Fleets first How accelerating fleet electrification can unlock the shift to clean road transport - Climate Group
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Fleets first How accelerating fleet electrification can unlock the shift to clean road transport July 2021
Foreword
Helen Clarkson,
Chief Executive Officer, Climate Group
Reaching net zero by the
middle of the century
requires a step change
The science is clear, we need to halve emissions across all sectors. And
by 2030. So for road transport, it’s surely simple: switching to electric vehicles
get rid of the internal combustion engine. is a crucial part ‑of the action
we need to take to hit this
Thankfully, despite the uncertainty and But while this progress is good, we’re now
goal and keep the target of
turmoil of the past year and half, the shift firmly in the Climate Decade and pockets of limiting global temperature
to zero emission vehicles (ZEVs) is certainly leadership are simply not enough. rise by 1.5C alive.
under way – it’s no longer a question of if, We need to do more, faster.
but when?
With this report, we’re reassured to see a
I am encouraged by research
In just four years, our EV100 initiative has way forward. such as this which shows that
grown to include over 100 multinational
Our analysis finds that fleet vehicles
change is within reach. We
companies committed to switch more
could be instrumental in bringing about must all work together ahead
than five million vehicles to electric by
a wider shift to clean road transport and of COP26, and beyond, if
the end of the decade. We’re also seeing
it’s possible for their electrification to we are to secure a greener
promising signs of movement from
happen on an accelerated timeframe.
policymakers and industry, with increasing future.
Perhaps even more encouraging is the
numbers of governments and automotive
extensive impact this would have on our
manufacturers announcing commitments to Alok Sharma,
climate, health and infrastructure, as well
a 100% ZEV future.
as reducing the costs of clean technology.
COP26 President-Designate
So, no more excuses. Businesses,
governments, and public sector
About EV100: organisations have the responsibility and
the ability to drive us to a better future by
EV100 is a global initiative, led by the Climate Group, flipping their fleets to electric; industry has
bringing together forward-looking companies committed a serious business opportunity to meet
to making EVs the new normal by 2030. Members publicly this inevitable demand; investors have
commit to at least one of the following by 2030: the capital and policymakers have the
• E
lectrifying owned/leased fleets enabling power to make this all happen.
(100% < 3.5t / 50% 3.5 – 7.5t)
With the upcoming UN climate change
• I nstalling charging at all relevant sites negotiations, COP26 in November, we have
for staff and/or customers a chance to build momentum and deliver a
• Requiring EVs in service contracts real breakthrough in clean road transport.
It’s time to step on it.
2 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Foreword 3
Contents
06 Executive summary
10 Methodology
14 The EV landscape
16 Our accelerated scenario
24 Constraining factors
28 The impact of faster fleet electrification
31 Direct impacts
33 System benefits
42 Making it happen
46 Glossary
48 Acknowledgments
4 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Contents 5
Executive
summary
Accelerating the electrification
of fleet vehicles – those which are
owned or operated by a business,
public sector body or other
organisation, or used for shared Globally fleets make up a quarter
of all vehicles on the road. However,
95% market share for new purchases
across most vehicle types and
mobility purposes – can significantly because these vehicles travel further
and are heavier than private vehicles on
geographies by 2028 – this could result
in cutting over 3 billion tonnes of carbon
reduce road transport emissions average, they contribute close to two-
thirds of all greenhouse gas emissions
dioxide by 2030 (3.1 GT CO2e), similar to
the current annual emissions of India,
in the 2020s, bringing us closer to from road transport. While medium and
heavy duty freight vehicles are a major
the world’s third highest emitter.1
The Climate Group worked with
the trajectory needed to keep contributor to this fleet impact, light duty
vehicles (under 3.5 tonnes) and buses still
SYSTEMIQ to explore this high ambition
scenario, in which fleet electrification
global temperatures within 1.5°C account for more than a quarter (26%)
of all global road transport emissions.
occurs rapidly from the mid-2020s,
over and above the business-as-usual
above pre-industrial levels. If fleet owners rapidly transition to
fully electric vehicles (EVs) in light duty
forecast contained in the BloombergNEF
Electric Vehicle Outlook 2020.
categories and buses – reaching around
1 Ministry of Environment, Forest and Climate Change, Government of India (2021). India: Third Biennial Update Report to the
United Nations Framework Convention on Climate Change.
6 Executive summary 7
This analysis – supported by insights from a series of expert Significantly, this accelerated transition scenario is achievable with the
interviews with sector specialists, industry, policy experts, lithium-ion battery manufacturing capacity announced to 2025. This will
require a doubling in raw material production for lithium carbonate against
and some of the world’s largest fleets – found that a fleets-
current projections, which should be feasible given the mining lead times.
forward pathway to electrified road transport is both
However, the right commitments, policy support and additional investment
possible and can unlock a wide range of benefits, including:
will be required to turn this opportunity into a reality. In order to unlock a
rapid transition to electrified fleets, there are certain critical changes that
will be required over the next three to five years:
Climate Innovation • Fleet owners and operators need to • Renewable energy power purchase
provide a strong demand signal. This agreements (PPAs) and other
By 2030 there could be direct Higher output advances battery will help trigger the investments in mechanisms for purchasing clean
cumulative emission savings technology along the learning increased production capacity from energy are essential for delivering
from fleets of 3.1 GT CO2e, plus an curve, resulting in more efficient automotive manufacturers and within emission savings. This is especially
indirect benefit of a further 0.7 GT production. This leads to EV battery the battery value chain by the mid- the case in markets where fossil
CO2e thanks to positive knock-on costs being around 14% cheaper 2020s. Global initiatives such as EV100 fuels are highly prevalent within the
effects on used vehicle markets. by 2030, over and above the cost are helping to aggregate this demand, electricity grid. Around 40% of the direct
Together this 3.8 GT CO2e represents reductions that would be expected with over 100 corporates now committed greenhouse gas emission savings from
a reduction close to the annual on our current trajectory. to transition more than 5 million light this accelerated fleet electrification
emissions of the European Union.2 duty vehicles to EVs by 2030. scenario (a cumulative 1.3 GT CO2e by
• Utilities, and local authorities need 2030) are achieved only if additional
electricity demand is met with zero
to support the timely build-out
Health Scale of charging infrastructure and
carbon energy sources.
