The future of electric vehicles in the carsharing industry

While electric vehicles (EVs) are becoming more popular in shared mobility worldwide, there are still many hurdles to making them outnumber ICE vehicles in fleets. High costs and insufficient charging infrastructure are challenges to widespread EV adoption and integration. In this article, we will discuss those challenges and explore new trends that will encourage EV adoption in 2024.

Table of Contents

• Projected global EV market growth in 2024
• Adoption of electric car sharing
• Challenges of e-mobility
• Road to electrification – how can we get there?

Projected global EV market growth in 2024

Sales of battery-electric vehicles and plug-in hybrids have seen strong and growing since 2021. According to a report by BloombergNEF, global annual sales of EVs are projected to surpass 10 million units in 2024, from a mere 2.1 million in 2019. As Christophe Perillat, CEO of Valeo, shared at the Consumer Electronics Show (CES) 2024, electric vehicles will make up 62% of new car production globally by 2035. This growth is a driving force for electrification in the carsharing industry.

Adoption of electric vehicles in carsharing

There has been a big push for mobility decarbonization as many countries and cities worldwide are planning to phase out the sale of fossil fuel-powered vehicles, including cars and buses, to reduce pollution and meet greenhouse gas reduction targets under international agreements like the Paris Agreement.

Europe

• In London, Zipcar is increasing the number of electric vehicles in their fleet and have set a goal to become net zero by 2050.
• As of a 2019 report, ShareNow aimed to increase the proportion of electric vehicles in its European fleet to 26% by the end of that year, with an ongoing commitment to electrifying its vehicle offerings​.
• 20.5% of all carsharing vehicles in Germany are EVs. (German Car Sharing Association)
• Electric vehicles accounted for over 25% of the carsharing fleet in Italy. (Osservatorio Nazionale)
• 14% of carsharing vehicles in the UK are electric (CoMoUK)

North America

While North American operators are slower to adopt, we have noticed an increasing trend. Carsharing companies like Zipcar have initiated a substantial electric vehicle (EV) initiative across several major cities in the United States, including Boston, Chicago, New York City, San Francisco, Los Angeles, Portland, Seattle, Baltimore, Denver, and Philadelphia. Zipcar’s approach is focused on increasing its EV fleet, and plans to double its current EV fleet size by 2024.

Challenges of e-mobility

Despite the push towards electrification, carsharing operators face several challenges when infleeting EVs.

1. High upfront vehicle costs and maintenance expenses

Upfront costs for EVs are higher compared to conventional vehicles, thanks to their advanced technology and expensive battery system. Using microcars as an example, Christophe Perillat explained that the internal combustion engine (ICE) version weighs 1 tonne; the electric version weighs 1.4 tonnes – there’s an extra 400 kilograms of components and technology in an electric car. In addition, maintenance for EVs also adds to the operators’ financial burden. While EVs require less service, repair costs are higher. Hertz, for instance, recently sold 20,000 electric vehicles in the US, citing expensive repairs. This highlights the need for carsharing operators to factor in the long-term costs of EVs in their business plans.

What it means for carshare operators:

There are ways to reduce the cost of EVs, through innovation and scale, and that is something we can expect in 2024. Increased availability of mechanic training specific to EVs and an increasingly competitive market will also help lower costs. At the same time, more manufacturers will continue to push new electric vehicles into the market, creating competition, which also pushes down prices.

But in the interim, carsharing operators need to navigate these challenges carefully. Incentives and government subsidiaries for EVs can help mitigate some of these costs. However, the viability and availability of these incentives vary by region and over time. Carshare operators must balance these financial challenges with their sustainability goals and expectations.

2. Uncertain residual values of electric vehicles

The residual value of EVs can be challenging to predict due to the fast pace of technological advancements in the sector.

Newer models can quickly make older ones obsolete. This makes it challenging for carsharing operators to forecast long-term returns on their EV investments.
The value of an EV is largely tied to the health of its battery. Over time, batteries degrade, reducing range and efficiency, which can significantly impact the residual value. The potential high cost of battery replacement also adds to this uncertainty.

