The last speed bump

Sit back, relax and observe. A few of the key words I wanted to keep in mind after the last 12 hectic months of dealing with a large corporate merger, navigating through ECB requirements and the continued search for the holy grail of synergies (Found it! Just so you know).

Now,? don’t get me wrong … The last few months at Ayvens were electrifying in terms of motivation, enthusiasm and learning and, as my superteam is kicking homerun after homerun, I am a satisfied coach, player and spectator.

That being said, the outside world and automotive industry seem to be more volatile and polarised than ever. The clearest example of this are the recent discussions related to electrification.

While two years ago “believers” were promising us an electric dream as soon as 2030 or 2035, today, preaching a fast transition to EV seems like the fastest way to lose your street credibility and an excellent way to ruin your career. Non-believers and EV-pessimist seem to be in fashion.

Has the world become more polarised between believers and non-believers? Or are artificial intelligence and social media fooling us by locking us up in echo chambers and feeding us with cognitive bias? Are we still going electric? Or are we moving forward towards the past?

Let’s get the facts straight

I was born in the countryside and I like things to be simple … so let’s look at some simple numbers and focus on Europe. The European vehicle fleet accounts for approximately 250 million vehicles. The average age of a vehicle in Europe is 11,5 years old and that number rises year after year. Annual new vehicle sales in Europe account for roughly 10 million units a year. This number has actually decreased significantly compared to the years prior to COVID. Roughly, it takes us 25 to 30 years to fully renew the car park.

The degree of electrification, especially looking at battery electric vehicles and excluding hybrid vehicles, varies strongly across Europe when looking at new vehicle registrations. While countries such as Norway, Netherlands and Belgium are far ahead of the pack, some of the larger vehicle markets such as Spain, Italy and Poland are still cuddling combustion engines (and hybrids).

So what does this mean?

The leasing and fleet industry is the earliest adopter of Electric Mobility. Let’s be proud of that because we are playing an important role in the rejuvenation of the car park. To give you an idea, at Ayvens 26% of our new vehicle registrations in Q2 2024 were EV … meaning real EV’s excluding hybrids.

However, in our industry we also run risk of cognitive bias as in our “leasing” world we focus on buying new cars and holding them for 4 to 5 years. Our vehicles are younger, technologically more advanced and greener than the overall outside world.

According to ACEA statistics, pure electric vehicles represented 14% of all registered vehicles in 2023. In total this means Europe has registered a bit more than 4.3 million electric vehicles on a park of 250 million cars … so not even 2% of the total vehicle park.

So for those LinkedIn influencers who believe electrification is a short term game, I am afraid I won’t be joining your party even if I love and share your enthusiasm.

At a renewal rate of 10 million vehicles per year and going full zero emission in 2035, it will take us? 25 years for a full transition which will take us based on the European Union’s zero emission policy until 2060 before we are fully electric. It is just mathematics. Amen.

So let’s be clear. Evolution, not revolution. Or are pessimists right when they say this is just another fashion statement which will come and go like Birkenstocks (please … go away)?

Is the EV battery drained?

So what is the plan? Is the EV transition coming to a stop? Will we stop electrification and go back to improving internal combustion engines? Will manufacturers go back to good old? Are the EV skeptics right or wrong?

Of course they are wrong. Believing this automotive (r)evolution will come to an end is just as naive as thinking we could have outsmarted the Ford Model T with faster horses back in 1910. Three main elements will change the type of cars … or more correctly … powertrains which will be produced, sold and driven … whether you like it or not.

• Climate change: Unfortunately we are living in a world with rising temperatures. We see ocean levels rising, we see an increase in extreme weather events and are witnessing ocean acidification. We are witnessing a loss of biodiversity and food and water security are becoming more and more an issue. No … this problem is not going away anytime soon and needs to be addressed. Dealing with mobility in a different way will be one key component in protecting planet earth.
• Regulation: Fortunately, governments have decided to act against climate change and are forcing change. And let’s be grateful for that. Of course, there will be some push-back from more or less populistic politicians which may try to soften the impact of some of this regulation but the change is there and it is there to stay. Change is difficult … but needed.
• Vehicle manufacturers: Vehicle manufacturers have started transforming their business models, manufacturing plants and distribution models to be ready for a new world of electrification. Just looking at the Western manufacturers, recents EV investments total an investment amount above 250 billion euro. This shows us three things: 1) they are definitely going the EV road 2) this is really happening 3) there is no way back because no one will write off such an investment amount. It is financially impossible to turn around.

So … let’s be realistic …. Electrification is here to stay. It will happen despite recent setbacks.

The last speed bump

We may have hit a last speed bump over recent months. 2022 and 2023 have been extreme years in vehicle registrations with a shift from a lack of supply following issues with semi-conductors towards a situation of over-supply on the vehicle manufacturing side combined with the entrance of some very strong players coming from China.

People and markets have been feeling a bit unsettled as we don’t cope with change all that well … but again … it is just a speed bump as the process towards electrification is not a sprint but a marathon. The transition will continue … at a different cruising speed depending on the county and biotope. But we will continue to go electric.

In the long run we are all dead

So will we all be driving Tesla Model 3’s in 15 years from now?

“The long run is a misleading guide to current affairs”, John Maynard Keynes wrote back in 1923, “In the long run we will all be dead.” 25 years is a very long period in which a lot of things can happen, especially in the automotive and technology world.

Coincidently, I started my career in automotive about 25 years ago. The vehicles we put on the? road for our leasing customers back in 1997 almost feel like classic cars now.

Most vehicles we put on the market at that time missed a large number of the features we now consider normal. Let’s name a few: GPS navigation systems, ABS, ADAS, Bluetooth connectivity, keyless entry systems, air conditioning, LED headlights, touchscreen infotainment, … The internet was still a wild dream and smartphones were still ignorant.

As electrification will take two or three decades, the typical EV launched in 2040 will be as close to Tesla Model 3 as the Model 3 is compared to the VW Golf Generation 3rd Generation with an naturally aspired diesel engine I used to drive to work back in 1997.

Believers and non-believers

So at which table will you find me? Clearly, the believers table … but the realistic believers. Therefore I am personally preparing for the following:

1. Transition to EV will continue and is irreversible.
2. This transition will take more time than more people seem to think.
3. EV’s and internal combustion engines will coexist for the next decades, just like we have witnessed this with diesel and engine. Coexistence does not question the right to exist.
4. Making this transition slowly is environmentally much more wise than forcing a fast transition. Scrapping cars is not the best way forward to an environmentally friendly world.
5. The real revolution will be software driven, not hardware driven. The SDV or software defined vehicle wil be the future. While we argue about hardware, big tech is taking over.
6. Vehicles as we know them are by default inefficient as they stand still most of their lives and when they move, they mostly foresee hardware for four people while only one person is actively using it. The discussion will shift from what cars "are" to "what we do with them". Here comes the virtual power plant … maybe.
7. Cars we will drive/use in 2040 will be more different from the cars we drive today than our cars of today differ from the ones we used 20 years ago. But again … bet on software rather than hardware.
8. There will be a battle between automotive and big tech over who is your cockpit partner and most likely the battle already has a winner.
9. The fear that current EV's will become obsolete is nonsensical. Cars will be software defined and therefore upgradable. Besides ... we need another 245 million of them to gradually replace really obsolete cars.
10. Opinions will remain polarised. Just ignore them.

Enjoy your vacation. Dream wild. Watch out for speed bumps.