Reduced transport-related Increased demand for EVs helps
strengthening of local distribution • Policy support is needed to positively
air pollution helps to avoid networks, particularly along critical influence demand and supply dynamics
drive down battery costs and bring
approximately 120,000 premature transport corridors. Globally, there will for EVs and electricity infrastructure.
forward the tipping point where
deaths in 2030, with the greatest need to be installations of an additional There is an emerging evidence
EVs commonly reach purchase
benefit occurring in densely 14,000 charging units per day through to base around the measures that are
price parity with equivalent internal
populated urban areas in the 2030 above current projections to meet proving to be effective. These include:
combustion engine (ICE) vehicles
Global South. growing demand, requiring an extra implementing the phase out of new
by around one year, with this
US$250 billion in investment. Easing internal combustion engine vehicle
occurring as soon as 2023 across a
planning permissions and giving private sales through mandates or emission
range of markets and categories.
sector charge point providers access to standards; introducing zero emission
Availability public land can support this. areas in cities; leveraging the power of
The second-hand market for EVs is around 40% larger • Alternative financing schemes and public procurement; and introducing
financial incentives, such as grants or tax
new business models are needed.
in 2030 and over 70% larger in 2040. This increases deductions for fleet EV purchasing. There
Innovations such as charging-as-a-
EV choice and affordability for individuals and is also a need for harmonised protocols
service solutions can help accelerate the
organisations without ready access to finance, unlocking and standards for hardware and
deployment of charging infrastructure,
the wider transition to zero emission road transport. technology, to ensure interoperability
as well as to help fleet owners manage
This contributes towards building an additional 4 million between different providers.
cash flow challenges stemming from
public charging units by 2030.
lower total cost of ownership but higher
up-front purchase costs.
2 European Environment Agency (2021). Total greenhouse gas emission trends and projections in Europe.
8 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Executive summary 9
Methodology To reach net zero
emissions in road
This report sets out a scenario to understand the
impact of accelerating the electrification of light duty
transport, we need
fleet vehicles (under 3.5 tonnes) and buses. These are vehicles that do not
defined as vehicles that are either registered under or
managed by an organisation, or both. The analysis was produce any tailpipe
CO2 emissions.
conducted by SYSTEMIQ between March and May 2021.
The underlying model is built on top of corporate-owned passenger vehicles. The
the more ambitious of the two scenarios classification of shared two-wheelers and
in the BloombergNEF Electric Vehicle passenger cars includes digital ride-hailing,
Outlook 2020, referred to as the EVO 2020 taxis, autonomous vehicles, on-demand
Trajectory Scenario, which also provides delivery vehicles, and other similar shared
the reference point as a baseline scenario. mobility models.
This contains existing and projected data
Medium and heavy duty commercial
on vehicle stock, new vehicle sales (EV and
vehicles were excluded from this analysis,
ICE), emissions calculation, EV value chain
as they face different challenges to electrify
analysis, energy demand and supply, as
within the time frames explored and have
well as charging infrastructure.
different use cases. While there is significant mid-2020s. This includes: the approach vehicle phase out policies, such as EV sales
We have compared this baseline with our potential for a similar accelerated transition of price parity with ICE vehicles due to mandates, emission standards, or zero
accelerated scenario to identify the benefits of fleets to zero emission vehicles in these battery price declines; an increasing emission areas.
of a concerted push on EV manufacturing, categories, over a different timeframe, range of EV models becoming available;
While the shape of the S-curve shows a
fleet purchasing, innovation, and exploring this was outside the scope of the development of retrofit technology;
more rapid transition than other studies,
infrastructure build out. Our scenario this study. and central and local government ICE
experience shows that experts have found
was built around an S-curve model to
The scenario divides the world into eight it notoriously difficult to predict the non-
illustrate what a plausible high ambition
separate geographies: China, Europe, US, linear change of technology adoption
fleet transition to EVs could look like.
To refine this model and test assumptions,
India, South Korea, Japan, Australia, and
Rest of World. Depending on their current
Our accelerated scenario curves and forecast tipping points.
Examples of this include the scale up of
a range of sources were consulted and
SYSTEMIQ conducted a series of in-depth
market conditions, these were then divided
into Leader and Follower classifications
assumes exponential growth renewable energy capacity, through to
adoption of the internet or mobile phones,
interviews with subject matter experts from in different vehicle categories, which of EVs, based on existing which all far outstripped early expectations.
industry and academia, as well as major impacted the date of their acceleration
fleet owners and operators from around starting point and speed of acceleration, trends that point towards a To put in place guardrails of plausibility, we
have also stress-tested against potential
the world. influencing the shape S-Curve.
The analysis splits fleet vehicles into the Our accelerated scenario assumes
tipping point in fleet vehicle constraining factors that could limit
growth. These include the availability of
following vehicle types: light commercial
vehicles (
The EV
landscape
Electric vehicles (EVs) are getting
ready to overtake internal
combustion engine (ICE) vehicles.
Today fleet vehicles are being left behind in
the electrification race.
Government policies that require sales of China is already leading the way – At present, the majority of EVs on the road organisations to take advantage of the
zero emission vehicles, falling costs, rising over 30% of all vehicles in the nation are privately owned passenger vehicles, total cost of ownership benefits that can
consumer desirability, and increasing are EVs, largely two-wheelers and while just 11% are fleet vehicles. According to be achieved.
numbers of public charge points mean buses. This is thanks to over a decade BNEF by 2040 the proportion of EVs that are
Buses and two and three-wheeled vehicles,
that EV sales are now expected to overtake of supportive policies and subsidies, fleet vehicles will rise, but only to 23% of
however, seem to be making better progress
those of ICE vehicles in the medium-term. coupled with a strong automotive the total.
with global electrification rates, at 16% and
The transition has become inevitable, the manufacturing and battery industry.
