Read this article to understand:
- How holistic stewardship can help bring down the barriers to the climate transition
- The five key challenges to decarbonising surface transport
- The cross-industry solutions that can unlock the sector’s transformation
No company can achieve net-zero emissions alone; instead, it requires a collective unlocking of entire ecosystems. Alongside other hard-to-abate sectors, surface transport operates within a network of suppliers, regulators, and consumers, creating a tightly woven system often resistant to change. Yet it accounts for around ten per cent of global greenhouse-gas emissions, meaning it is central to decarbonisation efforts.
Progress to date on surface transport has been unequal. Globally, electric vehicle (EV) sales grew by 25 per cent in the first half of 2024; China accounted for 80 per cent of the increase but growth in other key markets was above ten per cent.1 For instance, in the UK, EVs rose from 6.6 per cent of new vehicle registrations in 2020 to over 20 per cent in August, September and October 2024.2 However, by the end of October 2024, there were just under 1.3 million fully electric cars in the UK – still only 3.8 per cent of the country’s total.3
By bringing together stakeholders from across the value chain of the sector, we aim to help address climate challenges at both the corporate and systemic levels (see “Building bridges to net zero: Mobilising value chains for decarbonisation”).4 As such, value-chain mobilisation is central to our holistic approach to stewardship – an approach that, in addition to discrete interactions with individual firms, also embraces working with industry initiatives, governments and multilateral institutions to understand the shifts sweeping economies and long-term value creation (see “Only connect: How a holistic approach to investment stewardship can enhance client outcomes”).5
Our surface transport roundtable gathered 15 experts from across the sector value chain, including automotive manufacturers, battery producers, charging infrastructure companies, policymakers and local governments, as well as our own investment teams. We had a wide-ranging conversation, where participants shared their practical insights into the economic, political and technological variables influencing the state of play.
The discussion was conducted under Chatham House rules, where the participants’ roles and affiliations are not communicated but the information exchanged can be shared without attribution. In this article, we highlight five impediments to change that came out of this exchange of views, and – much more importantly – the ideas put forward to remove them. We note that, while many of the recommendations will be of global relevance, they were first and foremost made in a UK context.
Consumer perception
Despite recent growth, participants noted market demand for EVs and investment in supply chains are still being held back by negative public perceptions, particularly around factors such as cost and range anxiety. (This is the fear the car’s battery will run out before the end of a journey and that it will not be easy to recharge quickly during the trip.)
While the total cost of ownership of EVs (capturing retail price and subsidies, as well as fuel and maintenance costs) has been falling, it is still higher than for petrol and diesel equivalents in some market segments. For example, as Figure 1 shows, buying and running a medium-size EV with incentives makes sense from year one in China, but not in the US.
Figure 1: EV total cost of ownership premium over internal combustion engine cars (per cent)
Source: International Energy Agency.6
And although EVs often offer a range compatible with most journeys consumers tend to make on a day-to-day basis, range anxiety needs to be addressed to build long-term market demand (see Figure 2).
Figure 2: Sales-weighted average range of battery electric cars by segment, 2015-2023 (kilometres)
Note: Range in kilometres calculated using global weighted average fuel economy (Worldwide Harmonised Light Vehicle Test Procedure) and battery capacity by size segment. Fuel economy reflects on-road conditions by applying a factor of 1.1. Small cars include A and B segments. Medium cars include C and D segments and A segments with sports utility vehicle (SUV) body type. Large cars include E and F segments, multi-purpose vehicles and B segments with SUV body type. SUV category in figure encompasses segments C to F with SUV body type.
Source: International Energy Agency.7
Proposed solutions
- Create downward price pressure through zero-emission-vehicle (ZEV) mandates (policy ensuring a percentage of the new vehicles sold are zero emissions by a set date).
- Complement ZEV mandates by providing consumers with further financial support to help them overcome the upfront affordability barrier until cost parity is achieved with petrol and diesel equivalents.
- Publish industry-wide battery-health standards to reassure consumers on battery viability – including on the used-EV market.
- Design regulations guaranteeing a high degree of reliability and accessibility of charging points, to address range anxiety.
- Deliver a proactive, evidence-based awareness campaign to alleviate consumer concerns.
Power grid and EV charging infrastructure
The EV infrastructure needed for high-power charging and hydrogen refuelling, and the underpinning power-grid infrastructure, are currently not available or not as supportive as for petrol or diesel vehicles.
Drivers must navigate confusing payment systems, and struggle to find charging points in good working order close to their homes or to get them through a long journey. Charging points are also unevenly spread across the UK (see Figure 3) and installing charging points at scale will require reinforcing the power grid.
