LEK: The Electric Car Tipping Point

Check out a real LEK presentation on electric cars.

LEK Presentation: The Electric Car Tipping Point

Key Learnings from the Presentation

The L.E.K. Consulting report titled “The Electric Car Tipping Point,” published on November 2, 2017, provides an in-depth analysis of the electric vehicle (EV) market, focusing on the decline in battery costs, regulatory influences, and the evolving consumer landscape. This report aims to forecast the adoption rates of electric cars and examines various factors influencing the electrification of the automotive industry. Here’s a structured summary capturing the essential insights and strategic considerations outlined in the report:

Decline in Battery Costs

• Battery costs have been decreasing at approximately 20% annually since 2009, a trend expected to continue, making EVs more economically viable for consumers between 2025 and 2030 without relying on incentives.

Regulatory Influence

• Until 2020, advancements in internal combustion engine (ICE) technology will suffice to meet emissions regulations. Post-2020, electrification will become necessary to comply with stricter standards.
• By 2025, while most vehicles will still feature an ICE, the average additional cost per vehicle sold to meet regulatory requirements is projected to be about $500 above traditional ICE costs.

Global Electrification Trends

• Electrification will manifest differently across the globe, influenced by regional regulatory environments, consumer preferences, and the maturity of EV infrastructure.

The Role of Shared and Autonomous Vehicles

• The shared economy and autonomous vehicles are expected to accelerate the adoption of hybrid electric vehicles (HEVs) and battery electric vehicles (BEVs) due to higher mileage requirements, boosting shared mobility demand.

Market Forecast

• By 2025, electrified vehicles (xEVs) are expected to constitute about 30% of the global market, increasing to approximately 50% by 2030. BEVs alone are projected to account for 6% of the market in 2025, rising to 14% in 2030.

Strategic Implications for Stakeholders

• OEMs must navigate the transition by devising pricing strategies, investing in charging infrastructure, and managing the profitability shift from ICE components.
• Suppliers need to adjust investment levels and support the development of EV charging infrastructure.
• Governments should determine the level of incentives required to sustain EV momentum until reaching a cost-effective total cost of ownership (TCO) for consumers.

Key Takeaways

• The automotive industry is at a pivotal point, with battery cost reductions, regulatory pressures, and changes in consumer behavior driving the shift towards electrification.
• Strategic partnerships, technological innovations, and government incentives will play crucial roles in accelerating the adoption of electric vehicles.
• Stakeholders must remain agile and responsive to the rapidly evolving market dynamics to capitalize on the opportunities presented by the electric vehicle revolution.

About L.E.K. Consulting

Specializing in strategy, mergers and acquisitions, and operations, L.E.K. Consulting offers deep expertise across a broad range of industries, including life sciences, healthcare, retail, and transportation. The firm is known for its rigorous analysis, strategic insights, and practical solutions that produce high-impact results. L.E.K.’s approach is to collaborate closely with clients, providing tailored advice that addresses complex business challenges and opportunities.

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