The top barrier for businesses progressing 20% respectively. Although much of this is
question is how quickly it will occur. And this puts the country on track to
with fleet electrification is a lack of charging due to government-led efforts in China,
reach 84% EV vehicle stock by 2040.
In 2019, 85% of global new vehicle sales infrastructure.3 Insufficient choice in fleet EVs resulting in a near 65% electrification
were ICE vehicles, 13% were EVs for By comparison, in all other geographies is the next biggest issue, with many EV100 rate for these vehicle types in 2020 within
private use, and just 2% were EVs for fleet analysed – including the US, Europe, members identifying commercial vans (61%) the country.
use. According to the more ambitious of Japan, India, Australia, and South Korea as the most challenging EV vehicle type
Consequently, under the BNEF baseline
the two scenarios contained within the – barely 1% of all vehicles are currently to procure.
prediction, only a a subset of fleet vehicle
BloombergNEF (BNEF) Electric Vehicle EVs. By 2040 the baseline suggests that
The upfront cost of EVs, which are on categories in certain more advanced
Outlook 2020 – the baseline for comparison the US, Europe and South Korea will have
average still more expensive than ICE geographies will have a greater than 50%
to our accelerated scenario – the tipping caught up significantly to China, with EV
vehicle alternatives for many vehicle types, share of EV sales by 2030.
point where EVs become dominant in new shares just below 60%. But worldwide,
can also be off-putting, though a range
vehicle sales is expected to come in 2035. the average share of EVs on the road We believe fleets can do a lot better
of new finance products are now helping
By 2040, only 37% of the total vehicle stock would still be hovering around 40%. than this.
will be EVs, with 47% of new sales being
private EVs, and 17% EV fleet vehicles.
3 Climate Group (2021). EV100: Progress and Insights Report 2021.
12 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport The EV landscape 13
What about hybrids?
Defining EVs and ICE vehicles
To reach net zero emissions in road transport, we need vehicles that
do not produce any tailpipe CO2 emissions. While there is a limited
role for plug-in hybrid electric vehicles (PHEVs) in the transition to
electric mobility, within the context of our accelerated scenario any
references to “EVs” refer to vehicles solely powered by a battery electric
powertrain. Hybrid vehicles that contain a battery electric powertrain
alongside an internal combustion engine (ICE), and therefore produce
tailpipe CO2 emissions, are categorised as “ICE vehicles”.
What about hydrogen?
The role of fuel cell electric vehicles
Fuel cell electric vehicles (FCEVs) do offer a potential pathway to net zero
emissions in road transport. But the technology cost reductions, infrastructure
development, and industry support for this option lag significantly behind what
is currently seen with battery electric vehicles. As such, FCEVs have not been
incorporated into analysis in this report, as it is considered that they are unlikely
to form a meaningful contribution within the light duty vehicle categories
included within this accelerated scenario for fleet electrification. While it is
possible that fuel cells may yet prove to be important in electrifying medium
and heavy duty vehicles, that consideration is outside the scope of this report.
14 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport The EV landscape 15
Our accelerated
scenario We don’t believe this is overambitious.
Here’s why.
The accelerated scenario assumes a Under an S-curve pattern, adoption of
rapid growth in EV sales. We believe this is innovations starts slowly, of interest to a
What if we can go faster? plausible based on already existing market niche group. As the market grows, prices
trends, that are pushing EVs towards what fall rapidly and performance improves in
technologists call S-curve growth. leaps and bounds – encouraging more
Our accelerated scenario has been built of global new vehicle sales by 2032, and
and more people to use the technology.
to illustrate an ambitious but plausible reach 53% of the total vehicle stock by 2040. S-curve growth has been observed within
Growth becomes exponential – the
transition to EVs in fleets, demonstrating many technological revolutions, such as
This is a significant acceleration compared to upwards curve of the “S” – and doesn’t
the size of the prize in speeding up the adoption of the internet and renewable
the baseline prediction, which forecasts that flatten out until the technology is in
electrification over the next decade. Under energy. It describes the path they take
a 50% market share would only be reached use by most of the relevant market.
this scenario, we find that EVs can hit a to dominance, which is not linear, but
three years later, in 2035, with EVs making up
tipping point where they make up over 50% explosive and disruptive, changing the way
only 37% of total vehicle stock by 2040.
societies live.
Accelerated scenario – total global vehicle stock Accelerated scenario – global new vehicle sales
Total
3.2 billion
Total vehicle sales Total vehicle sales
181 million Total vehicle sales CAGR 1% 215 million
Total
2.3 billion
ICE vehicle
25%
Sales CAGR -3%
54%
EV Private
Sales CAGR 7%
50% Market
Vehicles Sales
Vehicle Stock
47%
Share
85%
24%
52.6%
36.5%
28% EV Fleet
22%
13% Sales CAGR 14%
8% 2%
2019 2030 2040 2019 2030 2040
EVs will overtake ICE vehicles to make up the
ICE vehicles Fleet EVs majority of global sales in 2032 compared to
Baseline scenario - All EVs 2035 in the baseline scenario
Private EVs
16 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Our accelerated scenario 17
Accelerated scenario – reaching the EV tipping point
C
A B
100%
90%
80%
Leaders
Followers
70%
EV Sales as % of all Vehicle Sales
BNEF BAU
A Growth Point
60%
B Inflection Point
50% C Acceleration Period
40%
30%
C
20%
A B
10%
0%
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
2020: Investment surges 2025: A growing numbers of cities 2030: A number of major
into EV manufacturers, as begin restricting ICE vehicles in low automotive manufacturers are no
company valuations spike or zero emission zones longer producing ICE vehicles
2022: Choice of EV models 2024: EVs commonly start 2035: New sales of ICE vehicles
on the market more than reaching sticker price parity with are now banned across a
doubles compared with 2019 ICE vehicles in some categories number of major markets
2023: EV retrofit for ICE
vehicles starts becoming widely
available in some markets
18 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Our accelerated scenario 19S-curve growth is hard to predict, precisely These include the fact that:
Fleet EVs in particular Building the model for
because the tipping points for acceleration
can depend on a number of factors. But
• Automotive manufacturers are
are ready for our fleets-led approach,
significantly increasing investment
a number of trends point to EVs being
into EV production and setting bolder S-curve growth. regions are divided into
at the beginning of the upward slope of
the “S” and ready to experience a similar
targets for future sales. 7
Fleet owners upgrade vehicles more two groups – leaders
trajectory to renewable energy. • EVs are expected to reach upfront frequently than private car owners, since and followers.
