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COUNCIL - AGENDA ITEM - 03/08/2022 - AFFORDABLE HOUSING AND ELECTRIC VEHICLE CHARGING O
DATE: STAFF: March 8, 2022 Kirk Longstein, Project Manager John Phelan, Energy Services Manager WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Affordable Housing and Electric Vehicle Charging Options. EXECUTIVE SUMMARY The purpose of this item is to discuss updates to the 2021 International Building Code and present options for the proposed local amendment requiring Electric Vehicle (EV) charging infrastructure for affordable housing developments. During the February 15 regular meeting, Council adopted nine ordinances on first reading related to updating building codes. Staff material for the March 8 work session relates to the Public Hearing and Second Reading of Ordinance No. 149, 2022, Amending Chapter 5, Article II, Division 2, of the Code of the City of Fort Collins for the Purpose of Repealing the 2018 International Building Code and Adopting the 2021 International Building Code, with local amendments. One of the local amendments includes requirements for electric vehicle charging infrastructure that vary by occupancy type for single-unit, multi-unit and commercial buildings. Council expressed interest in discussing options for the electric vehicle charging infrastructure amendment as they would apply to affordable housing to address potential negative impacts. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED At this work session, staff is seeking Council’s input on potential options to revise Ordinance No. 149, 2022 related to EV charging infrastructure requirements for affordable housing developments. Council’s feedback will help staff adjust the proposed code language for second reading, scheduled for April 5, 2022. 1. What feedback do Councilmembers have on the options presented to modify the EV building Code requirements for affordable housing projects? BACKGROUND/DISCUSSION The purpose of updating Building Codes with local amendments is to adopt the most up -to-date, comprehensive, and fully integrated body of building codes, collectively referred to as the “2021 I -Codes,” regulating building construction to safeguard the public health, safety, and general welfare by regulating structural strength and stability, sanitation, light and ventilation, energy conservation, and property protection from hazards attributed to the built environment within the City of Fort Collins. The 2021 I-Codes will replace the 2018 editions which were adopted on January 12, 2019. These codes ar e reviewed and voted on by code officials and construction industry professionals from across the country and published every three years under the oversight of the International Code Council (ICC). These core 2021 I - Codes represent the latest construction publications from the ICC. Council’s discussion at the hearing on February 15 surfaced concerns about the proposed local amendment for EV infrastructure and its impact on the cost for new multi-unit affordable housing. This item is meant to support March 8, 2022 Page 2 Council’s decision-making process to address concerns regarding the incremental cost impact on affordable housing developments. Policy alignment - Our Climate Future - BIG Move 13: Residents can afford and use electric cars, including shared electric cars, and conventional fleets are converted to electric. In addition to Our Climate Future, and the Colorado Energy Office’s Electric Vehicle targets and policies, every major automaker has announced a plan to electrify a significant portion of their vehicle fleet ov er the next 3-5 years. The number of available EV models in the U.S. will grow from 48 in 2020 to over 100 in the next 5 years and include over 20 electric SUV and pickup truck models. The Southwest Energy Efficiency Project has provided a complete list of EV commitments from global auto manufacturers. (Attachment 1) A recent Consumer Reports survey cites the growing level of interest in EVs -71 percent of U.S. drivers say they would consider buying one at some point in the future, with nearly a third indi cating interest in an EV for their next vehicle purchase. (Attachment 2) Additionally, the Colorado Energy Office reports an accelerating trend with EVs as a percentage of new car sales. In October 2021, the share of EVs across the State of Colorado’s new car sales was 9.6%, November 2021 was 10.8%, and December 2021 was 12.8%. According to a 2019 Deloitte forecast for new EV sales across the United States, Battery Electric Vehicles will likely account for 27% of all new car sales by 2030. (Attachment 3) Electric Vehicle Charging Infrastructure Building Code EV Charging infrastructure building Codes are defined by three categories: • EVSE-INSTALLED - Type 2 charging stations, installed during construction. • EV READY - Full circuit installations including 208/240V, 40-amp panel capacity, raceway, wiring, receptacle, and overprotection devices similar to a dryer circuit. • EV CAPABLE - Installation of panel space and conduit (raceway) to accommodate the future build -out of EV charging with 208/240 V, 40-amp circuits EV Infrastructure. Key cost considerations: • Building electric components are defined by the National Electric Code • Utility needs are based on submitted building designs 2021 IBC Local Amendment: EV Charging The local amendment requiring Electric Vehicle (EV) charging infrastructure as discussed at the February 15, 2022 Council hearing is summarized below. Discussion at the hearing focused on the requirements proposed in “Tier 1” (10% EVSE-INSTALLED, 20% EV-READY, 40% EV-CAPABLE) and the potential cost impacts to multi- unit affordable housing developments. March 8, 2022 Page 3 Development Scenario Oak 140 is a recent affordable housing development located in downtown Fort Collins and offers an opportunity to evaluate the EV charging local amendment under real-world conditions. Oak 140 is a 100% affordable, 5 -story mixed-use development currently under construction. When complete, the project will provide 79 affordable homes to households making between 30-80% Area Median Income (AMI; $23,000-$61,000 for a household of 2). The scenario outlined below illustrates the potential impact of the EV charging local amendment and cost estimates for the installation of EV infrastructure. The information presented below has changed from what was presented during the February 15 Council meeting. Staff has integrated additional information regarding the range of costs for the full construction (e.g. EV chargers, conduit, wiring, electrical panel space and capacity) that more fully represent expected costs. There is a range provided due to varying estimates for different components costs by different reliable sources. Electric Vehicle Infrastructure Scenario (Oak 140) TOTAL PARKING SPACES REQUIRED BY LAND USE CODE = 58 2021 Building Code Parking Spaces EVSE-INSTALLED 10% 6 EV READY 20% 12 EV CAPABLE 40% 23 Total 41 EV Charging Infrastructure Total Cost Example (Oak 140) TOTAL PARKING SPACES REQUIRED BY LAND USE CODE = 58 Total Parking Spaces with EV Charging Infrastructure = 41 Low High EVSE-INSTALLED (6) $19,200 $63,300 EV READY (12) $33,600 $48,600 EV CAPABLE (23) $32,200 $46,000 INCREMENTAL COST $85,000 $157,900 March 8, 2022 Page 4 EV Charging Infrastructure Cost per Space Type (Oak 140) TOTAL PARKING SPACES REQUIRED BY LAND USE CODE = 58 Total Parking Spaces with EV Charging Infrastructure = 41 Low High EVSE-INSTALLED $3,200 $10,550 EV READY $2,800 $4,050 EV CAPABLE $1,400 $2,000 Note: • The total construction budget for Oak 140 was approximately $19.5 million (materials and labor). The current 2018 Building Codes requires 10% EV-CAPABLE which is estimated to cost the Oak140 project between $8,400 - $12,000. • EV infrastructure cost estimates reference data provided by Tesla through an Electric Vehicle Infrastructure technical policy guidebook - (Attachment 4) • Staff cost estimates for EV CAPABLE exclude wire and breakers. • Staff do not assume a building electric system design for simultaneous maximum power draw for all EV chargers (EV installed plus EV ready plus EV capable) • The estimated construction cost for a new 68,400 sq ft Multifamily building with parking ($285/SF) is $19.5M. The estimated incremental costs with Colorado Housing Finance Authority (CHFA) EV -READY requirements and the current 2018 building Code includes 10% EV-CAPABLE. The cost for these EV infrastructure building costs as a percentage of total construction cost is approximately less than 1%. Code Implementation Considerations Building Codes require parking in new buildings to include the electrical equipment necessary to enable future low-cost installation of electric vehicle (EV) charging stations and with EV Ready installations, to allow charging of electric vehicles that have a portable charger (without the need for a charging station). As interpreted by the Chief Building Official, new construction electrical plans should consider the immediate electric demand for Electric Vehicle Supply Equipment (EVSE) and EV-Ready parking spaces, not EV Capable spaces. Developers can provide electrical panel capacity with future installat ions in mind, but the building code does not require additional panel electrical capacity at the time of construction. The EV building codes enable and encourage increased EV adoption by increasing the number of charging stations and EV Ready receptacles a nd reducing up front charger installation costs by 75% or more according to studies completed by SWEEP and the Colorado Energy Office for the Town of Superior, Colorado. (Attachment 5) A primary objective of this code is to take advantage of cost savings that result from installing this infrastructure upfront and avoiding later retrofit expenses. Several factors contribute to the high cost of retrofitting EV infrastructure, including demolition and repair of surface parking or walkways, demolition and rep airing walls, longer conduit runs and upgrading electric service panels. In addition to cost considerations, many developers and building owners have recognized that EV charging infrastructure is an increasingly important amenity for many tenants. EV infr astructure building codes support a more accessible and competitive housing market, while also providing a standard set of definitions for developers and contractors to build from. Incentives for Affordable Housing Developers To improve air quality and encourage deployment of electric vehicles across the State of Colorado, the Regional Air Quality Council (RAQC) and Colorado Energy Office (CEO) have teamed up to provide financial support for March 8, 2022 Page 5 electric vehicle charging stations (EVSE). A $9,000 grant is ava ilable for Commercial and Multifamily Developers including installation and maintenance. In alignment with the proposed Fort Collins Recovery Plan, staff are reviewing whether American Rescue Plan Act funds can be used to provide additional incentives for EV Charging Infrastructure requirements from building codes. Low Income Housing Tax Credits and Electric Vehicle Charging Infrastructure Staff’s proposed options for Council consideration seek to provide equitable access to EV charging infrastructure without creating additional burdens to housing affordability. Incremental cost increases from additional EV infrastructure present a barrier to affordable housing providers, as these additional costs cannot be absorbed within the rental rates of affordable housing developments. Instead, additional costs reduce the debt capacity for affordable projects, thereby requiring additional subsidy. Low Income Housing Tax Credit (LIHTC) financing is how most affordable multi -family rental homes are being developed in the City. LIHTC allows developers to have more advantageous financing terms. The Colorado Housing Finance Authority (CHFA) administers this program in Colorado. CHFA has standards for EV charging infrastructure that apply to affordable housing using LIHTC financing. CHFA’s 2021-2022 Qualified Allocation Program (Section 8, page 51) requires 10% EV-READY and encourages EVSE-INSTALLED which is included as option 3 for Council’s consideration. CHFA exempts projects that are 100-percent Housing Homeless/Special Needs projects and acquisition/rehab projects from this requirement. (Attachment 6) Options for Affordable Housing Developments To support Council’s decision-making process, staff has outlined three options for consideration below. These options seek to balance City policies to encourage the development of EV infrastructure while also recognizing the unique challenges of developing new affordable housing. The options are described assuming Council will adopt the proposed Tier 1 Residential requirements for the 2021 IBC as proposed (EVSE Installed 10%; EV Ready 20%; EV Capable 40%). 