Figure 3: Regional variation in EV charging infrastructure (per cent)
Note: Total column height indicates the number of chargepoints installed in each region per 100,000 population, with the orange sub-columns indicating the extent of network expansion in 2022. The UK Government target is calculated by dividing the minimum target of 300,000 public chargepoints in 2030 by the expected UK population.
Source: Change Committee, June 2023.8
Proposed solutions
- Accelerate the pace of the UK’s EV-charging infrastructure development and the speed of investment delivery under existing public-charging infrastructure funding pots.
- Incentivise greater flexibility in the energy market and implement planning and regulatory reforms to accelerate reinforcement of the power grid.
- Extend reliability standards across the full network of public charging networks and simplify payment options.
Regulatory and investment certainty
A lack of long-term visibility and stability in policy and incentives, coupled with inconsistent standards across markets, contributes to continued uncertainty for EV manufacturers, charging-infrastructure providers and power-grid businesses.
It also limits their ability to plan and invest on a wider scale in the required new technologies and infrastructure.
Figure 4: Global zero-emission vehicle mandates and internal combustion engine bans
Note: EU = European Union; DO = Dominican Republic.
Source: International Energy Agency.9
Proposed solutions
- Deliver long-term, stable policies and clear signals across sectors to incentivise local supply chains.
- Offer more effective and innovative government-funding models (with rapid release of funding) and long-term contracts to mitigate risks and encourage private sector investment.
- Better coordinate policy and public-funding decisions between different levels of national and local government to ensure infrastructure choices optimise environmental and economic returns.
Reliance on China
The International Energy Agency (IEA) EVs currently have a share of around 20 per cent in new car sales worldwide. This is set to rise towards 50 per cent by 2030, according to the policies stated by governments globally. However, China was already close to 50 per cent in 2024. And while EVs are generally more expensive than petrol or diesel cars on a global basis, in China over 60 per cent of EVs are now priced below conventional cars.10
In fact, Chinese players tend to hold a dominant position over all three stages of the process: access to critical metals, battery manufacturing, and recycling (see Figure 5). There are persistent strategic challenges as to how Western suppliers can compete.
During the roundtable, participants emphasised the importance of expanding EV-battery-recycling capacity in the UK, due to the projected increase in EV volume, and to strengthen the resilience of the UK’s battery supply chain.
Figure 5: Geographical distribution of the global EV-battery supply chain
Note: Geographical breakdown refers to the country where the production occurs. Mining is based on production data. Material processing is based on refining production capacity data. Cell component production is based on cathode and anode material production capacity data. Battery cell production is based on battery cell production capacity data. EV production is based on EV production data. Although Indonesia produces around 40% of total nickel, little of this is currently used in the EV battery supply chain. The largest Class 1 battery-grade nickel producers are Russia, Canada and Australia.
Source: International Energy Agency.11
Proposed solutions
- Explore the feasibility of domestic mining and contract a diverse range of suppliers of critical metals.
- Deliver additional public and private investment in the domestic supply chain for EV-battery manufacturing and incentivise investment in recycling.
- Set product standards requiring more resource-efficient battery design and targets for recycled yield.
Workforce development
While the burgeoning green economy is seen as a promising generator of new jobs, participants raised concerns about skills shortages that could hold back the transition.
They emphasised the need for retraining and reskilling. They also warned it was imperative to make jobs in the green economy more attractive and aspirational, addressing both gender and skills gaps.
Proposed solutions
- Develop a Green Skills Action Plan in the UK, outlining the essential skill gaps that need to be addressed in key low-carbon supply chains such as EVs, charging and batteries, and the actions to plug these gaps. This could include better embedding the necessary skills into the education system, as well as providing practical skills training to those already in the workforce. Similar approaches could be taken across different jurisdictions depending on local skill gaps and needs.
What next to grow investments?
A comprehensive range of policy solutions are required to grow investment in low-emissions transport
“A comprehensive range of policy solutions are required to address these challenges and strengthen market signals to grow investment in low-emissions transport,” said Edward Kevis, global equity fund manager, and Martin McCudden, senior credit research analyst at Aviva Investors, who both attended the roundtable.12
“This includes accelerating the pace at which the UK’s EV-charging infrastructure is developed in line with the strengthening of the Zero Emission Vehicles mandate out to 2035. It needs to work hand in hand with fully decarbonising and reinforcing the power grid to support such a rapid deployment of charging infrastructure,” they added.