(sticker) price parity with ICE vehicles by they typically have better access to finance
As a comparison, renewable energy
2024 due to battery price declines. 8 and put a greater focus on total cost of Under our scenario, leaders are able
is a technology where time after time,
• The choice of EV models on the market ownership. Fleet vehicles are typically to begin the rapid acceleration of EV
industry and expert forecasts have been
renewed on average every three to four sales in 2023, reaching 100% EV market
outstripped by the market, frequently by a will more than double between 2019
years for light commercial vehicles, shared share in fleet purchases by 2030.
significant amount. For example, in 2014, and 2022, from around 230 to in excess
passenger cars and corporate-owned
the International Energy Agency forecast of 520. 9 These leading regions include:
passenger cars, compared with seven
that average solar prices would only reach
$0.05/kWh by 2050. 4 But this milestone was • Retrofitting ICE vehicles with EV years for private passenger vehicles. • China, where continued regulatory and
technology is expected to become manufacturing support will strengthen
already reached in some markets by 2020. The economic advantages of EVs are also
widely available by 2023.10 the country’s dominance in EVs. However
In fact, energy produced by solar and wind greater for fleets when compared with
charging infrastructure availability may
in countries spanning two-thirds of the
world’s population was cheaper in terms of
• A large number of cities around private vehicles, since the higher average
frequency and length of journeys means
slow down China’s growth, bringing it
the world are announcing plans closer in line with other leading regions.
levelised cost of energy (LCOE) than fossil they have a greater upside from electricity
• Europe, where electrified shared
to restrict ICE vehicles in zero
fuel sources by 2020, having consistently emission zones across a major costing less than petrol or diesel. Today,
exceeded industry forecasts. 5 area of their city by 2030.11 the total cost of ownership of EVs is lower passenger vehicles and corporate
fleets will increase thanks to EV car
• An expanding number of countries
than for ICE vehicles in a majority of cases
In 2016, it was forecast by the International
across many markets, thanks to lower ownership schemes from companies,
Energy Agency that ICE vehicles would are introducing legislation that maintenance, tax and energy costs, which while policies such as low and zero
still account for the majority of cars on the will require the phase out petrol offset higher up front prices.15 emission areas in urban areas will
road in the early 2050s, with EVs making and diesel engines in new vehicles push light commercial vehicles (LCVs)
up only around 40% of the light duty vehicle between 2025 and 2040.12 and buses to make the switch.
stock (and just 10% by 2030).6 Just five years
later, it’s hard to imagine them capturing • There are also a growing number of • The US, where growth will be driven
anything but a shrinking minority of new states and regions moving ahead of by the pro-EV stance and significant
vehicle sales by the middle of the century, their national governments to introduce industry support seen to date from
thanks to government phase outs and local ICE phase outs,13 or EV market President Biden’s administration,
manufacturer commitments. share targets.14 combined with emerging disruptive
Many existing trends point to a tipping Scenarios have boundaries, business models and fast-growth
start-ups.
point in vehicle electrification in the mid-
but so does our planet
2020s in most geographies, and for most
vehicle types. This report sets out a scenario exploring the role
• South Korea, where a combination of
subsidies for fleet transition and stringent
of fleets in accelerating the shift towards zero policy measures will drive forward
emission vehicles. However, this is just one part of battery manufacturing and the EV
4 International Energy Agency (2014). Energy Technology Perspectives 2014. a complex global transport system. We need to industry, strengthened by the presence
5 BloombergNEF (2020). New Energy Outlook 2020. transform the entire economy at scale and speed of Hyundai and its introduction of new
6 International Energy Agency (2016). Global EV Outlook 2016.
if we are to achieve net zero by 2050, giving EV models.
7 Companies or brands with announced ICE phase out dates include Jaguar (2025), BAIC (2025), Volvo Cars (2030), Fiat (2030),
Ford (Europe only, 2030), Volkswagen (Europe 2035), General Motors (2035), Daimler (2039), Honda (2040). ourselves a realistic chance of avoiding the worst
8 UBS (2020). Q-Series: Tearing Down the Heart of an Electric Car Lap 2: Cost Parity a Closer Reality?. impacts from climate change.
9 McKinsey (2020). McKinsey Electric Vehicle Index Q1 2020.
10 Expert interviews conducted by SYSTEMIQ. While this scenario explores some of the
11 There are 36 global cities committed to this through the C40 Green & Health Streets Declaration, including London, Paris, opportunities for change, as well as the benefits
Rome, Amsterdam, Madrid, Moscow, Jakarta, Tokyo, Santiago, Rio de Janeiro, Mexico City, Bogota, and Los Angeles.
fleet electrification can bring, doing this in
12 Examples include: Norway (2025); the Netherlands, Sweden, Denmark, Ireland, Iceland, Slovenia (2030); the UK, Canada,
Cape Verde (2035); France, Spain (2040). In addition, both Japan and China intend to have a limited phase out by 2035, that isolation will not be sufficient. We will only achieve
still allows for hybrid vehicles. our goals with high ambition and bold action
13 Examples include: Hainan in China (2030); Scotland in the UK (2032); California and Massachusetts in the US, Quebec in
Canada, Sakhalin in Russia (2035). across multiple sectors.