1) 10% EV-CAPABLE ONLY Details: Carry forward the current 2018 Building Code requirements for EV infrastructure to apply to affordable housing developments. To meet this standard, new developments must provide an empty conduit of 3/4" minimum, installed from the building electrical panel board to a junction box or capped pipe in a readily accessible location near/at the parking space, capable of supporting a 50 ampere 208/220-volt outlet. Considerations: • Offers a reduced requirement for the number of EV-CAPABLE spaces from 40% to 10% • Exempts projects from providing EV-READY or EVSE INSTALLED spaces • Lowest cost impact for affordable housing development of these opti ons and keeps the investment cost the same as current Code requirements • Does not align with minimum CHFA EV requirements • Does not advance City policies beyond current 2018 IBC requirements 2) 10% EV-CAPABLE + 10% EV-READY Details: Require 10% EV-READY and 10% EV-CAPABLE parking spaces in affordable housing developments, with a minimum of one EV-READY parking space. To meet this standard, only a junction box March 8, 2022 Page 6 or electrical outlet capable of supporting EV charging is required as the termination point; i nstallation of Level 2 chargers is not required, though is encouraged. Considerations: • Offers a reduced requirement for the number of EV-CAPABLE spaces from 40% to 10% • Offers a reduced requirement for the number of EV-READY spaces from 20% to 10% • Exempts projects from providing EVSE Installed spaces • Aligns with existing CHFA requirements, which enhances consistency and predictability for affordable housing developers • Because this option aligns with CHFA, additional cost impacts are minimal (<1 % of total project cost) and, in many cases, are already required for affordable developments using this funding source • Advances City policies beyond current 2018 IBC requirements 3) 10% EV-CAPABLE + 10% EV-READY + 1 EVSE-INSTALLED: Details: Require 10% EV-READY and 10% EV-Capable parking spaces and a minimum of one EVSE- INSTALLED parking space in affordable housing developments. Considerations: • Offers a reduced requirement for the number of EV-CAPABLE spaces from 40% to 10% • Offers a reduced requirement for the number of EV-READY spaces from 20% to 10% • Offers a reduced requirement for the number of EVSE-INSTALLED spaces from 10% to a minimum of one (1) space per project • This standard exceeds the minimum requirements set by CHFA. • Additional cost impacts are estimated to be <1% of total project cost • Because this option requires an EVSE-INSTALLED space, affordable housing developers would be eligible for the $9,000 grant from the Regional Air Quality Council (RAQC) and Colorado Energy Offic e (CEO). • Advances City policies beyond current 2018 IBC Requirements Next Steps: ✓ Based on Councilmembers feedback, revisions will be made to the applicable sections of Ordinance No. 149, 2022. ✓ The team will conduct any necessary outreach to affordab le housing partners. ✓ April 5, 2022 - Public Hearing and Second Reading of Ordinance No. 149, 2022, Amending Chapter 5, Article II, Division 2, of the Code of the City of Fort Collins for the Purpose of Repealing the 2018 International Building Code and Adopting the 2021 International Building Code, with local amendments; including EV Charging infrastructure Building Codes. ATTACHMENTS 1. Automaker EV Commitments 2020 (PDF) 2. Consumer Reports Electric Vehicles, August 2020 (PDF) 3. Market Overview - Electric Vehicles (PDF) 4. Model Ordinance Related to EV Charging Infrastructure (2018) (PDF) 5. Cost Estimates for Superior SWEEP and CEO 2022 (PDF) 6. CHFA EV Requirements (PDF) 7. Powerpoint Presentation (PDF) ATTACHMENT 1 Electric Vehicles and Fuel Economy: A Nationally Representative Multi-Mode Survey Results TOPLINE RESULTS A screener question assessed whether respondents were eligible for the electric vehicles section. Which section displayed first after that, fuel economy or electric vehicles, was randomized. (The fuel economy section began with a second screener.) Many respondents were only eligible for one section. The questions presented below were shown to respondents in order within each section. Where appropriate, question verbiage, response answer choices, or direction of scales were randomized or rotated and those instances are noted below. Respondents who identified as Hispanic were offered the opportunity to take the survey in Spanish or English. Prepared by CR Survey Research Department, December 2020 www.cr.org Overview of Methodology Consumer Reports fielded a nationally-representative survey of Americans to understand attitudes toward fuel economy among Americans who intend to purchase a vehicle in the next two years and to better udes toward electric vehicles, including what they see as incentives and barriers to owning them. The results are based on interviews conducted July 29, 2020 through August 12, 2020. The survey was administered by NORC at the University of Chicago through its AmeriSpeak® Panel to a nationally representative sample -in panel was also used to oversample three states (Minnesota, Nevada, and Virginia California, also oversampled, was fully NORC). Interviews were conducted in English and in Spanish, and were administered both online and by phone. In total NORC collected 3,879 interviews, 3,758 by web mode and 121 by phone mode. Questions about electric vehicles while questions about fuel economy were asked of those who plan to purchase or lease a vehicle in the next two years (n=1,735) unless otherwise noted. Final data are weighted separately for each section by sex, age, education, race/ethnicity, census region, housing tenure, and telephone status. Because of the nonprobability data used to oversample some states, margins of error cannot be calculated for the nationally-representative samples. ATTACHMENT 2 2 CONSUMER REPORTS SCREEN2. [RANDOMIZE. ELECTRIC VEHICLES SECTION SHOWED ONLY RESPONDENTS WOULD NOT DELIBERATELY SCREEN IN. SCREEN2 SHOWED BEFORE EITHER SECTION.] WHICH SECTION SHOWED FIRST AFTER SCREEN2 WAS RANDOMIZED. ELECTRIC VEHICLES EV1. [SHOWED ONLY TO RESPONDENTS WITH A SECTION) AND WHO ARE PLANNING TO BUY OR LEASE A VEHICLE IN THE NEXT TWO YEARS (ANSWERED IN THE FUEL ECONOMY SECTION). RANDOMLY FLIP RESPONSE SCALE.] Which, if any, of the following do you have? A valid driver's license, including enhanced driver's license (allows entrance to Canada and Mexico by land or water; only offered by MI, MN, NY, VI, and WA) A valid passport A valid passport card (allows entrance to Canada and Mexico by land or water; not valid for air travel) State-issues photo ID that is not a driver's license A student or employee ID Total % Yes 6 No, but I have in the past 4 No, I have never owned or leased one 91 Base: Respondents with a valid driver's license who currently own vehicles and are planning to buy or lease a vehicle in the next two years. Note: This was only asked of this specific sub-group, not all licensed drivers as the rest of the section is. 505 Do you currently own or lease a plug-in electric vehicle? 3 CONSUMER REPORTS EV2. [RANDOMLY FLIP RESPONSE SCALE.] EV3. [RANDOMIZE. --IN ] Total % I know a lot about plug-in electric vehicles 8 I have heard of plug-in electric vehicles and know quite a bit about them 21 I've heard of plug-in electric vehicles but don't know much about them 68 I've never heard of a plug-in electric vehicle before 2 Base: Respondents with a valid driver's license 3,380 Which of the following best describes your knowledge of plug-in electric vehicles? Total % Costs less to charge than fueling a gasoline-powered vehicle 21 Lower maintenance costs than gasoline-powered vehicles 17 A purchase price similar to a gasoline-powered vehicle in the same class 17 Ability to charge at home 11 Higher reliability than gasoline-powered vehicles 11 No tailpipe emissions (exhaust fumes)9 Not having to pump gas 9 Better acceleration than gasoline-powered vehicles 3 Car runs quietly (that is, very little engine noise)2 Attractive styling or other aesthetic features 1 Base: Respondents with a valid driver's license 3,323 Here are some attributes that a plug-in electric vehicle might have. Which of these would most encourage you to purchase a plug-in electric vehicle? 4 CONSUMER REPORTS EV4. [] EV6. [IN QUESTION STEM EVER GETTING A PLUG-IN ELECTRIC VEHICLE, PLUG-IN ELECTRIC VEHICLE A PLUG-IN ELECTRIC VEHICLE RANDOMLY FLIP RESPONSE SCALE.] Total % Less than 50 miles 2 50 miles to less than 100 miles 6 100 to less than 150 miles 9 150 to less than 200 miles 9 200 to less than 250 miles 11 250 to less than 300 miles 14 300 to less than 350 miles 14 350 to less than 400 miles 10 400 miles or more 25 Base: Respondents with a valid driver's license 3,359 How far would a plug-in electric vehicle have to be able to travel between charges for you to consider purchasing or leasing one? Total % I definitely plan on getting a plug-in electric vehicle for my next vehicle.4 I would consider getting a plug-in electric vehicle as my next vehicle.27 I have some interest in getting a plug-in electric vehicle in the future, but not for my next vehicle.40 I have no interest in ever getting a plug-in electric vehicle.29 Base: Respondents with a valid driver's license 3,383 Which of the following statements best describes your thoughts on buying or leasing a plug-in electric vehicle? 5 CONSUMER REPORTS EV5. [-IN --IN ; I AM OPEN TO AND COMFORTABLE WITH THE IDEA OF PURCHASING OR LEASING A PLUG-IN ELECTRIC VEHICLE ORDER. CAPTURE RE ] Total % Not enough public charging stations 48 Purchase price 43 Insufficient driving range (number of miles vehicles can be driven on a full charge)42 I don't know enough about electric vehicles to buy one 30 Nowhere to charge it at home 28 Long charging times 21 Lack of options among plug-in electric vehicle models currently on the market 14 Higher state registration fees for plug-in electric vehicles 9 Difficult to use technology 2 Other, please specify:6 Nothing; I am open to and comfortable with the idea of purchasing or leasing a plug-in electric vehicle 4 Base: Respondents with a valid driver's license who do not "definitely" plan to get a plug-in electric vehicle for their next vehicle.3,252 Of the following attributes, which, if any, are holding you back from purchasing or leasing a plug-in electric vehicle for your next vehicle? Select up to three. We are interested in knowing your thoughts in general, even if you are not currently in the market to buy or lease a vehicle of any type. 6 CONSUMER REPORTS EV7. [RANDOMIZE. SHOW ON THREE SCREENS: FOUR ITEMS ON THE FIRST SCREEN, THREE ON THE OTHER TWO , KEEPING TOGETHER IN QUESTION STEM, WITH RESPONSE OPTIONS SHOWING IN THE SAME ORDER AS THE STEM. ] Total % Widespread electric vehicle use will help reduce air or climate pollution Strongly agree 33 Agree 39 Neither agree nor disagree 17 Disagree 4 Strongly disagree 3 Unsure 4 Base: Respondents with a valid driver's license 3,378 Automakers should make a variety of vehicle types (like sedans, minivans, SUVs and pickups) available as plug-in electric models Strongly agree 26 Agree 44 Neither agree nor disagree 22 Disagree 2 Strongly disagree 2 Unsure 3 Base: Respondents with a valid driver's license 3,382 My state should require automakers to offer plug-in electric vehicle options Strongly agree 12 Agree 25 Neither agree nor disagree 33 Disagree 17 Strongly disagree 9 Unsure 5 Base: Respondents with a valid driver's license 3,380 The federal government should require automakers to offer plug-in electric vehicle options Strongly agree 13 Agree 25 Neither agree nor disagree 32 Disagree 17 Strongly disagree 9 Unsure 4 Base: Respondents with a valid driver's license 3,382 Please indicate if you agree or disagree with, or are unsure about, each of the following statements. 