Six automotive giants to pass Tesla in the electric car market by 2021

25 July 2018

While at present Tesla is unparalleled in the market for electric cars, the company can expect to come up against stiff competition in the coming years, as large car manufacturers previously uninterested in the electric vehicle (EV) market invest hundreds of millions into the sector. According to new research, a number of keystone automotive names will have surpassed Tesla by 2021, with Daimler and BMW expected to take pole position in the e-mobility market.

A new PA Consulting Group report has analysed how well car manufacturers are performing within the electric vehicle segment. In order to rank the competitors, the researchers assessed the parties with respect to six key success factors, which together determine the e-mobility potential of the car manufacturers. It concerns the aspects of technology and strategy (weighting factor 30%), battery technology (20%), culture and incentives (10%), financial performance (10%), supplier network (15%) and ecosystems and partners (15%).

An analysis of the scores awarded by the most important car manufacturers shows that Tesla will still be the market leader in the electric vehicle segment in 2019, but will fall back to seventh place by 2021, as mainstream manufacturers enter the arena prompted by policy changes across major markets such as France and the UK. Daimler, fifth in the ranking in 2019, is expected to take the lead by 2021. German manufacturers will do well in the next three years: German players Daimler, BMW, and VW are expected to arrive in the first, second and fourth place by 2021.

Electric is the future

In the coming years the larger car manufacturers will invest billions in the further development of electric vehicles. The expected number one in the ranking in 2021, Daimler, will invest some €10 billion in electric cars in the coming years. This investment will have to ensure that every type of Mercedes-Benz gets a fully electric or hybrid variant by 2022. In 2018 Mercedes will open its sixth battery factory again.

Renault Nissan Mitsubishi, in second place in 2019, is expected to drop a place in 2021, to third. The three car manufacturers, who together form the Franco-Japanese strategic partnership 'Alliance 2022', announced plans at the end of last year to produce twelve fully electric models until 2022. They also want to develop forty self-driving models. As of January 2018, the Alliance, if taken as a single entity, became the world's leading plug-in electric vehicle manufacturer, while also at the start of this year the three parties announced that they would invest around €1 billion in a fund for start-ups in the coming five years. The fund will invest in new developments in the field of electric driving, self-driving cars and artificial intelligence.

Six automotive giants to pass Tesla in the electric car market by 2021

The current number three, BMW, will rise by one place come 2021. At the end of 2017, the German car manufacturer announced that by the close of play in 2019 it would already have sold half a million electric cars (fully electric and hybrid models). BMW Group expects that by 2025 about 15% to 25% of sales will consist of electrified models. BMW recently signed an agreement worth €1 billion with China's largest manufacturer of lithium batteries.

Volkswagen – which also owns Audi, Seat and Škoda, among others – is now ranked seventh, and is expected to be at number four by 2021. The famous German corporation announced in late 2017 until 2022 a total of €34 billion will go into the development of electric and self-driving cars. VW also announced that it would have an electric version available for each of its three hundred models by 2030. Volkswagen CEO Matthias Müller said he would like to launch more than eighty new models with electric propulsion over the next eight years; fifty fully electric cars and thirty plug-in hybrids.

Volvo, which looks set to rise one rank to fifth by 2021, recently announced that by 2019 all its new cars will be fully or partially powered electrically. Volvo Cars and owner Zhejiang Geely Holding Group also invested around €640 million in the first phase of the product, brand and industrial development of the Polestar electric vehicle brand.

Strong competition

Due to the fierce competition from established car manufacturers, it is not surprising that Tesla is predicted to slide to a middle position in the automotive stakes in 2021. Commenting on the prospective seventh position Tesla faces, Thomas Goettle, Head of Automotive at PA Consulting Group, said that the uncertainty with which Tesla currently has to deal is a major problem for it. For example, the company faces production problems related to their long-awaited Tesla 3 model and there is a low profit forecast. At the same time, workforce satisfaction is at a historic low, with relations between staff and CEO Elon Musk strained at best. Things reached a notable low last year at the company, following a memo in which the tycoon notoriously suggested he would see staff receive frozen yoghurt if they rejected unionisation efforts.