15 LeasePlan (2019). The Total Cost of Ownership of electric
14 The government of Delhi in India has set a target that 25% of new vehicle sales should be EVs by 2024. vehicles compared to traditional vehicles.
20 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Our accelerated scenario 21Accelerated scenario – EV vs ICE in total vehicle stock by 2040
Global
Electrification
52.6%
U.S.
58% 42%
225m
Japan
39% 61%
93m
Non-EV
EV
Rest-of-
Europe India China Korea Australia16
34% World 66% 59% 41% 44% 56% 84% 16% 32% 68% 32% 68%
399m 455m 768m 24m 24m
1174m
Follower regions are not too far behind These follower regions include: particularly Toyota, as they continue automotive manufacturers will not see
in many vehicle categories, given the
global nature of automotive production
• India, where EV adoption will be to focus on low cost cars, hybrids and
fuel cell vehicles. Local municipalities
the region as a priority opportunity,
especially given the need to provide
boosted by local government policies,
and increasing market availability of new may only set loose targets on zero right-hand drive models.
government subsidies, and the growth
models. This sees the starting point for
rapid acceleration beginning in 2024, with
of ride hailing and delivery service
start-ups, alongside the an expansion in
emission vehicles, and a national
priority on scaling up green hydrogen • In the rest of the world, a lack of
price parity for the upfront cost of
EVs reaching an 80% market share of new reduces the adoption of EVs in LCVs.
e-commerce, but a lack of price parity EVs will slow down their adoption
fleet vehicle sales by 2030.
In these countries, many fleet vehicle
with low cost domestically-produced ICE
vehicles will slow adoption rates.
• Australia, where a current lack of in fleets, especially in developing
government regulation to incentivise countries. The transition is also held
categories will still reach 100% EV sales by
2030, although some – mostly buses and • Japan, where there is not sufficient the switch to EVs could delay progress.
Limited local manufacturing and
back due to a lack of regulations or
supportive policy, as well as insufficient
support from important local
LCVs – will only get up to 80% by the end of logistical challenges means that many levels of charging infrastructure.
automotive manufacturers for EVs,
the decade.
16 Australia’s commercial vehicle data is under Rest-of-World
22 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Our accelerated scenario 23Constraining
factors
Our accelerated scenario does not
break the laws of physics or the market.
We want our accelerated scenario to While we predict a rapid expansion in EV
be ambitious – high levels of ambition sales, this does not result in a consequent
are necessary to tackle climate change acceleration in the early retirement or
– but also realistic. It is based on scrapping of ICE vehicle stocks, so impact
analysis of trends that are already well on overall market transformation is actually
under way, that could reach tipping slower than it would be otherwise.
points sooner than expected.
Similarly, lead times for manufacturing
scale up and infrastructure build out have
been taken into account through a stress-
testing process.
24 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Constraining factors 25Accelerated scenario – lithium carbonate equivalent (LCE) demand Accelerated scenario – growth in lithium-ion battery demand
vs production forecast vs production
4.119
3.083
2.946
2.687
Lithium Production / Demand (kt)
2.417
2.110
1.643 2.045
1.769 1.752
1.133 2.761
2.646
816 2.395
627 2.135 806
534 1.838
426 1.381
883 432
402
579 194 194
223 323
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2020 2025 2030
Total battery demand Mining production Announced production capacity (GWh) Accelerated scenario – demand (GWh)
Other demand Baseline scenario demand Baseline scenario – demand (GWh)
With clear demand signals to drive forward to manufacturing. However, realistically should be met by battery manufacturing
this will only meet a small share of demand capacity already announced to date.
investment and preemptive strengthening of before 2030.
While around three-quarters of current
distribution & charging networks, there will What is needed is a clear demand signal capacity is in China today, a number of
be enough raw materials and manufacturing today from industry and governments, as planned gigafactories in other regions will
capacity for making batteries. the lead time for expanding production
capacity of mining operations ranges
ensure that production and availability is
more prevalent across most other major
between three and seven years. But with automotive manufacturing regions. In
Lithium is a key raw material needed for that availability of proven reserves is not swift and decisive investment and action in particular, Europe had more than 600
EV batteries , accounting for a large and a constraint in itself, the infrastructure just the near-term, lithium availability will not gigawatt hours (GWh) of annual production
growing share of total lithium demand. needs to be put in place for extraction prevent a more rapid transition to EVs as capacity announced as of Q1 in 2021.18
Under our accelerated scenario, total supported by adequate investment. demand accelerates later in the 2020s.
Then looking out to 2030, there will
demand for battery-grade lithium It is also essential that this is done
We also stress-tested our scenario need to be an even greater increase in
carbonate would be around two times following stringent environmental
against battery manufacturing capacity, production capacity for EV batteries.
greater than current projections for global and social standards, to limit negative
comparing the announced lithium-cell Although with significant lead time,
mining in 2026.17 potential impacts.
manufacturing capacity in 2025 with total continued cost reductions, and the
In 2015, economically viable lithium Beyond this, there are considerable lithium-ion battery demand resulting potential for exciting breakthroughs in
reserves were estimated at around 13.5 opportunities to scale up battery recycling from our accelerated scenario. Here it is battery technologies, this is not expected
million tonnes, although actual resources as an additional source of raw materials, in apparent that even with the significant to be a constraint on continued
are likely to be much higher. This means the shift towards a more circular approach increases in demand seen by 2025, this rapid growth.
17 SYSTEMIQ analysis based on data from Office of the Chief Economist, Australian Government, BloombergNEF, US
18 Zenn, R. (2021). Li-on Battery Gigafactories in Europe (January 2021).
Geological Survey, and Global Battery Alliance.
26 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport Constraining factors 27The impact
of faster fleet
electrification
There are multiple benefits to
accelerating the adoption of EVs by
fleets, both direct and indirect.