7 CONSUMER REPORTS EV7. [CONTINUED.] Incentives and tax rebates for plug-in electric vehicles should be targeted towards low and moderate income consumers Strongly agree 21 Agree 34 Neither agree nor disagree 26 Disagree 10 Strongly disagree 4 Unsure 4 Base: Respondents with a valid driver's license 3,383 Incentives and tax rebates for plug-in electric vehicles should be available to all consumers, including high income Strongly agree 20 Agree 40 Neither agree nor disagree 25 Disagree 8 Strongly disagree 4 Unsure 3 Base: Respondents with a valid driver's license 3,381 My state should invest money to increase the availability of plug-in electric vehicle charging stations Strongly agree 20 Agree 34 Neither agree nor disagree 27 Disagree 9 Strongly disagree 6 Unsure 4 Base: Respondents with a valid driver's license 3,383 The federal government should invest money to increase the availability of plug-in electric vehicle charging stations Strongly agree 21 Agree 34 Neither agree nor disagree 24 Disagree 10 Strongly disagree 6 Unsure 4 Base: Respondents with a valid driver's license 3,385 8 CONSUMER REPORTS EV7. [CONTINUED.] EV8. [SELECT ALL THAT APPLY. RANDOMIZE. THE CANNOT BE SELECTED WITH OTHER RESPONSES.] Electric utility providers should offer discounts to charge plug-in electric vehicles at times when electricity demand is low Strongly agree 24 Agree 45 Neither agree nor disagree 21 Disagree 4 Strongly disagree 3 Unsure 3 Base: Respondents with a valid driver's license 3,379 My state should create policies that financially support increasing the use of plug-in vehicles as electric school buses, public transit, and fleets (that is, groups of vehicles owned by businesses or government agencies). Strongly agree 21 Agree 37 Neither agree nor disagree 25 Disagree 8 Strongly disagree 5 Unsure 4 Base: Respondents with a valid driver's license 3,379 Total % Seen a public charging station for plug-in electric vehicles 63 Seen an ad for a plug-in electric vehicle 44 Seen a plug-in electric vehicle in your neighborhood 36 Known someone who owned a plug-in electric vehicle 31 Seen a plug-in electric vehicle at an auto dealership or store 25 Been a passenger in a plug-in electric vehicle 17 Seen a plug-in electric vehicle at an auto show 14 Driven a plug-in electric vehicle 9 None of the above 14 Base: Respondents with a valid driver's license 3,392 Which, if any, of the following have you experienced? Please select all that apply. 9 CONSUMER REPORTS EV9. [-- UP TO ] EV10. Total % Public charging stations along highways 42 Discounts to install a home charging station 37 Discounted charging rates from your electric utility provider 35 Rebates at the time of purchase or lease 34 Rebates as tax credits 30 Access to workplace charging stations 16 Charging stations or access to plug-in spots at apartment buildings 13 Preferential parking spaces for plug-in electric vehicles 8 Access to HOV lanes with only the driver in the vehicle 7 None of these 18 Base: Respondents with a valid driver's license 3,392 Out of the following state or federal policies, which, if enacted, would most likely increase your interest in purchasing or leasing a plug-in electric vehicle? Please select your top three. Total % In my private driveway or garage 72 At public fast-charging stations in my community 9 At a charger provided by my apartment building or complex 7 At public charging stations at places like restaurants and shopping centers 6 At a charger provided at work 5 Other, please specify:1 Base: Respondents with a valid driver's license 3,370 If you were to own a plug-in electric vehicle in the future, where do you think you would do most of your charging? 10 CONSUMER REPORTS EV11. FUEL ECONOMY SCREEN. [ LICENSE (SCREEN2) AND RANDOMIZED INTO SEEING THE FUEL ECONOMY SECTION FIRST, BUT WERE NOT PLANNING TO BUY OR LEASE A VEHICLE, WERE SENT TO THE START OF THE ELECTRIC VEHICLES SECTION.] FE2. [ Total % Yes 6 No 11 Don't know 83 Base: Respondents with a valid driver's license 3,386 Does the state in which you currently live offer any discounts, rebates, or credits for purchasing or leasing plug-in electric vehicles? Now, we'd like to ask you about future plans. Which of the following are you considering doing within the next two years? Select all, if any, that apply. Moving to a different part of the country Getting married Buying or leasing a new or used car or truck Buying a new home Getting a new job None of the above Total % Either new or used 48 Used only 30 New only 22 Base: Respondents planning to buy or lease a vehicle within the next two years.1,732 You said you are considering buying or leasing a vehicle within the next two years. Are you considering new, used, or both? 11 CONSUMER REPORTS FE3. [RANDOMIZE. KEEP TOGETHER SMALL SUV OR CROSSOVER WITH TWO ROWS OF SEATS LARGE SUV WITH THREE ROWS OF SEATS. THAT ORDER. ] FE4. [SELECT ALL THAT APPLY. RANDOMIZE. Total % Car/sedan 38 Small SUV or ''crossover'' with two rows of seats 20 Pickup truck 14 Large SUV with three rows of seats 10 Van or minivan 6 Sports car 3 Other 1 I don't currently own or lease a vehicle 6 Base: Respondents planning to buy or lease a vehicle within the next two years.1,730 What kind of vehicle do you currently own or lease? If you have more than one, please respond for the vehicle you drive most often. Total % Small SUV or "crossover" with two rows of seats 40 Car/sedan 37 Pickup truck 31 Large SUV with three rows of seats 21 Van or minivan 9 Sports car 8 Other, please specify: 2 Unsure 3 Base: Respondents planning to buy or lease a vehicle within the next two years.1,735 What kind of vehicle(s) are you considering for your next purchase/lease? Please select all that apply. 12 CONSUMER REPORTS FE5. [ALSO SHOWN; EXLCUDED HERE BECAUSE OF VERY LOW SELECTION.] FE6. Total % $10,000 or less 19 $10,001 to $15,000 12 $15,001 to $20,000 13 $20,001 to $25,000 11 $25,001 to $30,000 11 $30,001 to $35,000 11 $35,001 to $40,000 7 $40,001 to $45,000 5 $45,001 to $50,000 5 $50,001 to $55,000 2 More than $55,000 4 Base: Respondents planning to buy or lease a vehicle within the next two years.1,640 What is the maximum amount that you could spend on your next vehicle (i.e., if a vehicle were more than this price, you would not be able to afford it)? If you plan to lease, select the response corresponding to what you think that vehicle would cost if you paid for it in full. Total % Yes 33 No 67 Base: Respondents planning to buy or lease a vehicle within the next two years.1,731 You mentioned you are planning to purchase or lease a vehicle within the next two years. Has the coronavirus pandemic had any impact on your decision of what to get or when to get it? 13 CONSUMER REPORTS FE7. [ . CAPTURE RESPONSES TO ] FE8. [ SCREEN. RANDOMIZE.] Total % I am planning to purchase or lease later than I otherwise would have 64 I am planning to purchase or lease a different vehicle than I previously considered to save money 29 I am planning to purchase or lease a different vehicle than I previously considered because I plan to drive less often 13 I am planning to purchase or lease sooner than I otherwise would have 7 Other 9 Base: Respondents planning to buy or lease a vehicle within the next two years and say the coronavirus pandemic has affected their vehicle shopping plans.644 You said the coronavirus pandemic has affected your vehicle shopping in some way. How? Select all, if any, that apply. Total % Running errands (e.g., shopping, going to appointments) Both currently and before the pandemic 88 Currently, but not before the pandemic 2 Before the pandemic, but not currently 6 Neither before the pandemic nor currently 1 Not applicable 1 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,617 Due to the coronavirus pandemic, many people have made changes to their day-to- day activities. We are interested in which of the following activities you used a vehicle for before the pandemic, and which you use a vehicle for currently. If you Please select one response in each row to complete the sentence "I use a vehicle for this activity...." 14 CONSUMER REPORTS FE8. [CONTINUED.] Commuting to and from work Both currently and before the pandemic 51 Currently, but not before the pandemic 3 Before the pandemic, but not currently 19 Neither before the pandemic nor currently 8 Not applicable 20 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,617 Taking road trips or vacations Both currently and before the pandemic 43 Currently, but not before the pandemic 2 Before the pandemic, but not currently 35 Neither before the pandemic nor currently 10 Not applicable 10 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,615 Driving children to and from school Both currently and before the pandemic 13 Currently, but not before the pandemic 2 Before the pandemic, but not currently 20 Neither before the pandemic nor currently 19 Not applicable 45 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,614 Carrying cargo (e.g., luggage, equipment) Both currently and before the pandemic 45 Currently, but not before the pandemic 2 Before the pandemic, but not currently 9 Neither before the pandemic nor currently 17 Not applicable 27 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,619 Towing (a boat, trailer, etc.) Both currently and before the pandemic 15 Currently, but not before the pandemic 1 Before the pandemic, but not currently 4 Neither before the pandemic nor currently 31 Not applicable 49 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,612 15 CONSUMER REPORTS FE8. [CONTINUED.] FE9. [SHOW RESPONDENTS COULD SELECT UP TO THREE RESPONSES.] For entertainment, such as recreational off-roading Both currently and before the pandemic 20 Currently, but not before the pandemic 2 Before the pandemic, but not currently 9 Neither before the pandemic nor currently 33 Not applicable 36 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,613 Driving for a ride-hailing company (i.e., Uber/Lyft) or delivery company (i.e., Instacart) Both currently and before the pandemic 3 Currently, but not before the pandemic 1 Before the pandemic, but not currently 5 Neither before the pandemic nor currently 38 Not applicable 52 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,617 Total % Fuel economy 42 Purchase price 25 Maintenance costs 25 Infotainment or connectivity (e.g., Bluetooth, GPS navigation, Wi-Fi)22 Reliability 19 Vehicle size 18 Vehicle comfort 18 Cargo space 17 Safety 17 Passenger room 17 Horsepower 14 Style 12 Off-road capability 9 Handling 9 Base: Respondents planning to buy or lease a vehicle within the next two years who currently have a vehicle.1,620 Thinking about your current vehicle, which three attributes have the most room for improvement? Select up to three responses. 16 CONSUMER REPORTS FE10. [RANDOMLY FLIP RESPONSE SCALE.] FE11. [SHOW ON TWO SCREENS, FOUR ITEMS PER SCREEN. RANDOMIZE. RANDOMLY SHOW QUESTION STEM AS EITHER STEM.] Total % Extremely important 25 Very important 38 Somewhat important 31 Not very important 4 Not at all important 2 Base: Respondents planning to buy or lease a vehicle within the next two years.1,731 How important is fuel economy to you when considering what vehicle to purchase or lease? Total % Automakers should continue to improve fuel economy for all vehicle types Strongly Agree 56 Agree 34 Neither agree nor disagree 8 Disagree 1 Strongly Disagree 1 Base: All respondents.3,869 Making larger vehicles such as SUVs or trucks more fuel-efficient is important Strongly Agree 47 Agree 37 Neither agree nor disagree 12 Disagree 3 Strongly Disagree 1 Base: All respondents.3,867 I expect each new generation of vehicles available on the market to be more fuel- efficient than the last Strongly Agree 46 Agree 38 Neither agree nor disagree 14 Disagree 2 Strongly Disagree 1 Base: All respondents.3,863 Please indicate if you agree or disagree with each of the following statements. 17 CONSUMER REPORTS FE11. [CONTINUED.] The U.S. government should continue to increase fuel-efficiency standards Strongly Agree 42 Agree 31 Neither agree nor disagree 18 Disagree 7 Strongly Disagree 3 Base: All respondents.3,863 The federal government should prevent states from setting stronger vehicle emissions standards than the federal government Strongly Agree 10 Agree 20 Neither agree nor disagree 34 Disagree 19 Strongly Disagree 17 Base: All respondents.3,833 Automakers are doing a good job of making fuel-efficient passenger vehicles Strongly Agree 7 Agree 42 Neither agree nor disagree 34 Disagree 13 Strongly Disagree 3 Base: All respondents.3,839 Automakers have a responsibility to consumers to improve gas mileage Strongly Agree 26 Agree 48 Neither agree nor disagree 20 Disagree 4 Strongly Disagree 1 Base: All respondents.3,849 Automakers care about lowering fuel costs for their customers Strongly Agree 6 Agree 23 Neither agree nor disagree 43 Disagree 22 Strongly Disagree 5 Base: All respondents.3,844 18 CONSUMER REPORTS FE12. [ IN QUESTION STEM, WITH RESPONSE OPTIONS SHOWING IN THE SAME ORDER AS THE STEM.] FE13. Total % Strongly Agree 6 Agree 19 Neither agree nor disagree 36 Disagree 21 Strongly Disagree 18 Base: All respondents.3,858 The U.S. government has recently reduced fuel economy improvement requirements for automakers; standards will continue to go up, but by 1.5% per year instead of 5% per year. Do you agree or disagree with this change? Total % Within the first month 10 One month to less than three months 7 Three months to less than six months 10 Six months to less than one year 16 One year to less than two years 19 Two years to less than three years 10 Three years to less than five years 6 Over the lifetime of the vehicle 10 I would be willing to pay extra for a more fuel-efficient vehicle regardless of whether I would make the money back in fuel cost savings 13 Base: Respondents planning to buy or lease a vehicle within the next two years.1,713 Some people are interested in fuel-efficient vehicles even if the initial price for the vehicle is a little higher because it saves them money on gas, and thus larger savings over time. How quickly would fuel savings have to offset a higher purchase price for you to be willing to pay extra for a more fuel-efficient vehicle? 