In any case, it is certain that electric driving and, in a broader sense, e-mobility will receive more and more emphasis in the coming years, especially in view of the set objectives in the climate policy initiated by the EU, but also the call from consumers and companies to more sustainability. At the European level, targets for reduction of CO2 emissions, energy saving and the development of renewable energy are set for 2020, 2030 and 2050. In April 2018, the European Parliament adopted, by a large majority, new climate legislation to meet the Paris climate goals.*

Goettle commented: "Achieving CO2 targets and improving the future mobility performance of car manufacturers go hand in hand. However, this challenge has enormous consequences for the human resources of the companies. Our research shows that the roles of 267,000 employees at 16 brands across Europe come under pressure, 141,000 of whom need to be retrained or retrained - all in the next decade... In order to improve their future mobility performance score and meet the CO2 targets by 2021, car manufacturers need not only to speed up and adjust their new product development, but also create value in their supply chain and increase sales through customer focus."

* The legislation focuses specifically on the emission of greenhouses in the agricultural, transport, waste, and construction sectors and buildings. Member States are obliged by this legislation to reduce emissions from 2021 through annual targets. In 2030 emissions in these sectors should be on average 30% lower than in 2005. In June 2018, the Member States and the EP also agreed that in 2030 32% of the energy generated in the EU should be sustainable.

Europe's energy efficiency services market to reach €50 billion by 2025

02 April 2019

The growing climate change awareness as well as improvement to technology have lifted the market for energy efficiency in Europe to almost €25 billion. Growth will accelerate in the coming years, with the market set to double to €50 billion by 2025. The landscape remains fragmented however, according to a new report.

Climate change mitigation remains a key priority for much of the world – failure is noted as one of the world’s biggest risks going forward. Efforts to meet the Paris Agreement target of no more than 2.0°C warming by 2100, with a strong preference for 1.5°C, mean that transformations of various industries remains a priority. While reductions in the use of fossil fuels is a key part of wider moves to reduce global emissions, improvements to the efficiency of energy produced is a second avenue of improved energy outcomes.

Analysis regarding the improvement to energy efficiency for Europe show that considerable gains will need to be made over the coming decades to meet the region’s commitments. While governments have been keen to push for improvements in the space, companies too have sought to improve their energy efficiency, both to reduce long-terms costs as well as meeting their own goals related to reducing their carbon footprints.

EES is set to become a key European market

In a new report by Roland Berger, the authors analysed the market for energy efficiency services and products (EES), aimed at improving the energy efficiency of buildings, physical assets and business processes. In Europe, the most in demand service is engineering, focused on mobility technology, building technology and process technology, with the total market value estimated to be around €9.5 billion. Contracting, focused largely on energy supply, generates market volumes of €6.6 billion, followed by consulting at €5.2 billion.

As Europe ramps up attempts to reduce the energy waste in many of its systems, demand for services is set to rise significantly in the coming five to six years – at a CAGR of 8% across the various market segments. The market volume is projected to jump from €26 billion to almost €50 billion in the period up to 2025, in the process becoming a "key market in the European industrial landscape.” Software is forecast to enjoy the highest increase in demand, at a CAGR of 14% for the period, followed by engineering at a CAGR of 9%.

Businesses ownership remains split

While the consulting firm has projected strong growth for the market in the coming decade, various challenges for growth are also noted. This reflects the market’s diffuseness and fragmentation, and its relatively competitive nature, as well as the technical difficulty and sophistication of the space. While there are a range of companies focused primarily on developing propositions in the EES space, many established companies are also creating solutions for the space as a diversification strategy of their core propositions.

Fragmentation is the highest in the software industry, where around 60% of total EES activity stems from non-EES focused companies. The consulting segment is the most mixed, with 70% of companies operating in the space having a business focus within and without the industry. Contractors tend to have the strategic focus on the energy efficiency services market, at 70%, followed by operations-focused companies at 60% and engineering focused companies at 50%.

M&A intensity

The fragmented picture in part reflects the effect of acquisitions that are not well aligned with wider business processes and outcomes. Over the past five years around 100 deals were made in the space. Energy services specialists are the keenest to invest, according to Roland Berger, at 38% of the total, followed by utilities at 16% and investment funds at 11%. However, the researchers note that in many instances the deals were not well matched to the buyer’s wider business model, or were experiments in the segment, which sometimes created risks on their current business model.

For players to succeed in the market, the authors have three pieces of advice. “Players can succeed by following a few relatively straightforward principles. They must build a compelling business case for their customers, using levers such as digitalisation and cost of delivery. They must pursue smart growth through mergers and acquisitions, taking great care not to kill off the entrepreneurial spirit of their newly acquired firms. And they must ensure that they themselves have the right internal setup, with the required flexibility to accommodate strong growth businesses.”