Fleets make up a significant proportion to see transport overtake it as the most
of vehicles on the road and are a major significant source of global emissions this
source of emissions. But taking a fleets- decade.20 It’s already the biggest source in
forward approach to the roll out of EVs also some significant markets, such as the US,
gives us the opportunity to jumpstart the where in 2019 transport made up 29% of
decarbonisation of road transport globally. all greenhouse gas emissions – with road
vehicles contributing 84% of this total.21
Road transport contributes
Road transport contributes in excess of 10%
of global greenhouse gas emissions. It’s There are 2.3 billion vehicles in the world,
in excess of 10% of global
responsible for over 6 billion tonnes of CO2, of which 565 million can be categorised as
out of a current global total (including land fleet vehicles. The higher annual mileage
use change) of 59 billion tonnes.19 and average weight of fleet vehicles
There’s an urgency to tackle transport
means they contribute to a proportionately
greater level of emissions when compared
greenhouse gas emissions.
emissions. With the power sector increasing
to privately owned vehicles. Although
the pace of decarbonisation, thanks to
they represent only a quarter of vehicles
rapid renewable energy growth and a
on the road, fleet vehicles account for
shift away from coal, we are on track
close to two-thirds of emissions.
19 International Energy Agency (2020). Tracking Transport 2020.; UN Environment Programme (2020). Emission Gap
Report 2020.
20 Wang, S., and Ge, M. (2019). Everything You Need to Know About the Fastest-Growing Source of Global Emissions:
Transport. World Resources Institute.
21 United States Environmental Protection Agency (2020). Sources of Greenhouse Gas Emissions.
28 The impact of faster fleet electrification 29The size and impact of global fleets (2019) Accelerated scenario - global EV vehicle stock
Private vehicles Baseline scenario – fleet EVs
Light duty fleets 2,342 25,568 6.5 Accelerated scenario – fleet EVs
(3.5 t) 1,666 million EVs
35%
65%
76% Growth rate
26% 2030:
1,027
for private EV
725 million EVs stock: 9%
Growth rate
27% for fleet EV
459
39% 639
21% stock: 18%
266 270
9%
170
3% 22 80
Total stock Total annual distance travelled Total emissions 2019 2030 2040
(million vehicles) (billion km) (Gt CO2e)
Direct impacts
By themselves, these numbers present a transition to zero emission vehicles than Our analysis found that accelerated in 2030 by 11%, and by 17% by 2040.
powerful case for taking a fleets-forward currently forecast, different technological fleet electrification in these categories – Although potential emissions savings
approach. This is strengthened by the and infrastructure requirements will put reaching around 95% market share by 2028 vary between countries. Our analysis
fact that fleet owners and operators have them on a more delayed trajectory towards for most vehicle types and geographies suggests the greatest opportunity is in
a greater market power than private decarbonisation, that would require – would triple the number of fleet EVs on China, which can avoid around 20% of
individuals, due to the number of new separate analysis. the road by 2030: reaching 266 million, emissions in 2030, while in Japan, cuts
vehicles purchases they make directly, compared to a baseline of just 80 million. would only reach 7% by that date.
However, fleet vehicles under 3.5 tonnes
or can indirectly influence (for example
and buses together still make up 26% of To put this in context, this alone would Significantly, while this accelerated scenario
through procurement of third party
total road transport emissions. And the reduce expected road transport emissions results in a very meaningful contribution
logistics, setting parameters for shared
potential exists to convert the majority to necessary emissions reductions,
vehicles operating on driver platforms, or
of global fleet sales to EVs this decade, transforming fleets alone is nowhere near
providing company cars).
providing there are the right commitments
The opportunity to reduce emissions is enough. It would still leave a considerable
We have excluded medium and heavy duty and policy support that can drive this gap towards the trajectory required to limit
vehicles from the accelerated scenario transformation at scale. enormous. By 2030, this faster transition warming to around 1.5°C. This highlights the
we present in this report. While there are of fleets to EVs would cumulatively avoid importance of acting as soon as possible
positive indications that these categories
3.1 billion tonnes of CO2 – close to the to simultaneously accelerate the transition
can similarly go through a more rapid to zero emission technologies in private
annual greenhouse gas emissions of India, vehicles, as well as in medium and heavy
the world’s third highest emitter. duty fleet categories.
30 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport The impact of faster fleet electrification 31Accelerated scenario – direct impact on road transport emissions Shift to renewables increases emission savings from EV switch
782
745
2019 Total
700
6.5 GT CO2e 2040 total
Global road transport emissions (GtCO2e)
633 Max grid intensity to
10.7%
6.9 GT CO2e 587
equal ICE emissions25
Grid Intensity (gCO2/kWh)
17.4%
2040 total 512 524
482
5.7 GT CO2e 441
430
397 389
279
238 224
219
178
2040 total
1.6 GT CO2e 89
54
2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2019 2030 2040
Grid Intensity for Key Regions, 2019-2040 24
Baseline scenario Approximate 1.5°C scenario China Europe Australia, South Korea, Japan
Fleet acceleration scenario U.S. India Rest of World
Renewable energy power purchase agreements System benefits
(PPAs) and other mechanisms for purchasing clean
energy are needed to avoid dirty electrification. A fleets-led approach offers many benefits, These benefits include:
beyond just fleet emissions reductions. It
contributes to wider market and energy
• Growing the used-vehicle
Around 40% of the direct emissions reductions contained within our accelerated market for EVs
system transformation, at the same time as
scenario comes from fleet EVs being charged by zero emission electricity. We believe
this is realistic, but it will require organisations to simultaneously focus on clean
delivering social benefits and supporting • Strengthening
technology innovation. electricity grids
• Reducing air pollution
energy procurement.
Renewable energy sources have become the lowest cost option for new generation
in the majority of countries across the world, 22 and 100% renewable or zero emission • Driving down battery costs
electricity products are readily available in many markets today, either through
power purchase agreements (PPAs) or utility tariffs. Indeed, the market for corporate
• Increasing charging
point installations
PPAs grew almost a quarter just in 2020, 23 and over 300 global corporates are now
committed to purchasing 100% renewable electricity through our RE100 initiative.
