In depth: Carmakers race towards a greener and smarter future

A new report by the Intesa Sanpaolo Innovation Center examines the industry trends in Automotive, Transportation and Logistics, with a focus on the ways in which personal and commercial transportation is becoming greener and smarter. More broadly, it provides a guide as to how innovation in vehicles is impacting the Automotive market.
The Intesa Sanpaolo Innovation Center, an Intesa Sanpaolo Group company, explores the world of cutting-edge innovation, invests in applied research projects and high-potential startups, and works to accelerate the adoption of the circular economy.

The European Union (EU) has set an ambitious target to reduce emissions by at least 40% by 2030.

As a result, transportation is becoming greener and smarter. Europe saw the best two months of electric vehicle (EV) sales in January and February 2020 – before COVID-19 ground the car industry to a halt.

But things are on the up. Frost & Sullivan remains bullish about a short to mid-term recovery in global sales and estimates that by 2025 around a third of the total passenger car market will be accounted for by EVs.

Intesa Sanpaolo is supporting the transformation of the automotive sector as it embraces technology that is electric, connected and autonomous.

Electric

As consumer demands shift to greener solutions, EV sales are on the up while diesel is in decline. In the third quarter of 2021, registrations of hybrid EVs overtook diesel, accounting for 20.7% of market and making it the second most popular powertrain option in the EU for the first time.

Figures from the European Automobile Manufacturers’ Association reveal that demand for battery EVs (BEVs) increased by 56.7%, while plug-in hybrid EVs saw registrations rise by 42.6%.

Frost & Sullivan estimates that there are 225,000 AC and DC charging points in Europe, and that numbers are growing at 26.3% on average per annum. From a power perspective, it is predicted that, by 2027, 94.7% of on-board chargers (OBCs) will have a power rating of 6.6kW and above, with 11kW the standard, enabling faster charging.

For batteries, lithium-ion is synonymous with EVs. However, the growing demand for vehicles with greater range and faster charging has encouraged research into alternative solutions. Solid-state batteries could be a game-changer for EVs because they offer longer life cycles, improved thermal stability and higher voltage supply.

There are also concerns about the sustainability of conventional batteries. The Extended Producer Responsibility policy is setting out to ensure that producers are culpable for the environmental impact of the entire process, from design to dumping.

With this renewed focus, EV battery recycling is predicted to be worth $6.5bn in 2025, up from $10.3m in 2018.

However, there are challenges. Dismantling and sorting the batteries is one of the most difficult and expensive steps in the recycling process. To tackle this problem, the industry is increasingly focused on ensuring batteries are designed to be recycled. The automatic disassembly of EV batteries using robots is seen as an essential step to improving the efficacy of recycling.

Fuel cell EVs (FCEVs), an alternative to BEVs, function like a battery but are powered by hydrogen. According to the Intesa Sanpaolo Innovation Center, the global FCEV market is expected to reach 1.53m units in 2030, with Hyundai-Kia leading the race, followed by Toyota.

The advantage of FCEVs over EVs is that they offer motorists better driving performance, longer range and faster “refuelling”. The downside is that hydrogen is prohibitively expensive.

Water-splitting methods using renewable sources, such as solar and wind, are expected to be increasingly commercialised by 2030, which should see a drastic reduction in the retail price of hydrogen. There is also growing interest in electrolysis – the process of using electricity (from renewable sources) to split water into hydrogen and oxygen – which could become another low-cost supply option.

In terms of transporting hydrogen, pipelines offer the greatest efficiency, despite the high initial costs. The UK government has invested £1bn to unlock the potential of hydrogen, and plans are in place to repurpose about 25% of the current gas transmission pipelines to meet its goal of 5 gigawatts of low-carbon hydrogen production capacity by 2030. This could be equivalent to the amount of gas consumed by more than 3 million households in the UK each year.

Government schemes are also helping operators to deploy the charging infrastructure. The EU has ambitious plans to increase its stations from 161 to 4,200 by 2030.

Connected

As well as the changes in power supplies, the automotive industry is being reshaped by the rise of increasingly connected vehicles. Frost & Sullivan estimates that by 2022, 75% of cars globally will be highly connected via embedded systems. In Europe, the figure is expected to be 70%.

Original equipment manufacturers (OEMs) and Tier one suppliers – who supply parts or systems directly to OEMs – are increasing their offering in established areas such as navigation and audio.

Cutting-edge innovation is also taking place in the emerging areas of driver monitoring systems and in-vehicle marketplaces, which will feature transactional business models and the upselling of vehicle-specific services. Indeed, in-vehicle payment is expected to be the next frontier.

In the longer term, monetising data generated from connected cars will unlock huge opportunities. With more than 55% of consumers willing to share data, this represents a predicted $50bn global opportunity by 2025.

The focus is shifting from selling data to using it – to create value and deliver services across a host of applications, from pay-as-you-go insurance to information on road conditions and EV charging points.

To ensure data security, new standards are driving the establishment of Vehicle Security Operations Centres, which protect connected cars from cyberattacks.

Autonomous

All cars will offer at least some autonomous features by 2029, but the overall shift toward a driverless car is taking longer than the industry expected. OEMs are in the process of adopting “L2+” technologies, to bridge the gap between L3 and L4 solutions, which offer higher levels of autonomy.

The slow transition to autonomy is seeing auto makers shift their focus to shorter-term gains such as new plug-and-play solutions.

OEMs are also focusing on emerging service areas such as autonomous shuttles and car-sharing businesses, which offer more convenience while reducing costs, congestion and carbon emissions. Some of the major players have begun flexing their muscles in driverless trucking, unveiling prototypes with increasingly sophisticated levels of autonomy.

In the agricultural sector, innovations often blur the lines between vehicles and robotics. Naio Technologies, from France, has developed an autonomous weeding robot, while Monarch in the US recently launched an autonomous and 100% electric tractor.

With this renewed focus on sustainability, automakers have prioritised developing transformative, digitally driven business models and value-added services that will create a more resilient future for the industry.

This article is based on the Intesa Sanpaolo Innovation Centre's industry trends report on Automotive, Transportation and Logistics. All data is from the report unless otherwise indicated.

Download here the abstract of the report and watch the video: