Mobility In A Post-Covid World

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Norbert Rücker   Contributor

Julius Baer Monaco

The pandemic has not put the breaks on the future of the electric car era.

The Covid crisis and associated lockdown measures brought everyday life and mobility across the globe to a standstill. The absence of commuters as people transitioned to working from home produced startling images of city centers free of traffic-related clouds of pollution. Currently the mobility patterns are changing markedly because of the collapse and rebound of economic activity, health concerns and the reorganization of business and social life.

Automakers are in the midst of a meaningful expansion of the offering of plug-in cars while the stimulus packages put in place, in particular in Europe, will very likely accelerate the dawning of the electric car era.

FOMO

Mobility also follows our social needs. We long to share time with friends and be with our families. We miss leisure and travel. The world will not change as radically as some hoped or feared, the vaccine will make the fear of contagion fade, and we will start using public transport and flying again. Business travel could be the only segment where the impact likely is more significant.

In the coming years, the trend should intensify. FOMO (fear of missing out) likely is stronger than flygskam (a movement urging passengers not to fly and to choose alternative means of transport to reduce their carbon footprint) as our everyday life slowly returns to normal.

FUTURE

The year 2020 was set to be pivotal for electrification, irrespective of the crisis, as automakers grow their plug-in offering. The shift turned out to be more decisive than most had expected last year. Europe in particular is taking off in terms of electrification and putting electric cars on the road and surpassed China, which used to be the leader. Plug-ins now account for roughly 20% of new cars in Europe, and roughly 9% in China.

At Julius Baer, we believe that 2020-2030 is the decade of electrification, when electric cars become mass market. According to our projections, the plug-in car market share will reach 30% by 2025 and 60% by 2030 in Europe, 25% by 2025 and 60% by 2030 in China and globally 19% by 2025, 47.5% by 2030.

CONVENIENCE

We see two elements behind the adoption rate of electric cars: the expanding offering and the dynamics of the S-curve. Both are interdependent. The available and upcoming mass-market models are likely to each capture sustainable market shares as they match specific client needs. This adoption should then fuel the typical S-curve momentum.

Electric cars are more and more common sights on the streets, they are perceived as a pinnacle of technology and offer great connectivity. Car salesmen get used to selling electric cars and the charging infrastructure expands swiftly without much government support, mostly driven by market needs. Electric cars change the way we perceive mobility, and once accustomed most will likely not look back.

We believe that convenience and coolness matter more than costs for consumers when buying a car. This explains the popularity of crossovers and sports utility vehicles compared to usually less expensive standard versions.

There are ever more models available across all car segments, featuring electric driving ranges beyond 400km and fast charge capabilities measured in minutes, both thresholds where range anxiety tends to disappear. This increase in choice should meaningfully lift electric car sales going forward.

STIMULUS

The significant stimulus packages put in place by the governments around the world very often include support for clean technology. Particularly Europe’s different stimulus packages all have a clear “Green Deal” flavor. Buyers can claim meaningful rebates when purchasing electric cars across the core European markets. This subsidy further raises the attractiveness of electric
cars, which in most cases anyhow are already the more economic option compared to similar sized combustion engine vehicles.

The combination of these factors means in our view that the future of mobility is electric. It is not a question of if, but at what pace electric vehicles will spread and eventually replace the traditional internal combustion engine vehicle.

REVOLUTION

While the current decade towards 2030 looks evolutionary, an electric car is still a car. The next decade beyond 2030 could become revolutionary, with the widespread adoption of autonomous driving technology truly transforming mobility. Against early predictions and hopes, self-driving cars are taking more time to develop. The demands on technology to take over as driver and to master all road conditions any time are simply enormous.

That said, the common vision of self-driving cars might be myopic. We are witnessing today the emergence of niche segments of autonomous driving such as slow- speed shuttles, delivery vehicles and short-range trucking. These segments have in common that they operate in a more controlled environment and transport goods, not passengers, which meaningfully lowers technology and liability barriers.

Meanwhile for passengers, we might eventually see the emergence of dedicated highway lines, roads or parts of urban centers, mapped in full detail and potentially equipped with sensors, which would accelerate the adoption of self-driving cars. Overall, artificial intelligence, computing power and faster and more responsive mobile networks are an enabler of the transition.

SHIFT

The revolutionary aspect of autonomous driving is that it blurs the boundaries between private and public, owning and using. The technology is a big win for safety and convenience, and the basis for many new business models. This economic prize is what ultimately drives the adoption of self-driving vehicles and cars. Automation can make life a lot easier for many of us, be it hopping into a taxi without a driver or having the groceries delivered to the front door autonomously.

Automation also means that mobility becomes more accessible for those that for health, age or other reasons cannot drive own their own vehicles today. Ultimately, there is a positive influence on urbanization and quality of life in general. We can expect the comeback of cities, because they will be cleaner, there will be more space as self-driving cars need less parking. From that perspective, autonomous driving holds out great promise. However, only later in this decade will we see the pathway to autonomous driving open up, and thus which journey mobility could take beyond 2030.

It is impossible to predict exactly where the changes we are witnessing in mobility will take us, but it is safe to say that technology is set to make mobility cleaner, safer, and more accessible for everyone.

 

AHEAD OF THE GREEN GAME 

(L-R): Rémy Bersier, chairman of the Board of Directors; Marie Raoux, chief risk officer; Albert Henriques, chief executive officer; and Laurent Schneider, chief financial officer at the Bank Julius Baer Monaco.

Long before the pandemic, Monaco had been ahead of the green game. Since 1994, the country has offered a concrete incentive policy in favor of clean vehicles and, more recently, set up the National Green Fund, a budgetary instrument supporting low-carbon transition.

Prince Albert told Forbes Monaco in October 2020 that eco-mobility was “starting to catch on.” Road traffic at the entrances to the Principality that had been growing steadily since the end of the 1990s, has been falling slightly since 2015. And since early 2020, “ecological vehicles represent nearly 6% of the Monegasque fleet.”

“In addition to developing public transport, the government has really been a pioneer in awarding grants for electric vehicles for more than twenty years,” highlights Albert Henriques, CEO at Bank Julius Baer Monaco. “The acquisition of clean vehicles is incentivized for individuals and businesses and systematic for state departments and we have seen the subsidies increasing in order to focus on the cleanest vehicles and factor in technological developments.”

Hosting a Formula E race is also a statement. It is a declaration to the world that it is time for the future of mobility and to find innovative solutions to the current challenges faced by cities. As the championship demonstrates: it is possible to improve both design and performance while investing in sustainability.

“Initiatives such as hosting the ABB FIA Formula E Championship on May 8, with which Julius Baer has partnered closely since the very first race back in 2014, are also helping to boost the popularity of these vehicles. Together with our team at Bank Julius Baer Monaco we are happy to welcome our guests at this important event.”

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Norbert Rücker   Contributor

Norbert Rücker is head of economics and next generation research at Bank Julius Baer Zurich.