While it is possible in principle that EVs can result in higher in-use emissions than ICE
vehicle equivalents, today this only occurs in markets with high levels of coal use.
Under current trajectories for grid decarbonisation, EVs will have a considerable
22 International Renewable Energy Agency (2020). Renewable Power Generation Costs in 2019.
advantage over ICE vehicles across all regions by 2030. This highlights the mutually 23 International Energy Agency (2021). Corporate PPA volumes by technology, 2015-2020.
reinforcing benefits from of accelerating the shift to renewable power and electrified 24 International Energy Agency (2020). World Energy Outlook.
transport in tandem. 25 ICE emissions are calculated only on a tank-to-wheel basis.
32 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport The impact of faster fleet electrification 33Accelerated scenario – growth in used vehicle market26 Accelerated scenario – additional indirect impact on road transport emissions
~70% increase in used
vehicle market size
2040 Total 2040 Total 2019 total 6.5 GT CO2e
Global road transport emissions (Gt CO2e)
85.6 m 49.8 m
8.0
Used vehicle sales (millions)
~40% increase in used
vehicle market size 85.635 7.5
2030 Total 2030 Total
24.6 m 17.4 m 7.0 2040 total
12.8%
6.9 GT CO2e
49.827
Additional fleet EVs under 6.5
accelerated scenario begin entering 21.0%
the used vehicle market
6.0 2040 total
5.7 GT CO2e
5.5 2040 total
5.5 GT CO2e
2019 2026 2030 2040 2020 2030 2040
Baseline scenario Accelerated scenario Baseline scenario Fleet acceleration scenario – Fleet acceleration scenario –
direct impacts direct and indirect impacts
Growing the used-vehicle market for EVs Vehicle segment Typical duration of initial ownership27
Light Commercial 4 Years
Fleets tend to have shorter vehicle This significant increase in used EVs would
Medium Commercial 4 Years
replacement cycles than private owners. improve availability and affordability for
For example, brand new cars used for individuals and organisations, especially Heavy Commercial 4 Years
shared mobility services, such as ride- those without ready access to finance. A Buses 8 Years
hailing, tend to be replaced and enter strong secondary market can also bolster the
the used vehicle market after three years, residual value of EVs, helping to reduce the Shared 2/3 Wheeler 4 Years
compared with seven years for a private cost of leasing. In turn, this will help to unlock a Private 2/3 Wheeler 6 Years
passenger vehicle. wider transition to electrified road transport.
Shared Passenger 3 Years
If fleet electrification is accelerated, our As greater choice and more attractively
Organisationally-owned Passenger 4 Years
analysis shows that the size of the used priced EVs displace ICE vehicle purchases,
EV market would be approximately 40% this will also lead to reduced emissions Private Passenger 7 Years
larger by 2030 compared with the baseline from privately owned vehicles. We calculate
scenario, rising to be around 70% larger in that this effect could result in cumulatively
2040. This results in an additional 35 million avoiding an additional 700 million tonnes of When added to the direct emission savings from fleets over this time period
EVs in secondary markets at this point. CO2 by 2030. (3.1 Gt CO2e), the total direct and indirect cumulative emission savings that
can be achieved from accelerating the roll out of EVs in fleets could be up to
3.8 billion tonnes of CO2 by 2030 – similar to the annual greenhouse gas
26 The size of used vehicle market was calculated based as a percentage of new vehicle sales, based either on: (a) when emissions from the entire European Union.28
a critical mass of a minimum 1,000 EVs is reached; or (b) after a lead-time equal to typical initial ownership period is
reached after the first EV segment sale within the region. Calculating the used market as a percentage of new vehicle
sales is based on expert interviews and the following sources: China Automotive Distribution and Aftermarket Industry
Report, 2020-2026; BCA (2013). BCA Used Car Market Report; McKinsey (2019). Used cars, new platforms: Accelerating
sales in a digitally disrupted market; Mordor Intelligence (2021). India Used Car Market - Growth, Trends, Covid-19 27 Expert interviews and SYSTEMIQ analysis.
Impact, and Forecast (2021 - 2026). 28 European Environment Agency (2021). Total greenhouse gas emission trends and projections in Europe.
34 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport The impact of faster fleet electrification 35Strengthening electricity grids
As we seek to reach net zero in the energy Under our accelerated scenario, by 2030
sector, vehicle-to-grid (V2G) technology we estimate that EVs could be providing
will have a critical role to play in bringing as much as 10 terawatt hours (TWh) of
down total transition costs. Connecting theoretical battery capacity to grids
EVs to grids can displace generation costs globally31 . This equates to around 10% of
and increase capacity adequacy value, global daily power demand in an electrified
requiring a lower level of total power economy, which would be enough to
generation to be added to the network. provide around one-third of the daily grid
They can also provide important intra- balancing needs in a power system with
day and intra-seasonal supply-demand high levels of variable renewable electricity
balancing opportunities and reduced (equivalent to around 75% of the total,
distribution network reinforcement costs, mostly from wind and solar).
helping to manage variable levels of
However, this theoretical benefit will
renewable electricity from wind and
depend on how effectively V2G technology
solar generation. It is estimated that the
and business models are implemented.
additional value provided by just one
To maximise this potential, these will need
electric van connected to the UK electricity
to incentivise high levels of participation
system could be up to £500 per year. 30
from fleets and individuals, ensure that
This can also help to unlock an additional grids are upgraded to enable V2G by
source of value for fleet owners and allowing for two-way electricity flow,
However, the benefits of the increased used vehicles, ensuring environmental or individual EV drivers: selling stored energy as well as overcoming concerns around
availability of used EVs may have a safety standards.29 in EV batteries back to the grid at times of battery degradation.