While the most sustainable solution is to remanufacture batteries, will consumers be willing to buy an EV with one? Even when they know that it’s fully warrantied, delivers exactly the same performance and durability, and is better for the planet, consumers may not buying it because they don’t trust remanufacturing, yet.

Consumers’ views and interest in used electric vehicles can change due to technological advancements, changes in government incentives, and evolving infrastructure. This makes it even harder to predict the future values of these vehicles.

What it means for operators:

Carsharing operators need to develop strategies to handle these uncertainties. This may include renewing their fleets more frequently to keep up with the latest models, leveraging government incentives, and staying abreast of market trends and technological advancements. Additionally, operators should capitalize on the value of older EVs, following the example of companies like Hertz that have successfully done so.

Another important tip, using telematics insights is crucial for more accurately estimating vehicle depreciation. Advanced telematics data allows operators to keep an eye on the health of their vehicles and make informed decisions about their fleet composition and management. Operators can use this data to forego the typical three-year residual value method of calculation depreciation. Instead, they can have real-time, data-driven insights on the value of their vehicles, as discussed in our webinar.

3. Government push for EV adoption and current infrastructure support

Governments worldwide are pushing for mobility decarbonization by 2050 and many have decided to ban sales of ICE cars in 2035. Unfortunately, the support for infrastructure development, like charging networks, still needs to catch up. Some areas, like Nordic countries for example, have seen a big push to EVs and and supporting infrastructure. Other areas, like North America, are lagging behind. Often, North American operators have to invest in charging infrastructure themselves.

The capacity of local electrical grids to support widespread EV charging is also a concern. Many cities are not equipped to handle the additional load and will need substantial upgrades and financial investment.

But as Alex Mitchell, Senior Fellow at MIT Mobility Initiative, suggested at CES 2024, an increase of electric vehicles means more mobile batteries in our cities which can provide our grids with backup power and redudancy. What is needed is a seamless program for vehicle-to-grid and vehicle-to-home processes, like MyWheels bidirectionally chargeable cars.

What it means for operators:

While the push for EV adoption is a positive step towards sustainable urban mobility, it must be coordinated. The carsharing industry needs to align with government initiatives and infrastructure development. This will help them make the most of electrification and keep growing sustainably and user-friendly.

Road to electrification – how can we get there?

“Electrification will be a catalyst for a range of new experiences, and that includes how autonomous vehicles will transform our daily experience.” ~ GM Chairman and CEO Mary Barra, CES 2022.

So, how can we push towards electrification in the carsharing industry?

1. Reduce prices of electric cars

One way is through the reduction of EV costs. As technology advances, the cost of EVs will decrease, making them more accessible and affordable. Battery prices will also drop as automakers improve their battery technologies and chemistries. Since the battery makes up about 40% of the price of an EV, lowering battery costs will reduce EV prices and help sales grow.

2. Breakthroughs in battery technology

In 2023, Toyota introduced a new electric vehicle (EV) battery. This battery uses solid-state technology and can travel up to 745 miles on a single charge. Toyota also agreed to produce solid-state batteries that can travel up to 932 miles on a single charge.

Stellantis is set to incorporate battery-swapping technology into its EVs. This innovative approach allows EV drivers to quickly replace their depleted battery with a fully charged one instead of taking much longer to recharge it. This initiative represents a significant development in EV technology, potentially enhancing the convenience and appeal of electric cars by addressing one of the main concerns of potential EV owners: the time it takes to recharge the battery.

3. Standardizing of EV charging infrastructure

More automakers are using Tesla’s charging plug for their vehicles. This trend started in 2023 when Ford, GM, and Honda, among others, announced plans to adopt Tesla’s EV charging port, the North American Charging Standard (NACS) connector. Tesla has also created an adapter for non-Teslas to charge at its locations to make charging easier.

Charging ahead – the future of electric vehicles in carsharing

Integrating EVs into carsharing is a complex process, driven by numerous factors and fraught with challenges. Yet, the potential rewards make it an endeavor worth pursuing. As we look towards 2024, it is important to consider these challenges and trends to develop effective business models for the adoption of EVs in the carsharing, and even the car rental industry.

Explore other car sharing industry trends.