<aside> 💡 This is the 4th article of our general deep dive on Climate Tech trends that we started a couple of weeks ago. One of the main source of carbon emissions is transportation and electrification of mobility is therefore a key piece of the puzzle to reach net azero. If this segment is already quite mature and concentrates a large sum of VC investments, a lot remains to be done to make electric mobility affordable, efficient and intuitive for the end consumer.

You can find here all the articles of the Climate Series:

1. Introduction to Climate Tech
2. Renewable energy deployment
3. Smart Grids
4. Electrification of Mobility
5. Carbon markets
6. Carbon capture (to be published)

Wishing you an insightful reading,

Raphaël Cattan, Alexandre Dewez, Maryam Mahla, Charlotte Pratt & Henri Courdent.

PS: You are a climate company at Seed or Series A, operating in Europe and curious about how Eurazeo can help you ? Please reach out on Linkedin or drop us an email ar [email protected], [email protected] or [email protected]

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Introduction

• Cars are one of the most importants good in our economy and society. They are the most expensive mass consumer good after real estate. All our infrastructures and urban development have been adapted to cars. Industries and new jobs developed to supply the demand for automobile parts and fuel, including petroleum and gasoline, rubber, plastics and services like gas stations and convenience stores. And they have become an iconic purchase to assert social status.
• Electrification of mobility is the most important consumer revolution since mobile as it is reshuffling all these parameters. Electric cars tend to be much more expensive than petrol cars, reducing affordability for individual consumers. Because they have lower operational costs, it however makes more sense to be operated as fleets. As charging is different from refuelling especially from a time perspectives, it calls into question the business of gas stations and requires additional “smart capacities” to manage charging and peak loads. And in a world where the presence of cars into cities is called into question, “small is beautiful” become the new norm in terms of mobility assets.
• Electrification of mobility is key to reach climate goals: transportation is responsible for ~15% of global GHG emissions, including 10% from road transportation (cars and truckss). An ambitious roadmap has been defined by governments: ). The EU objective is to reach 30M of EV on the road by 2030 vs. 1.4M today. From 2035, all new cars that come on the market should be zero-emission.

Electric Vehicles

In terms of manufacturing EV, Tesla has been leading the way, but OEMs are catching up, driven by regulatory pressures.

****In 2009, Tesla introduced fully electric vehicles before everyone else and has been leading the market since then. Tesla was ranked as the best selling electric vehicule manufacturer worldwide after selling close to 936k units in 2021, representing 14% market share. Tesla’s first-to-market status gave it a competitive advantage but OEMs are planning to invest more than $515bn in the next 5 to 10 years in EV-related technologies and manufacturing plant upgrades, driven by increasingly strict regulations in Europe and China notably.

Nevertheless, Tesla will maintain a competitive advantage vs. other OEMs: Tesla has "built electrification, connectivity, and autonomy capability into its vehicles from the start," introducing over-the-air (OTA) software updates — which let the automaker beam out system upgrades on a regular basis — in 2012. Legacy automakers have begun to introduce OTA updates, but they're typically focused on infotainment features like maps and Bluetooth, while Tesla's updates can improve range, power, braking, safety, and driver-assistance features. Tesla also has a more limited number of models and vertically integrated model, which offers more efficient supply chains and enables better inetegration of software and hardware; whereas VW and BW struggles to hire software engineers who must work with 20 different models and 5 different architectures.

The new emerging players that have been surfing on the SPAC bubble last year are now facing severe difficulties. New entrants with little in earning or even sales such as Rivian, Nikola and Lordstown Motors have seen their share price collapsed due to fraud, delays or issues with their production.