19 CONSUMER REPORTS CONTACT: Kristen Purcell Chief Research Officer Kristen.Purcell@consumer.org @kristenpurcell Electric vehicles Setting a course for 2030 ATTACHMENT 3 Deloitte’s Global Automotive team helps automotive companies execute innovative ideas in exceptional ways. We offer a global, integrated approach combined with business and industry knowledge to help our clients excel anywhere in the world. Contact the authors for more information or read more about our services on Deloitte.com. Contents Introduction 2 Part 1: Global progress and forecast 3 EVs in regional markets 4 2030 sales forecast 6 Four factors driving growth 7 Part 2: New landscape, new approach 12 Segmenting the market 12 Checklist for the journey ahead 21 Endnotes 23 2 Electric vehicles S INCE DELOITTE LAST presented a forecast for electric vehicle (EV) sales, in January 2019, the EV market has made great strides, and not just in terms of sales. Original equipment manufacturers (OEMS) have invested billions to deliver new electrified models, from R&D to factory redesign. Consumer attitudes have evolved. Government interventions have pushed forward and pulled back. But then COVID-19 completely disrupted global sales and manufacturing. In this context, a revised forecast based on updated data is needed. By examining the current state of the EV market worldwide and noting the many factors fostering growth in various directions (Part 1 of this report), we have formed conclusions about how the market will take shape over the next decade. The significant growth of EVs leading up to 2030 will present major opportunities and challenges for traditional OEMs, new-entrant OEMs, captive finance companies and dealerships. In particular, traditional OEMs will find insights in this report that can help them re-prioritise their customers and strategies in a volatile competitive landscape. Paramount to seizing opportunities and man- aging risks is taking a new approach to market segmentation. We detail one such approach in Part 2 and apply it as a use case to one major market, the United Kingdom, to inform and inspire OEMs and other stakeholders globally. By letting today’s insights fuel the journey for the next ten years, we can accelerate beyond the obstacles the pandemic has brought and toward a future where EVs take centre stage. Introduction Before the COVID-19 pandemic shook up the automotive industry – along with every other industry – electric vehicles were moving steadily into the spotlight. The combined annual sales of battery electric vehicles and plug-in hybrid electric vehicles tipped over the two-million-vehicle mark for the first time in 2019. This much-anticipated milestone may have become overshadowed by economic uncertainty and changed consumer priorities, but there is value in taking stock of the electric vehicle market even now. In this report, we use the term electric vehicles (EVs) to refer to battery electric vehicles (BEVs), as well as plug-in hybrid electric vehicles (PHEVs).1 Unless specifically stated, our analysis has considered both forms of drivetrain. • BEVs are powered solely by batteries. They use an electric motor to turn the wheels and produce zero emissions. • PHEVs are capable of zero-emission driving, typically between 20 and 30 miles, and can run on petrol or diesel for longer trips. As the name suggests, they need to be plugged in to an electricity supply to maximise their zero-emission capability. 3 Setting a course for 2030 Part 1: Global progress and forecast T HE EV MARKET’S collective accomplishments over the past two years off er hope, despite the short-term impact of COVID-19: a pattern of continued growth, which is expected to be sustained throughout the 2020s. As BEV and PHEV sales surpassed two million vehicles in 2019 (see fi gure 1), EVs staked their claim on a 2.5 per cent share of all new car sales last year. Looking back at BEVs in 2019, they accounted for 74 per cent of global EV sales: an increase of six percentage points since 2018. This rise was partly stimulated by new, stricter European emissions standards that persuaded manufacturers to favour the production and sale of zero-emission vehicles. Another factor is the advanced state of the BEV market in China, compared to the rest of the world. Although BEVs are still the dominant EV technology in the United States and Europe, they command a smaller share of the market than in China. Since the last time Deloitte reported on EV sales, signifi cant regional disparities in growth have sur- faced. For example, sales of EVs grew by 15 per cent in 2019 compared to 2018, driven by the growth of BEVs in Europe (+93 per cent), China (+17 per cent) and ‘other’ regions (+22 per cent). In con- trast, the United States market for BEVs fell 2 per cent (see fi gure 1). Then, in the fi rst half of 2020, COVID-19 slowed down the growth rate of EV sales, or sent it into decline, across various regions. The speed of recovery is expected to vary by region. Source: Deloitte analysis, IHS Markit, EV-volumes.com2 Deloitte Insights | deloitte.com/insights 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 FIGURE 1 EVs: annual passenger-car and light-duty vehicle sales in major regions China BEV EV share China PHEV Europe BEV Europe PHEV US BEV US PHEV Other BEV Other PHEV 0 500 1000 1500 2000 2500 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%EVs sold (in thousands)Market share 4 Electric vehicles But generally speaking, the course seems clear for growth over the next decade, despite the potential lasting impact of COVID-19 on total car sales over the next three years. To under- stand how things might continue, we need to understand what’s been taking place across the various regional markets over the past year. EVs in regional markets EUROPE Europe’s EV sector saw significantly more growth than other regions in 2019. The Nordics and the Netherlands continued to lead the way; Norway achieved 56 per cent market share, and two of the top ten best-selling cars in Holland were BEVs.3 The United Kingdom and some other countries reported triple-digit growth for the year. Favour- able government policies and a change in consumer attitudes were the catalysts, driven primarily by growing concerns about climate change. Climate change rose to the top of many European governments’ agendas. The United Kingdom committed to a target of net zero emissions by 2050, and proposed a ban on the sale of all polluting vehicles by 2035.4 Germany plans to cut greenhouse gas emissions by 40 per cent by the end of 2020, by 55 per cent by the end of 2030 and up to 95 per cent by the end of 2050, compared to 1990 levels.5 Despite the growth seen in 2019, mainstream adop- tion of EVs has been, so far, hindered by the limited number of models available to the European market and consumer perceptions regarding insufficient charging infrastructure in some regions.6 The outbreak of COVID-19 and national lockdown measures impacted total car sales in Europe, as showrooms closed their doors and manufacturers halted production, but EV sales have held up well in comparison to their internal combustion engine (ICE) equivalents. In the first four months of 2020, in the European Union (EU), demand for new pas- senger cars contracted by 38.5 per cent, but in April 2020 – the first full month with COVID-19 restric- tions in place – registrations of new passenger cars in the EU posted a year-on-year decline of 76.3 per cent, with some major markets reporting declines of over 95 per cent year-on-year.7 But EV sales in Western Europe only fell by 31 per cent in April, with some countries actually reporting modest year-on-year growth – albeit against a low base.8 CHINA China continues to dominate the EV market, accounting for half of all vehicle sales. Sales in the second half of 2019 turned out lower than previ- ously expected after some subsidies available to Chinese consumers were halved.9 This considerably eroded the consumer demand for EVs, and total yearly sales dropped: PHEV sales fell by 9 per cent and BEV sales fell to a 17 per cent growth rate from 2018 to 2019.10 On a positive note, a slowdown in the sales of ICE vehicles in the region means that the EV market share in China actually increased. China continues to dominate the EV market, accounting for half of all vehicle sales. 5 Setting a course for 2030 China’s slowdown in the second half of 2019 affected global EV sales figures, but neither the slashed subsidies nor the impact of COVID-19 should impact EV sales significantly in the long term. Chinese authorities announced they would refrain from more subsidy cuts in 2020.11 Mean- while, other incentives (for example, number-plate privileges in Tier 1 cities) remain, investment is being made in China’s charging infrastructure and there is a continued focus on encouraging Chinese manufacturers to produce and market EVs. As a result of the COVID-19 pandemic and lockdown measures in place, China saw a 45 per cent decline in passenger car sales in Q1 2020.12 EV sales fell at a faster rate than the total market (by 56 per cent), as consumers stayed home and showrooms closed their doors.13 But the rate of recovery has been swift. By March 2020, Chinese factories had recovered to achieve a production rate of 75 per cent, with 86 per cent of employees returning to work. By April 2020, production had basically been restored to pre-pandemic levels. Although sales have remained depressed in certain Chinese provinces, recovery has been accelerated by pent-up demand, favourable policies put in place by Chinese authorities and the ability to purchase cars online; total sales actually reflected year-on-year growth in April. This brings hope for a ‘V-shaped’ recovery in China, with many individual EV manufacturers already benefitting from the release of new models.14 UNITED STATES After an encouraging start to 2019, falling fuel prices in the United States (a market that already enjoys comparatively cheap private transportation) led to a disappointing second half of the year for EV sales. The United States EV market is almost singlehandedly being carried by the success of the Tesla Model 3 – alone responsible for almost half of all EV sales.15 As in Europe and China, United States car sales fell sharply in the first three months of 2020 as the pan- demic took a toll on demand; job losses increased and large swathes of the population were ordered to stay home. The recovery in EV sales is likely to be slower in the United States than in other major regions, as manufacturers delay the launch of new cars and consumers take advantage of low oil prices. REST OF THE WORLD The world outside Europe, China and the United States is lagging behind in terms of EV sales, for various reasons: a lack of government commit- ment to EVs, insufficient or unsuitable charging infrastructure, unavailability of EVs and cultural differences regarding mobility models. For example, Japan is a major global car market, but new car sales are dominated by domestic OEMs that have not yet developed the same range of EVs as their European and Chinese competitors. Meanwhile, India, like many markets, is dominated by mass- and low-cost mobility models: an area that OEMs haven’t been able to penetrate so far, because of EVs’ comparative higher price. The world outside Europe, China and the United States is lagging behind in terms of electric vehicles sales. 