Collaboration within the eMobility ecosystem – and with the public sector – is vital in order to create seamless charging experiences, or the new business models we previously described. Incumbents need to rethink their positions in this new industry and develop strategies that define their approach to cross-industry collaboration.
When orchestrating this convergence, each player should bring a deep understanding of what they require from others, and what they can provide to the rest of the ecosystem. Each step toward convergence strengthens and reinforces these interdependencies, but also improves overall customer experience. The charging experience becomes increasingly seamless, steadily addressing the issues that could stop drivers from buying or leasing an EV. Significant change is required.
Reinvention of the oil and gas industry in an electrified world
Eventually, the eMobility ecosystem will displace the ICE fuel value chain for passenger vehicles23. Electricity is replacing petroleum as the fuel; and charge points are replacing service stations as the refueling location. The oil and gas industry may also face a lost monopoly it holds over ICE vehicle refueling. EV charging has much lower barriers to entry because virtually anyone with an off-street parking space can install a charge point. The challenge for the oil and gas industry is how to remain relevant in an electrified world. However, oil and gas companies have many competitive strengths and could play a major role across eMobility24.
Transforming forecourts to support new business models
Service stations amount to significant real estate in convenient locations worldwide25. Road transport electrification could be the catalyst to reimagine service station forecourts. For example, they could become mobility hubs that include fast charge points, battery exchange points, or a vehicle exchange service for a shared ownership scheme or mobility-as-a-service. They could also add convenience services such as quick-service restaurants or coffee shops to add value while customers are charging.
Oil and gas companies become integrated energy companies
But why should oil and gas companies stop at installing charge points on their forecourts or being CPOs? Why not become a power provider as well? Those with the courage to undergo a reinvention will find that they have the skills that will give them a competitive edge, for instance by leveraging experience in trading to capitalize on flexibility.
Three months into 2023, European big oil invested >$1.2 bn in Mobility 26
Many oil and gas companies are already making the transition to integrated energy companies, acquiring utilities in Europe and North America. Their strong brand recognition, and their experience in running huge networks of service stations and procuring or hedging commodities, give them a competitive edge.
Power company transformation
EVs represent a once-in-a-generation growth opportunity for the power industry, with their demand for power set to help grow utilities’ revenues. But EVs also present a significant challenge to power network operators. Furthermore, in competitive markets, electricity retailers will face stiff competition to supply power27. So although there is significant growth potential, it is far from a given that the power industry will profit from it. Networks must be redesigned and new incentives developed to optimize EV charging when the supply of renewables is at its highest. These business models must be developed from the ground-up in the space of a few years. Consequently, the power industry must undergo a reinvention, or find itself left behind.
Distribution networks to ensure safe, reliable and clean power
The eMobility ecosystem depends on robust and reliable power networks. To meet net zero goals, they need to be powered by clean electricity. However, power networks were not designed around EV charging, which could overload parts of the distribution network. Nor were the power networks designed to cope with high levels of intermittent renewable electricity. It is incumbent on network operators to ensure the grid is sufficiently robust to supply safe and reliable power when it is needed. They should also ensure the grid is sufficiently flexible to maximize the use of renewable electricity.
Between 2022-2030, public EV chargers may need up to global $35 bn investment/year, but distribution grids at least $300 bn/yr 28
Energy markets to provide new incentives
Energy markets face a strong need to find ways to incentivize EV charging when renewable power is abundant, effectively monetizing the flexibility potential that these ‘batteries on wheels’ offer. The goal is balancing the grid in times of high demand, incentivizing customers to charge their vehicles only when demand is low – built on a foundation with dynamic pricing and new market structures that support EV aggregation and local balancing. What’s needed is new infrastructure that directly communicates with charge points and EVs, and manages payments to drivers who participate in flexibility markets.
Utilities to encourage drivers to participate in flexibility programs
The power industry needs to proactively attract EV owners into some of these programs. It is far from guaranteed that mass market participation will occur just by creating financial incentives. EV owners should be encouraged to participate. Even the simplest approaches – charging significantly less to charge overnight – are ineffective if customers do not know these tariffs exist. The challenge of recruiting drivers into flexibility programs increases with the additional complexity of V1G and V2G approaches. Customers need to feel that they are sufficiently rewarded for their participation, so the program needs to be simple and easy to understand. The power industry should also provide insight to raise awareness and allay any worries customers may have. Finally, flexibility programs need to be convenient and the driver should feel like they are in control.
