canada, and Mexico will be building EVs. In 2023, GM is launching the new GMC Sierra HD, Chevrolet Colorado, and GMC Canyon mid-size pickups.
Growing demand for charging stations and EV components
The growing number of EV ownerships needs to be accompanied by a growing number of chargers and batteries. According to the estimation made by the non-profit organization International Council on Clean Transportation (ICCT), the US will see more than 25.8 million EV ownerships in 2030 with the market penetration reaching 36%. ICCT, therefore, projected that the US will need more than one million public EV chargers by that time, and the installation and maintenance costs to cater to such demand could be nearly US$20 billion.
For comparison, the Biden administration proposed a planned budget of US$7.5 billion to build 500,000 public EV chargers, which, according to ICCT's estimate, should cost at least US$10 billion.
In light of the passage of the Inflation Reduction Act (IRA), the US has seen a rapid wave of construction starts of EV assembly and EV battery plants within its borders. As the law takes effect, only EVs assembled in the US or US's trade partners will be eligible for subsidies. The provision of the Act has frustrated countries exporting a significant share of cars to America.
For example, South Korea's Hyundai, whose EV model Ioniq and sub-brands Genesis and KIA have captured pretty good market share in the US, told CNBC that the loss of incentives was a "very challenging issue."
In addition to South Korea, Japan and the EU are reportedly also in negotiations with the US government, hoping to alleviate the economic impact.
According to the US Department of Energy (DOE), only 26 models of EV produced in 2022 may qualify for the EV credit after IRA. So far, only 17 models of EV are known to be eligible to apply for the credit in 2023, including the BMW 330e, Cadillac Lyriq, Chevrolet Bolt, Mercedes EQA SUV, Nissan Leaf, and all four Tesla models.
The negotiations are expected to continue into next year, but meanwhile, Hyundai, for one, is picking up pace in building its EV supply chain in the US, bringing a new wave of Korean EV suppliers to the US. The IRA has pushed the carmaker and its partners and suppliers to accelerate investment and deployment.
Automotive power semiconductors
Data provided by DIGITIMES researcher David Ma showed that EVs (BEV and PHEV) will be the main driver of power semiconductor market growth. The market size of power semiconductors is expected to grow from $6.3 billion in 2021 to $13.5 billion in 2027 with a CAGR of 13.5%.
Since the car market was disrupted by COVID and semiconductor supply was occupied by acute demand for consumer electronics during the pandemic, the chip industry has undergone a large wave of capacity expansion for more power semiconductors, including IGBT and MOSFET.
While capacity expansion of semiconductors may take years to materialize, chipmakers are now at full speed to cater demand.
Ma projected that the supply of insulated-gate bipolar transistors (IGBT), which will be used more and more in EVs, charging stations, solar and wind energy, and industrial motors, will increase and eventually meet demand in the second half of 2023.
Omdia Research also showed that the global MCU market for automotive applications will reach the size of US$10 billion in 2026.