6 Electric vehicles 2030 sales forecast With one eye fi rmly on progress so far, Deloitte has analysed the most recent indicators to develop an up-to-date prediction of the EV market for the next ten years. We know that BEVs already outperform PHEVs globally, and predict that by 2030, BEVs will likely account for 81 per cent (25.3 million) of all new EVs sold. By contrast, PHEV sales are expected to reach 5.8 million by 2030. A recovery from COVID-19 will see ICE vehicles return to growth, up to 2025 (81.7 million), then experience a decline in market penetration thereafter. Our global EV forecast is for a compound annual growth rate of 29 per cent achieved over the next ten years: Total EV sales growing from 2.5 million in 2020 to 11.2 million in 2025, then reaching 31.1 million by 2030. EVs would secure approximately 32 per cent of the total market share for new car sales (see fi gure 2). Annual car sales are unlikely to reach pre-COVID-19 levels until 2024. However, the pace of recovery is forecasted to be a result of a slowdown in ICE sales; EVs will continue to have a positive trajectory during the COVID-19 recovery period and may well end up capturing a dispro- portionate share of the market in the short term. Deloitte expects that by 2030 China will hold 49 per cent of the global EV market, Europe will account for 27 per cent, and the United States will hold 14 per cent. The share of new car sales taken up by EVs will vary considerably across markets (see fi gure 3). We forecast China to achieve a domestic market share of around 48 per cent by 2030 – almost double that of the United States (27 per cent), and Europe should achieve 42 per cent. But this doesn’t tell the whole story. Growth in Northern and Western Europe is expected to outstrip that in Southern and Eastern Europe as wealthier countries (such as the United Kingdom, Germany, France, the Netherlands, Nordic countries) likely invest more in infrastructure and off er greater cash and tax incentives to accelerate initial growth. Source: Deloitte analysis, IHS Markit, EV-Volumes.com16 Deloitte Insights | deloitte.com/insights201020112012201320142015201620172018201920202021202220232024202520262027202820292030FIGURE 2 Outlook for annual global passenger-car and light-duty vehicle sales, to 2030 Global ICE Global BEV Global PHEV 0 25 50 75 100 EV share Global passenger car and light dutyvehicle sales (in millions) Global market share0% 25% 50% 75% 100% 7 Setting a course for 2030 Four factors driving growth Despite the pressure exerted on the market by the COVID-19 pandemic, the long-term outlook for EVs is strong. The significant shift in expected volume of BEVs and PHEVs by 2030 is based on four factors: consumer sentiment, policy and regulation, OEM strategy and the role of corporate companies. All four of these factors saw major changes in direction over the last year, prior to the emergence of COVID-19, and have since been shaped further by the pandemic. FACTOR 1 – CHANGING CONSUMER SENTIMENT Consumer demand will fuel the growth of EVs but, at the moment, there are several reasons consumers haven’t swapped their ICE vehicles for equivalent EVs. However, as the barriers to adoption are rapidly removed, EVs are increasingly becoming a realistic and viable option. Figure 4 shows how consumer concerns regarding BEVs have changed, and in many instances diminished, since 2018. Source: Deloitte analysis, IHS Markit, EV-Volumes.com17 Deloitte Insights | deloitte.com/insights201020112012201320142015201620172018201920202021202220232024202520262027202820292030FIGURE 3 Outlook for EV market share by major region US - EV market share 0% 10% 20% 30% 40% 50% Europe - EV market share China - EV market share EV Global share of sales EV GROWTH BEYOND 2030 Beyond 2030, we expect the rate of growth in EV sales to slow. Some markets will be unable to support the transition to EVs in the same way that wealthier nations will over the next decade. Consider that, beyond 2030, one of the key factors in sustaining growth will be the implementation of suitable charging infrastructure. This requires multi-billion-dollar capital investments – achievable in some markets through a combination of public and private investment, but unlikely to be achieved uniformly around the world. In countries that cannot invest in charging infrastructure, we expect the market for ICE vehicles to remain for some time. 8 Electric vehicles From 2018 to 2020, there were some noticeable changes in consumer attitudes toward EVs. Concerns over the cost/price premium have diminished in every country apart from China (+ two percentage points), which has seen cuts in EV subsidies. Driving range has remained the number one concern in Germany, and became number one in France, but there are now fewer consumers citing it as a concern in those two markets. Elsewhere, the lack of charging infrastructure has become the top priority for consumers, reflecting the possibility that they are starting to see EVs as a realistic option and are considering the practicalities of ownership. Over the next few years, we expect some barriers to be completely removed. EVs’ driving range is already comparable to that of ICE vehicles; price has already reached parity, if you consider subsidies in various markets and total cost of ownership; and the number of models available is increasing. As EV sales continue to grow and consumers see more of them on the roads, or travel in EVs owned by family or friends, we expect personal experiences to trump concerns. The expected proliferation of commercial EVs (such as vans, trucks, lorries) should also play a part in reassurance, as will the rise of mass-transit options (such as electric buses). Measures that governments take in their COVID-19 recovery plans could also affect consumer senti- ment. As part of a $146 billion economic recovery plan, Germany has designated $2.8 billion to EV charging infrastructure and announced new legislation that will oblige all fuel stations to have an EV charging point.19 This is significant progress in a country where driving range and lack of charging infrastructure are the two biggest barriers for consumers. China has made similar commitments, announcing an additional $378 million investment in charging infrastructure as part of a COVID-19 recovery plan.20 Source: Deloitte Global Auto Consumer Study18 Deloitte Insights | deloitte.com/insights 2020 Global Auto Consumer Study In your opinion, what is the greatest concern regardingall battery-powered electric vehicles? Driving range Cost/price premium Time requiredto charge Lack of electric vehicle charging infrastructure Safety concerns with battery technology Others Total Sample size 31% 28% 35% 33% 4% 27% 26% 22% 25% 22% 24% 25% 32% 22% 22% 15% 19% 13% 24% 16% 9% 12% 26% 18% 11% 15% 11% 14% 18% 16% 13% 16% 12% 15% 10% 14% 16% 22% 20% 25% 44% 32% 22% 33% 18% 20% 22% 29% 4% 11% 5% 10% 7% 10% 6% 12% 22% 31% 8% 13% 6% 2% 7% 3% 8% 2% 9% 1% 14% 0% 10% 1% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 1,083 1,266 1,287 3,002 1,048 1,274 965 1,264 1,606 3,019 1,513 3,006 FRANCE GERMANY ITALY UK CHINA US 2018 2020 2018 2020 2018 2020 2018 2020 2018 2020 2018 2020 FIGURE 4 Consumer priorities for EV adoption, 2018 and 2020 Greater concerns are shown in orange. 9 Setting a course for 2030 FACTOR 2 – POLICY AND LEGISLATION Government intervention continues to play an important role in driving EV sales, as shown by the successes in Norway, fluctuating sales in the Netherlands and changing fortunes of the Chinese EV market.21 Not only are there economic benefits for states that support a transition to electric, but the positive environmental impact has made the widespread adoption of EVs a necessary step toward achieving climate-change goals, such as those of the 2015 Paris Agree- ment. Several policies and regulations are helping encourage the growth of EV adoption: Fuel economy and emission targets These differ across markets and are under constant review and consultation by governments. Recent Deloitte analysis shows that with the phasing-in of new European CO2 emission targets, which will be fully implemented in 2021 and bring punitive fines,22 half of car manufacturers are facing related penalty payments. They’ll owe a total of $0.5 billion in 2020 and $3.7 billion in 2021,23 which could cost the industry approximately $39 billion, based on recent emission levels.24 Such government intervention is shaping OEM strategy: to avoid fines and reputational fallout, OEMs are seeking ways to reduce emissions through increased electrification. City access restrictions City governments have led the way on imposing bans, or punitive taxes, on users of older com- bustion engines, addressing increasing concerns about toxic air pollution. pollution. In 2019 more cities followed the path already taken in Madrid, Mexico City, Rome and Seattle: Am- sterdam, Brussels and Barcelona all took action to reduce the number of ICE vehicles on the road. Several United Kingdom cities also brought forward plans for bans and zero-/low-emission zones. Throughout 2020 we expect this trend to continue as cities worldwide grapple with air pollution and confront their relationships with combustion engines – and private cars in general. Financial incentives Many governments have offered compelling financial incentives to make the electric switch, such as providing cash subsidies to consumers buying low-emission vehicles, reducing taxes on EVs and increasing or maintaining taxes on ICE vehicles. But as EVs reach price parity with ICE vehicles, some governments have explored rolling back such incentives; this can have a dramatic and immediate effect on EV sales, as seen by the recent fluctuations in sales in China and the Netherlands. Instead, in light of COVID-19, the need to stimulate total new car purchases has prompted a range of new financial incentives introduced across major markets, some of which clearly favour EVs. For example, in Germany the government has temporarily lowered VAT from 19 per cent to 16 per cent on low-emission vehicles and doubled existing subsidies to almost $7,000 on EVs costing less than $45,000.25 In France, private consumers who buy electric cars (that cost up to $50,000) now receive an almost $8,000 incentive, up from around $7,000; those looking to get rid of their old cars now receive double the previous value offered by a scrappage scheme, which was designed to get less-efficient models off the road.26 Under both schemes, a consumer replacing an older car for a new EV could be eligible for up to $13,500. Meanwhile, in China, EV subsidies and tax break policies set to expire in 2020 were extended to 2022 in a direct response to the economic impact of COVID-19.27 In the long term, the viability of financial incentives will need to be reconsidered as the economic recovery from the pandemic becomes clearer and governments try to manage other concerns, such as potential lost fuel-tax revenues. 10 Electric vehicles FACTOR 3 – OEM VEHICLE STRATEGY In the past year, some prominent OEMs have announced strategic commitments to EVs (see fi gure 5). New models have been announced, production targets increased and sales targets moved forward and multiplied. In the short term, COVID-19 may hinder some OEMs in their reach for these targets, as they conserve cash and divert investments elsewhere in the business. But in the long term, we expect these targets to continue as priorities for OEMs. The impact of the investment and targets shown in fi gure 5 will represent a seismic market shift over the next decade, in terms of availability and aff ordability of models. Availability of models Recent company announcements have made it clear that there will be substantially more EV models commercially available over the next decade than previously thought. According to statistics cited by the European Federation for Transport and Envi- ronment, Europe should expect 33 new models in 2020, 22 in 2021, 30 in 2022 and 33 in 2023.29 This means that BEV models available in the EU will surpass 100 in 2022 and reach 172 in 2025. In the United States, IHS Markit predicts there will be 130 available models by 2026, off ered by 43 brands.30 Source: Deloitte analysis28 Deloitte Insights | deloitte.com/insights FIGURE 5 Timeline of strategic OEM targets for EVs Tesla: China plant production begins with capacity of .5m EV’s a year JLR: To invest £1bn to build electric cars in the UK SAIC/VW:Invest $2.33bn in two separate Chinese electric vehicle players Fiat Chrysler:30 new battery-powered or hybrid vehicles by 202260% of cars in Europe to be hybrid or fully electric Renault-Nissan-Mitsubishi: 12 electrified and 8 pure EVs in range; 42% of European sales to be EVs by 2022 (Nissan)BMW: 25 EVs in range by 2023 GM: ~1m global EV sales by 2025 Honda: 2/3rd of global sales EVs VW Group: 25% global sales to be electric; Up to 3m BEVs annually by 2025, including 1.5m by the VW brand Volvo: Reach 1m total EV sales by 2025 EV’s to represent 50% of global sales VW Group:70 new electric models by 2028 instead of the 50 previously planned; 40% global sales to be electric by 2030 Daimler:EV’s to make up more than 50% of sales GM: Cadillac to be majority EV Hyundai:To invest $87bn in vehicle electrification by 2025; EV range to expand to 44 models by 2025; Target of 670k annual EV sales by 2025 BMW: Electrify European market – 33% by 2025 Mazda: All models EVs/hybrids by early 2030s BMW: Electrify European market – 50% by 2030 Toyota: Target of 5.5m total EV sales and .5m sales in 2025 BMW: Electrify European market – 25% by 2021; 1m EVs on road by 2021 Toyota/BYD:Joint ventureto develop pure EVs Toyota: targets 30k EV sales Mazda: releases first EV BYD and Hino sign a strategic business alliance agreement for commercial BEVs development Honda: All European mainstream models to be electrified by 2022 (insteadof 2025) GM: ‘On track’to meet 20 EV models targetby 2023 VW Group:1m EV sales Ford: 40 EVs in ‘global portfolio’; To invest $11.5bnon EV models by 2022 2020 20302021202320252022 11 Setting a course for 2030 Affordability of models Achieving price parity with, or even savings over, ICE vehicles will play a big role in speeding up EV adoption, especially