Regulated utilities can become trusted advisors
While regulated utilities’ ability to participate in eMobility may be restricted, they are still a vital part of the ecosystem. For example, they can generate a regulated return on new infrastructure deployed to support EV charging. But opportunities exist beyond their core business model. For example, they may look into working with the owners of large fleets, advising them on renewable energy procurement strategies, such as how to best use power purchase agreements.
Electricity retailers guide drivers on the complete customer journey
Electricity retailers in competitive markets may be less encumbered. While the increase in electricity demand will grow an energy retailer’s revenues, several other opportunities may emerge for them to facilitate customers’ net zero journey. The options include creating integrated offers that include the supply of clean electricity, orchestrate residential EV charge point installations, provide charge cards for charging on-the-go, provide rooftop solar, enable access to a local energy community, install a stationary battery and/or sell heat pumps.
The automotive industry is faced with a challenge to make significant changes as well. For one - our recent research indicates how the ongoing race to capture value in the sector is lacking a clear plan for monetizing digital services. But also in eMobility, it’s not just a simple case of transitioning from one drivetrain to another. It has already sparked a wave of innovation and reinvention among automakers, some of whom are moving into electricity supply, EV charging infrastructure, insurance, solar panels and home storage. 29
EVs may enable up to 40% recovery of aftersales profits 30
Likely not all automakers will adopt all these strategies. However, all EV manufacturers have a role as eMobility enablers. The functionality automakers deploy in an EV determines the level that vehicle can interoperate with the rest of the eMobility ecosystem. For example, as we have noted, V2G business models are only possible if EVs support bi-directional power flows. eMobility open data relies on the EV communicating its whereabouts and battery status.
Developing cleaner batteries
Although EVs are intended to be a cleaner alternative to ICE vehicles, batteries are receiving significant bad press. There is scope for the automotive industry to address this issue by driving improvements in the battery value chain, all the way from sourcing raw materials to disposal. New battery chemistries will reduce or negate the need for unsustainable materials – for instance those in short supply, whose extraction is environmentally harmful, or relies on unethical labor practices. Lengthening battery lifespan lengthens the replacement cycle, which reduces demand. And new approaches to recycling will reduce demand for mined ore.
Rethinking the ownership model
Service station forecourts could be transformed into new integrated transportation hubs. This opportunity can be boosted through collaboration between the oil, gas and automotive industries. There are significant opportunities for alternative ownership models – with shared ownership, leasing, rental and vehicle-as-a-service models all potentially helping to reduce traffic and demand for parking. Alternative approaches to EV ownership may also help transition customers with no off-street parking.
A shift in focus from hardware to software and services
One of the biggest impacts eMobility will have on the automotive value chain is the product itself. While an ICE vehicle can have over 2,000 moving parts, an EV has around 20. 31 An ICE vehicle’s engine contributes significantly to product differentiation. For EVs, the focus shifts to driver experience, amplifying the overall urgency in the sector to shift to digital services. That essentially means a shift from hardware to software, because it is software – including advanced battery management, route planning and infotainment – that will deliver this differentiated experience. And as EVs move into the mainstream, drivers will think less about EVs' environmental benefits and more about the experience. In fact, that shift is already underway. A recent survey of US drivers found that Gen Z’s primary interest in EVs was because they are cool, not because they are better for the environment.32
US gen Z primary interest in EVs: because they are “cool”.
Reinventing the dealership model
The shift from hardware to software will likely have wider consequences, particularly for dealers’ revenues. Because EVs are far simpler machines than ICE vehicles, their servicing needs are much lower.
When automakers focus solely on building vehicles, their dealership networks will be the only face-to-face contact consumers have with the EV value chain33. So, consumers will be likely to heavily rely on dealers to ease the transition from ICE to EV, helping them understand how public and private charging works, planning routes, fixing problems when en route, finding useful apps and, in the future, discussing participation in utility flexibility programs. But to do all of this, dealerships need people who understand all these areas, which will require significant training of sales teams.