smaller impact on vehicle markets in high demand, or flexibly charging at times
At present the European Union is the single
developing countries, particularly in of low demand at reduced cost (or even in
largest source of used light duty vehicle
the medium-term. This is because used return for payment).
exports, providing over half of the total
vehicles tend to circulate for a number
(54%), followed by Japan (27%) and the US
of years within the domestic markets of
(18%). The majority of these exports (70%)
developed countries before being either
end up in developing countries, particularly
scrapped or exported. It also reflects
in African nations that collectively import
reduced desirability of EVs in markets
Under our accelerated scenario, by 2030
40% of the overall total.
where there will be a lower level of early
investment into charging infrastructure. In order to achieve the maximum benefit
we estimate that EVs could be providing as
from early action on fleet acceleration –
This highlights the risk of ‘ICE dumping’ and to ensure the transition to EVs is truly
– delaying the global transition to zero global – it will therefore be important to
emission vehicles by flooding developing
country markets with cheap used ICE
strengthen policies and available finance to much as 10 terawatt hours of theoretical
specifically address this risk, or to increase
vehicles, as they become less desirable
domestically. Recent analysis from the
the availability of vehicle powertrain retrofit
options. In addition, it may be necessary
battery capacity to grids globally.
United Nations Environment Programme to introduce scrappage mechanisms or
found that two-thirds of developing other incentives, to take ICE vehicles off the
countries currently have ‘weak’ or ‘very market entirely.
weak’ policies to regulate the import of
30 Sandys, L., et al. (2020). ReCosting Energy: Building Blocks for Net Zero
29 United Nations Environment Programme (2021). Used vehicles and the environment: a global overview of used light duty 31 Based on 50% V2G participation, average battery size of 5kWh for two and three-wheeler vehicles, 60kWh for passenger
vehicles - flow, scale and regulation. and commercial..
36 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport The impact of faster fleet electrification 37Accelerated scenario – potential premature deaths avoided Accelerated scenario – battery price learning curve
1200 Fleet acceleration begins
~120,000
Battery Price price (US$/kWh)
1000
annual
Premature deaths (‘000)
premature
800 deaths
avoided
by 2030
600
Battery costs fall below $93/kWh a year
earlier, the tipping point at which EVs reach
upfront cost parity with ICE vehicles
400
61
200
-14%
52
0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2015 2020 2023 2024 2030
Baseline scenario – premature deaths Accelerated scenario – premature Historic learning curve Accelerated scenario – learning curve
from road transport air pollution deaths from road transport air pollution Baseline scenario – learning curve
Reducing air pollution Driving down battery costs
Air pollution remains one of the greatest example with higher e-commerce sales Looking across the history of lithium- forward the tipping point where EVs reach
global public health concerns, resulting resulting in increased last-mile deliveries ion batteries, with each doubling of the sticker price parity with ICE vehicles by
in $3 trillion in annual global healthcare in urban areas. cumulative volume produced, there is around a year. For example, should battery
costs. 32 And fossil fuel use in ICE an observed reduction of around 18-20% costs reach US$93 per kilowatt hour, this
Our analysis estimates that by 2030,
vehicles is a significant contributor to in prices. 35 Thanks to this high learning would result in a similar pre-tax price for a
accelerated EV roll out in fleets could help
this overall burden. rate, the scale of demand seen in our medium-sized ICE and EV car in the US. 36
avoid around 120,000 premature deaths
accelerated fleet transition would help
This challenge has been further annually from the fossil fuel-related air Achieving this tipping point as early as
to reduce battery unit costs as a result
exacerbated by outbreaks of respiratory pollution associated with road transport. 34 possible is significant. Once parity is
of higher production levels. Our analysis
illnesses, especially COVID-19, where Much of this benefit occurs in densely reached in upfront purchase costs, this
shows that by 2030, this would result in
increased pollution levels have been linked populated urban areas in developing creates a strong dynamic to accelerate EV
battery prices around 14% lower than would
to an 11% rise in mortality rates. 33 countries, including 22,000 potential adoption more generally thanks to lower
be expected under the baseline.
The pandemic has also contributed to avoided deaths in China and 12,000 running costs and need for maintenance,
the overall problem in some cases, for in India. With battery costs making up a significant as well as reducing dependency on
element within the cost structure of EV government subsidies and other incentives.
production today, this would help to bring
32 Vohra, K., et al. (2021). Global mortality from outdoor fine particle pollution generated by fossil fuel combustion: Results from
GEOS-Chem. Environmental Research 195. 35 BloombergNEF (2019). A Behind the Scenes Take on Lithium-ion Battery Prices; Beuse, M., et al. (2020). Projecting the
33 Greenpeace (2020). Toxic Air: The Price of Fossil Fuels. Competition between Energy-Storage Technologies in the Electricity Sector. Joule 2020, 4:10.
34 OECD (2021). Air pollution exposure database. 36 UBS (2020). Q-Series: Tearing Down the Heart of an Electric Car Lap 2: Cost Parity a Closer Reality?.
38 Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport The impact of faster fleet electrification 39Accelerated scenario – increase in global installed charging infrastructure
110
Accelerated scenario
100 Baseline scenario
90
80
Installed charge points (millions)
70
60
50
40
30
20 Fleet acceleration begins
10
0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Increasing charging point installations
Today, around one-fifth of all installed above what would be expected in the
charging points are available to the public. baseline. The total cumulative cost
However, as EVs continue to become more of this would be US$244 billion.
prevalent it is expected the ratio of public
While most of these will be private, this
to private chargers will decrease, resulting
would result in an additional four million
in only 9% of a much higher total number of
public charging points by 2030 when
charging points being public by 2030. 37
compared with the baseline scenario.
Looking out to 2030, to meet charging These would be enough to serve around
demand under our accelerated fleets 29 million EVs at current coverage ratios,
scenario there would need to be on including around five million private
average an additional 14,000 charging passenger cars, and 18 million two or
point installations a day globally, three-wheelers.
37 BloomberNEF (2020). Electric Vehicle Outlook 2020.
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