as model ranges and marketing priorities adapt to manufacturer emission targets. A key takeaway from monthly sales figures in 2019 is just how sensitive consumers are to the relative total cost of ownership when it comes to EVs versus ICE vehicles. This includes upfront costs (as seen in the Chinese EV sales drop when subsidies were cut) and short-term costs, like fuel (as seen in the United States, where EV sales dipped right along with fuel prices). Based on recent company an- nouncements, over the next decade we expect to see EVs – particularly BEVs – become available at the low-cost end of the market, but the roll-out of EVs across all parts of the market is likely to be uneven. Even with more OEMs offering affordable EV models, consumers are still unwilling to pay a premium for an EV instead of its ICE equiv- alent. However, we expect the existing price premium associated with EVs to be consigned to history sooner rather than later. In some cases, the total cost of owning a BEV or PHEV for private buyers is already less than for the ICE equivalent, and the annual cost of ownership is also balancing out. Meanwhile, for businesses and customers that use company car schemes, favourable tax schemes have already created an environment where EVs can offer savings. FACTOR 4 – THE ROLE OF CORPORATE COMPANIES We are seeing an increasingly important role for corporates to support the transition to EVs, using the three factors highlighted above to their advantage. Sales of new cars to businesses represents a significant proportion of all cars sold. For instance, Deloitte previously predicted that corporates would account for 63 per cent of total new car sales across Western Europe by 2021.31 In the past year, purpose has continued rising to the top of the corporate agenda, with an increasing number of companies seeking to differentiate themselves by acting as a force for positive change. Because travel is a major avenue for businesses to alleviate emissions, more and more companies are considering how they can support a shift to EVs. Traditional company car schemes are ripe for reinvention: By exploring broader mobility options, businesses are finding value not just in emissions reduction, but in cost savings and improved employee satisfaction. Government tax schemes that target company cars put the emphasis firmly on businesses to lead the way in the shift to EVs. In light of COVID-19, investment in fleets has stalled dramatically as corporates reduce their expenditure and prioritise other investments. Before a comprehensive transition to EVs can take place, business confidence needs to be restored and funds made available again. Cor- porates also need to consider how fundamental changes to how and where work is done will affect the structure of their mobility schemes. We expect the existing price premium associated with EVs to be consigned to history sooner rather than later. 12 Electric vehicles Part 2: New landscape, new approach IN OUR PREVIOUS report, we identified unprece- dented levels of competition that threatened incumbent OEMs as the shift to EVs began taking shape.32 That threat has reduced somewhat over the past year as those OEMs doubled down on their investment in the sector, and as the reality of com- peting in the automotive industry hit home for new market entrants. In China, for instance, 486 registered EV manufac- turers have raised over $18 billion in funding since 2011, but their collective manufacturing capacity is unsustainable – considering all reasonable sales forecasts.34 As a result, we expect to see consoli- dation of the market; some new entrants will fail, and the number of partnerships and joint ventures between Chinese manufacturers and Western OEMs will rise. Outside China, many established OEMs are actually investing in start-ups to take advantage of the capabilities they’ve built.34 Despite the marginal decline in the threat from new entrants and start-ups, there hasn’t been a consistent speed at which incumbent OEMs have reacted to, and planned for, the growth of EVs. The ability of some manufacturers to swiftly accommodate the future of EVs, and trade in their traditional approaches for creative thinking, means that the competitive landscape will likely re-arrange itself accordingly. Segmenting the market In an increasingly competitive marketplace, all au- tomotive industry stakeholders – established OEMs, new entrants, captive finance houses and dealer- ships, for example – should consider how they can convince consumers to purchase an EV – or, specif- ically, their EV. The obvious choices are to ensure current customers remain loyal during the transi- tion from ICE to EV, or to convert new customers to an EV brand or product. A valuable exercise to achieve either objective (or both) is through a refreshed customer segmentation approach: Targeting consumers by their behaviour and needs. In the sections that follow, we’ve used the United Kingdom as a use case for market segmentation, based on Monitor Deloitte’s GrowthPath® Action Segmentation®.35 Although there are significant differences worldwide when it comes to the structure of the automotive industry, the retail market, the readiness for EV adoption and con- sumer attitudes and behaviours, the principles of segmentation outlined below can be applied to many major markets. For those where they cannot, the central tenet remains true: Refreshing your consumer segmentation approach can benefit EV sales, stimulating the overall growth of the market. 13 Setting a course for 2030 USE CASE: UNITED KINGDOM In November 2019 Deloitte conducted a survey of 1,496 United Kingdom residents who are thinking of buying a car in the next three years. More than half of respondents were considering an EV – sig- nificantly more than those considering a petrol or diesel car (35 per cent). But their intention doesn’t mean an automatic conversion into purchases. Although sales of EVs in the United Kingdom are rising, BEVs and PHEVs combined still only com- manded a 3.1 per cent share of the market in 2019. It’s clear that there is an opportunity here to put consumers under the microscope, discerning certain characteristics that will aid in market segmentation and boost EV conversion. Our goal of meaningful and actionable segmenta- tion begins with the United Kingdom survey results: Based on the opinions of these buyers, we can create a segmentation framework based on driving behaviour and a mix of consumer and demographic variables (see figure 6). In the United Kingdom, the most prominent differences in behaviour and attitudes identified in our survey were determined by how old a consumer is, how much they spend each month and whether they currently own a car or not. Behaviour and attitudes also varied significantly, based on how respondents plan on using their next car and the distances they regularly travel. From the framework, we can see nine potential segments that can categorise future car buyers, all with various meaningful characteristics, be- haviours and needs to target and address (see figure 7). To calculate an approximate market size for each segment, a recent industry study offers insight: 56 per cent of adults (17 years and older) believe they will definitely or probably purchase a car in the next three years – a total addressable market of about 30 million people.38 Commute = Point-to-point journeys typically from home to place of work and back again. Travel = More varied than a standard commute, journeys are from home to a number of different locations. Source: Deloitte analysis37 Deloitte Insights | deloitte.com/insights Current car ownership Don’t own a car Work Regularly drive long distances Rarelydrive long distances Rarelydrive long distances Commute Personal Travel 51+Bought outright or spend <£299/month Bought outright or spend <£299/month +£300/month +£300/month Currently own a car <30 31-50Age Current monthly spend on car, or if bought outright Primary use of next car Further breakdown on use within work How the car is used for trips >100miles FIGURE 6 Automotive consumer segmentation framework 14 Electric vehicles Source: Deloitte analysis40 Deloitte Insights | deloitte.com/insights SEGMENT A Potential addressable market of circa 3 million people: All ages; do not own a car; will use it for multiple purposes SEGMENT B Circa 5.25 million people: Point-to-point commuters; rarely travel long distances; ages 17–50; those aged 31–50 will buy outright or spend less than £299/month ($382/month) SEGMENT C Circa 1.75 million people: Long-distance commuters; ages 17–50; those aged 31–50 will buy outright or spend less than £299/month ($382/month) SEGMENT D Circa 2.5 million people: Under age 30; will spend less than £299/month ($382/month) or buy outright for work travel or personal use SEGMENT E Circa 2.75 million people: Under age 30; will spend £300+/month ($383+/month) or buy outright for work travel or personal use SEGMENT F Circa 5 million people: Ages 31–50; will spend less than £299/month ($382/month) or buy outright for limited work travel or personal use SEGMENT G Circa 2 million people: Ages 31–50, regularly travel long distances or commute for work; will spend £300+/month ($383+/month) SEGMENT H Circa 2.5 million people: Ages 31–50; will spend £300+/month ($383+/month); will use for short work travel or personal use SEGMENT I Circa 5 million people: Ages 51+; will use for multiple purposes FIGURE 8 Consumer segment descriptions of the United Kingdom automotive market * Using the annual average GBP/USD exchange rate for 2019, <£299/month = <$382/month and +£300/month = +$383/month Source: Deloitte analysis39 Deloitte Insights | deloitte.com/insights Don’t own a car Work Regularly drive long distances Rarelydrive long distances Rarelydrive long distances Commute Personal Travel 51+Bought outright or spend <£299/month Bought outright or spend <£299/month +£300/month +£300/month Currently own a car <30 31-50 A10% D9%E9% G7% H9%F17% B18% C6% I17% FIGURE 7 The nine consumer segments of the United Kingdom automotive market % reflect overall size of the segment 15 Setting a course for 2030 Key behavioural differences This kind of segmentation provides a detailed understanding of modern automotive consumers’ needs, wants and behaviours. Before defining the nuances of each United Kingdom segment by creating Customer Portraits , let’s consider the obvious differences in key behaviours and attitudes: • Brand loyalty: Segments E and G are the most brand loyal, usually buying the same brand (47 per cent and 46 per cent, respectively, versus the average 27 per cent); this translates to their intended purchasing behaviour – both types of consumer believe they would buy an EV from their current brand (48 per cent and 64 per cent, respectively, versus the average 37 per cent). Segments F and I are most likely to consider switching brands to find a more suitable EV (47 per cent and 49 per cent, respectively, versus the average 36 per cent). Segment A is most likely to consider choosing either an EV start-up brand (42 per cent versus the average 25 per cent) or an existing brand not currently associ- ated with automotive products (12 per cent versus the average 5 per cent). • Research: Segment E is most likely to already know what car they intend to buy prior to researching (50 per cent versus the average 28 per cent). Segment A and Segment I are the least likely to know (40 per cent each versus the average 26 per cent). • Ownership benefits: Segment B is the most likely to think environmental reasons are the biggest advantage to EVs (22 per cent versus the average 17 per cent). Segment A considers driv- ing experience to be the biggest advantage (36 per cent versus the average 27 per cent). • Price sensitivity: Most segments would pay more for an EV. Segment E is the most likely to pay £100 ($128) or more per month (15 per cent versus the average 5 per cent). Segments F and I are the least likely to pay more for an EV (28 per cent and 35 per cent, respectively, versus the average 23 per cent). These characteristics are worthy of careful consideration in the next step of the segmen- tation exercise: building Customer Portraits. Customer Portraits: Driving a change in behaviour Building a Customer Portrait for each target segment invites insights into key aspects of a consumer that, when viewed collectively, explain their behaviour. It outlines what they do and why they do it, identifying the motives for, and barriers to, behavioural change – or lack thereof. Ultimately, this allows an OEM, captive finance company or dealership to effectively target and encourage desired behaviours by revising marketing and activation strategies. A detailed analysis of survey responses and addi- tional qualitative research informs the individual profiles. Each illustrates a typical consumer in a segment, defines their key characteristics, and then uses the distilled information to present ways that persona can be specifically targeted. As an example, we built three Customer Portraits for segments of United Kingdom–based consumers, complete with suggested actions for OEMs. 16 Electric vehicles Source: Deloitte analysis. Deloitte Insights | deloitte.com/insights FIGURE 9 Segment B Customer Portrait Typical persona My husband and I bought our latest car from our local dealer, on a great finance plan they organised, which has really brought down our monthly spend. It’s a small petrol car, similar to our previous one, just a different brand. Primarily, we use the car to get to and from work, which isn’t far, so most of the time it’s either sitting on our driveway or in the work car park, but that’s all we really need it for. At the weekend, we use it for short personal trips to the shops, but rarely do we use it for long distances. We’re not looking for luxury – just something that we can trust to get us from A to B. I’m not sure our current brand offers an electric car to suit our needs at the moment, so we would probably look to another established manufacturer when we switch. I think EVs are much better for the environment, but just not sure if they are practical for our day-to-day use at the moment. SARAH 31, Husband, No children Household income: £25k–50k ($32k-$64k) Currently owns: Small petrol car • Develop a compelling proposition for buying a used EV, with a lower price point and additional information on the implications for battery range and performance. • Conduct significant marketing efforts to make non-customers aware of the range of smaller, cheaper models you are bringing to market. • Invest in a joined-up, omnichannel purchasing journey, offering engaging and accessible information online about the practicalities of owning an EV, how this is different from traditional vehicles, and environmental benefits; ensure this customer information is cascaded to local dealers so they can convert to a sale when the customer decides to test-drive/purchase. Significantly more likely to buy from a traditional dealer 90%78%vs. Slightly less willing to pay morefor a BEV than average 66%69%vs. Most likely segment to research online prior to purchase 27%21%vs. Do not usually buy fromthe same brand 17%27%vs. 80%67% Charging time vs. 67%60% Battery range vs. MOST INTERESTED IN KNOWING MORE ABOUT… Resale value vs.17%23% LEAST INTERESTED INKNOWING MORE ABOUT… KEY CHARACTERISTICS HOW CAN OEMS WIN IN THIS SEGMENT? Segment B Average 17 Setting a course for 2030 Source: Deloitte analysis. Deloitte Insights | deloitte.com/insights FIGURE 10 Segment D Customer Portrait Typical persona I’m excited to have finished university and started working in my first job. I really care about the environment and sustainability but, without a big budget, EVs seem way beyond my reach. I’d love to own an EV sports car one day – I’ve seen cars in retail stores when I’m out shopping and they’re really cool. I can’t wait to see more start-ups bringing out EVs! Unlike my parents, I wouldn’t really worry about the range. The technology is improving all the time, and I read a lot about EVs so I know what they’re all about. I drive under 400 miles a month, so for now I’ve settled on something used, small and economical. I’m not really too fussed about brand and luxury; my goal was just something nippy that I could afford to buy with cash. OLIVER 25, Single, No children Household income: £50k or less ($64k or less) Currently owns: Used, micro car • Foster brand awareness of dedicated and differentiated EV brands with a ‘start-up’ feel. • Develop a lower-cost subscription service, with a reward scheme for things like friend/family recommendations and smart charging. • Conduct significant marketing efforts to make younger customers aware of the range of smaller, cheaper models you are bringing to market. • Invest in an innovative retail experience, focusing on technology, vehicle practicalities and sustainability – and, importantly, offering the ability to make a purchase without an obvious dealer handover. Significantly less likely to buyfrom a traditional dealer 67%78%vs. More likely to switch brands 47%40%vs. Likely to research via recommendations, and retail stores or popups 19%11%vs. More likely to think startups will produce EVs of the future 35%25%vs. 80%67% Technology vs. 67%60% Environmental impact vs. MOST INTERESTED INKNOWING MORE ABOUT… Battery range vs.17%23% LEAST INTERESTED INKNOWING MORE ABOUT… Segment D Average KEY CHARACTERISTICS HOW CAN OEMS WIN IN THIS SEGMENT? 18 Electric vehicles Source: Deloitte analysis. Deloitte Insights | deloitte.com/insights FIGURE 11 Segment G Customer Portrait Typical persona I often drive long distances for work, and as I spend so much time in the car every week I like to invest in something larger and more comfortable that I’m going to enjoy driving and that will fit the children in at the weekend. I always buy new and don’t mind spending more on my car, but I want to know it’s a good investment, and I can sell it later on for a good price. I usually buy from the same brand, they're luxury but they offer the best service. I already know which car I want and so will probably go straight to the dealer, but if I needed to research it more, I might consider one of their new retail stores, though I wouldn’t buy from there. I recognise EVs are better for the environment, and a number of my friends already own one, but I’m more interested in style, and I’m not sure about the practicality of my long drives for work. I think my current brand will be able to offer me a suitable EV at some point, so I’m unlikely to switch until then. SUZANNE 45, Husband, Three children Household income: £50k–100k ($64k-$128k) Currently owns: Large petrol car • Develop a transition strategy for ‘loyal’ customers, to ensure that when they are ready to move from ICE to BEV they have the information they need and the model availability they want, continuing the strong brand affinity and minimising the risk that they will switch brands. • Proactively upsell add-ons with larger and luxury vehicles, including technology options, ongoing maintenance and service packages, valet service deals, or data-focused services, to improve the customer experience and strengthen the ongoing connection with the brand. • Work with leasing providers and large fleet operators to ensure the latest models of larger and executive models are available and ready to order. Most likely to think theircurrent car brand is best placedto offer an EV 55%33%vs. Significantly more likely topay £60+ ($77+) per monthmore for a BEV 25%15%vs. Car features (e.g., comfortand style) most importantin next purchase 61%43%vs. Significantly more likelyto know what they intendto buy before researching 46%28%vs. 67%67% Charging time vs. 52%60% Battery range vs. 35%23% Resale value vs. MOST INTERESTED IN KNOWING MORE ABOUT… Environmental impact vs.3%11% LEAST INTERESTED INKNOWING MORE ABOUT… KEY CHARACTERISTICS HOW CAN OEMS WIN IN THIS SEGMENT? Segment G Average 19 Setting a course for 2030 Prioritise to drive purchases Having developed these nuanced Customer Portraits, OEMs and other stakeholders can drill down into the observations to draw con- clusions about who is likely to buy what. This will highlight segments to prioritise and where marketing and proposition development budgets can be deployed most effectively. Some segments are naturally more interested in purchasing an EV than others; OEMs and their partners may look to target them first – if the right product mix, capabilities and insight are available to do so effectively. In our United Kingdom example (see figure 8), Segment G is the most likely to consider buying an EV (69 per cent versus the average 50 per cent) – perhaps not surprising, given the relatively higher price tag of EVs up to this point and the greater likelihood of those consumers having off-street parking (77 per cent versus the average 72 per cent). Segment C is also significantly more likely than other segments to consider an EV, but these consumers’ motives seemingly relate to the distance they regularly travel and their awareness of potential ownership savings (e.g., through lower fuel costs and reduced maintenance costs). Source: Deloitte analysis41 Deloitte Insights | deloitte.com/insights Don’t own a car Work Regularly drive long distances Rarelydrive long distances Rarelydrive long distances Commute Personal Travel 51+Bought outright or spend <£299/month Bought outright or spend <£299/month +£300/month +£300/month Currently own a car <30 31-50 A47% D53%E47% G69% H50%F47% B53% C62% I38% Least likely Less likely More likely Most likely FIGURE 12 Share of United Kingdom consumer segments who would consider an EV purchase % reflect those in favour from each segment 20 Electric vehicles THE IMPACT OF COVID-19 ON CONSUMER BEHAVIOUR Deloitte’s segmentation of the United Kingdom market was performed prior to the emergence of COVID-19. It is important to consider how shifting priorities, in light of the pandemic, may aff ect the diff erent segments. In the United Kingdom, lockdown measures took consumers out of the automotive retail market for an extended period of time. Even as restrictions are eased, fi nancial concerns may shape how people re-engage with the sector, and to what extent. Lingering health concerns will likely also play a pivotal role in consumer behaviour. Short-term demand for EVs is likely to change, within and across segments. According to consumer research carried out by Deloitte bi-weekly, throughout the pandemic, close to half of United Kingdom consumers now plan to own their current vehicles for longer than originally intended.42 (The number of consumers aged 18 to 34, or 55 and over, who expressed this sentiment is marginally lower than other age groups.) With work travel being a key component of our segmentation, it is also worth considering how COVID-19 is changing how we travel to and for work. The recent research highlights that over two- thirds of consumers plan to limit their use of public transportation in the future, and well over half plan to limit their use of ride-sharing apps. In the short term, this will likely accelerate demand for cheap second-hand cars, but in the long term this could translate into increased demand for EVs within Segment A. COVID-19 might also prove to be a catalyst for the growth of online sales within diff erent segments. Our COVID-19–related research shows that a fi fth of consumers now plan to buy their next vehicle online (if possible). This fi gure is consistently higher among 18- to 34-year-olds, suggesting that Segments B, C, D and E could all demonstrate a signifi cant jump in demand for online services. With work travel being a key component of our segmentation, it is also worth considering how COVID-19 is changing how we travel to and for work. 21 Setting a course for 2030 Checklist for the journey ahead Ultimately, it’s up to all stakeholders in the auto- motive industry to consider how they best serve their prioritised segments. Consumer interest has been sparked, and the onus now lies with new-entry OEMs, captive finance companies, dealerships and, especially, established OEMs to feed the fire. To maximise the opportunities presented by the growing demand for EVs, business leaders in all regions should examine the priorities they have defined according to the segmentation exercise and ask themselves the key questions shown below. The answers may help soften the blow COVID-19 is making on the market and/or aid in the recovery. They’ll also highlight how well-positioned the busi- ness is to help accelerate growth in the EV market and reap the benefits when EVs take centre stage. ESTABLISHED OEMS: • How well does our existing model range fit the seg- ments we deem high priority, and on which segments should we focus future models? • Do we have the right EV supply chains and order-to-delivery capabilities to realise our promises to customers, especially in the initial launch phase? • Can we support, or even drive, change in our franchised dealerships by delivering more compelling in-store EV marketing and increasing model availability? • How do we make sure that our franchised dealers are aligned with our EV strategy? How can we incentivise them to sacrifice the long-term, recurring profit of an ICE vehicle sale to support the growth of EVs? • How well does our current branding support new EV model (and broader proposition) launches? Do we have the right marketing and campaign approaches to target specific segments? • Do we have sufficient in-house capabilities, or the right partnerships, to offer a compelling charging proposition? • How do we improve our current omnichannel experience? • What innovative retail formats, online and bricks and mortar, should we invest in? NEW-ENTRANT OEMS: • Some consumer segments will be identified as ‘easier wins’ to build brand and customer intimacy, so how can our product launch plans target these most effectively? • How can new business models, unconstrained by legacy IT systems and physical footprints, provide an enhanced customer experience as compared to traditional OEMs? • Will Chinese new entrants need different strategies for launching in Europe? • How will we continue to engage with customers after a purchase, to receive product feedback and incorporate it into a refreshed sales strategy? • How will we manage the after-sales business without established dealer networks? • Are there additional partners that could support market entry and offer a more compelling value proposition, such as energy providers? 22 Electric vehicles CAPTIVE FINANCE COMPANIES: • Which financing offers will appeal to which segment? • What is the best way to manage the wave of incom- ing ICE vehicles and realise the expected residuals on these? • Which finance solutions will address customers’ apprehension about switching (e.g., combined vehicle and wallbox-charger financing, or social offers, like cinema tickets)? • Do we have a compelling offering for our fleet customers to gain regulatory and tax benefits? • How can our marketing convincingly address ‘range anxiety’ and other barriers to EV ownership? • Do we have the capability to understand and act on existing EV customers’ feedback and learn- ings to strengthen our retention programmes? DEALERSHIPS: • Can we effectively communicate the benefits of EVs to our customers? • Do we understand which segments want to learn about environmental benefits and which are exclusively interested in technology and performance? • Do we have the assets to support a more targeted approach to marketing? • Do we offer a financially compelling reason to switch to EVs while maintaining an appropriate margin on the vehicles? • Can we fully explain all the available government grants and financial packages available for EVs? • Can we offer ongoing maintenance and service packages or deals that include funding for at-home charge points? • Is our business set up to handle an increase in online sales? • Can we offer collection and delivery services? • Can we provide test drives to online customers? • Can we use our existing regional footprint to effectively fulfil online sales? • Is our business set up to deal with the potential loss of recurring revenue (after-sales service and parts)? • Are our marketing and sales strategies fully aligned with those of our OEM partners? 23 Setting a course for 2030 Endnotes 1. “Fuel Type & Powertrain Technology”, SMMT, https://www.smmt.co.uk/industry-topics/emissions/fu- el-type-and-powertrain-technology/, accessed 18 May 2020. 2. 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Honda, https://hondanews.eu/eu/lt/corporate/media/pressreleases/162386/honda-commits-to-total-electrifica- tion-in-europe-by-2025, https://hondanews.eu/be/fr/cars/media/pressreleases/105219/hondas-electric-vision- two-thirds-of-european-sales-to-feature-electrified-powertrains-by-2025, https://hondanews.eu/eu/en/cars/ media/pressreleases/193797/honda-accelerates-its-electric-vision-strategy-with-new-2022-ambition, https:// global.honda/innovation/technology/automobile/electric-vehicles.html. SAIC, https://europe.autonews.com/automakers/vw-take-full-control-chinese-ev-joint-venture. BMW, https://www.bmwgroup.com/content/dam/grpw/websites/bmwgroup_com/ir/downloads/en/2020/Inves- tor_Presentation/BMW_Investor_Presentation_2020.pdf. JLR, https://www.autocar.co.uk/car-news/new-cars/jaguar-land-rover-invest-%C2%A31bn-three-new-uk-built- evs, https://www.expressandstar.com/news/motors/2020/03/23/jaguar-land-rover-set-to-invest-1bn-in-uk-ev- production/. Volvo, https://www.renewableenergymagazine.com/electric_hybrid_vehicles/volvo-xc40-recharge-electric-car- now-available-20200527, https://group.volvocars.com/company/innovation/electrification, https://techcrunch. com/2019/10/16/volvo-to-roll-out-a-new-electric-vehicle-every-year-through-2025/. 25 Setting a course for 2030 Tesla, https://fortune.com/2020/01/07/elon-musk-tesla-gigafactory-shanghai-china-ceremony/. BYD, https://global.toyota/en/newsroom/corporate/30565932.html, http://www.byd.com/en/news/2020-04-23/ BYD-and-Hino-sign-a-strategic-business-alliance-agreement-with-a-focus-on-Commercial-Battery-Electric-Vehi- cles-development. Hyundai, https://www.greencarcongress.com/2020/01/20200102-hmg.html, https://www.electrive. com/2019/12/04/hyundai-unveils-its-electric-strategy-till-2025-and-beyond/. Fiat Chrysler, https://www.ft.com/content/bf70f356-65a4-11e8-a39d-4df188287fff. 29. Eoin Bannon, “Electric surge: Carmakers’ electric car plans across Europe 2019-2025”, European Federation for Transport and Environment, https://www.transportenvironment.org/publications/electric-surge-carmakers-elec- tric-car-plans-across-europe-2019-2025, accessed 1 June 2020. 30. Paul Lienert, “Outside of Tesla, future EV sales in U.S. may be thin for most brands: study”, Reuters, https:// www.reuters.com/article/us-autos-electric-forecast/outside-of-tesla-future-ev-sales-in-u-s-may-be-thin-for-most- brands-study-idUSKCN1SZ20I, accessed 1 June 2020. 31. “Fleet management in Europe: Growing importance in a world of changing mobility”, Deloitte Global, https:// www2.deloitte.com/content/dam/Deloitte/cz/Documents/consumer-and-industrial/cz-fleet-management-in- europe.pdf, accessed 1 June 2020. 32. “Battery Electric Vehicles: New markets. New entrants. New challenges.”, Deloitte Insights, https://www2.deloitte. com/uk/en/insights/industry/automotive/battery-electric-vehicles.html. 33. “The $18 billion electric-car bubble at risk of bursting in China”, Bloomberg, https://www.bloomberg.com/news/ articles/2019-04-14/the-18-billion-electric-car-bubble-at-risk-of-bursting-in-china, accessed 1 June 2020. 34. “Hyundai adds electric vehicle ‘skateboard’ project with L.A. startup Canoo to $87 billion mobility push”, Forbes, https://www.forbes.com/sites/alanohnsman/2020/02/11/hyundai-adds-electric-vehicle-skateboard-project-with- la-startup-canoo-to-its-87-billion-mobility-push/#682634dd1017, accessed 1 June 2020. 35. Deloitte used Monitor Deloitte’s GrowthPath® Action Segmentation® with the results of a nationally representa- tive consumer survey of 1,496 people of car-driving age in the United Kingdom who are considering buying a car in the next three years. The Deloitte UK consumer segmentation survey was run in November 2019 by Alligator Research on behalf of Deloitte. 36. “Electric vehicle and alternatively fuelled vehicle registrations”, SMMT, https://www.smmt.co.uk/vehicle-data/ evs-and-afvs-registrations/, accessed 1 June 2020. 37. Deloitte UK consumer segmentation survey. 38. Neil Mason, “UK car review - UK - February 2020”, Mintel, https://reports.mintel.com/display/987894/, accessed 23 June 2020. 39. Deloitte UK consumer segmentation survey. 40. Ibid. 41. Ibid. 42. Deloitte state of the consumer tracker, Deloitte, https://www2.deloitte.com/us/en/insights/industry/retail-distri- bution/consumer-behavior-trends-state-of-the-consumer-tracker.html, accessed 17 June 2020. 26 Electric vehicles About the authors Dr Jamie Hamilton | jamihamilton@deloitte.co.uk Jamie Hamilton is a director in Monitor Deloitte’s London office and leads the strategy and operations work in the automotive sector. He works with senior management teams of leading OEMs, leasing com- panies and new EV entrants to understand the disruptive trends reshaping the automotive and wider mobility sector. Jamie’s current focus is on helping existing and new OEMs manage the transition to electric, considering all aspects of the business, from engineering, sales model, charging and mar- ket entry. Dr Bryn Walton | bcwalton@deloitte.co.uk Bryn is the insight lead for Deloitte’s UK automotive practice. He has a wealth of experience working with some of the world’s leading consumer brands designing, running and implementing consumer research in areas that include innovation and technology. He is the author of several recent thought leadership reports on electric mobility and the future of the automotive industry. James Ringrow | jaringrow@deloitte.co.uk James is an experienced strategist, primarily working with automotive and industrial organisations to imagine and deliver winning approaches for the Future of Mobility. His engagements have involved refreshed vision and growth narrative, market entry and international growth, digital transformation, commercial and business model redesign and broader holistic, strategic transformations as companies seek to respond to disruption. Geneviève Alberts | galberts@deloitte.co.uk Geneviève started her career as an engineer at a global OEM and is now based in our strategy practice working with some of the world’s largest companies to support them with the challenges and choices they face in a fast-changing mobility landscape. Her experience includes electric and fuel cell mobility, alternative fuels and advanced biofuels, energy storage, automotive value chain and new business mod- els, and behavioural economics. Saskia Fullerton-Smith | sfullertonsmith@deloitte.co.uk Saskia is a consultant within our strategy and business design practice and is part of the automotive strategy team. With a background in manufacturing engineering, Saskia has experience in helping man- ufacturing-based companies understand the rapid changes in the industry, including mobility as a service business models, changing consumer behaviour and new technology, and navigating the options available within the new landscape. Edward Day | edday@deloitte.co.uk Edward sits within our organic growth practice and has experience working across a spectrum of strate- gic automotive projects. With a background in economics, Edward has experience designing and modelling both macroeconomic- and industry-level scenarios, overlaying impacts from key technological developments and supporting the development of overarching strategic direction. 27 Setting a course for 2030 Michael Woodward NSE Automotive leader | Partner | Deloitte NSE +44 20 7303 0884 | mwoodward@deloitte.co.uk Dr Jamie Hamilton Director | Monitor Deloitte +44 20 7303 0650 | jamihamilton@deloitte.co.uk Dr Bryn Walton Insight Manager | Deloitte NSE +44 20 7007 2352 | bcwalton@deloitte.co.uk James Ringrow Manager | Deloitte NSE +44 20 7303 5215 | jaringrow@deloitte.co.uk Geneviève Alberts Senior Consultant | Deloitte NSE +44 20 7007 3336 | galberts@deloitte.co.uk Saskia Fullerton-Smith Consultant | Deloitte NSE +44 20 3741 2092 | sfullertonsmith@deloitte.co.uk Edward Day Consultant | Deloitte NSE +44 20 7303 4345 | edday@deloitte.co.uk Contact us 28 Electric vehicles About Deloitte Insights Deloitte Insights publishes original articles, reports and periodicals that provide insights for businesses, the public sector and NGOs. 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Follow @DeloitteInsight ATTACHMENT 4 1 2 3 4 5 6 $19,360 $11,020 $4,770 $4,950 $40,100 7 8 9 10 11 1. 2. 3. 12 13 14 15 - - - - - 16 17 18 19 $38,720 $22,040 $9,540 $9,900 $80,200 20 21 - - - - 22 23 24 25 26 27 28 29 30 31 32 33 34 Add RMI?]] To:Superior Board of Trustees From:Southwest Energy Efficiency Project and the Colorado Energy Office Date:February 10, 2022 Re:Residential Cost Estimates for 2021 IECC + Amendments Contact:Christine Brinker, cbrinker@swenergy.org Dear Superior Trustees, Our hearts go out to you and your community as you work to recover from the devastating Marshall Fire. As part of your deliberations on what building code to use for the rebuilding effort, we would like to share some current information on the cost impacts of adopting the 2021 IECC as well as a few additional code amendments. We pulled these numbers together with the help of fellow experts in building science and local building trades, after growing concern that other estimates exaggerated and overinflated some of the costs. We would urge you to take this analysis into consideration while making decisions on revising your code. We share your concerns about affordability and your desire to minimize costs and speed up rebuilding efforts, along with your commitment to reducing climate impacts. We encourage Superior to use the opportunity to rebuild better and greener. We also note that, while we can not yet share firm numbers, we anticipate significant utility incentives will be available for homeowners to meet IECC 2021 if it is adopted, and the state is working on additional resources. More information should be available in the relatively near future. The analysis below shows the cost impacts for Superior to adopt the 2021 IECC, along with solar-ready, EV-ready, electric-ready, and electric-preferred amendments. Each of these items has modest incremental costs, but also ongoing cost savings that lead to net cost savings over time for homeowners. All of us are motivated to quickly and accurately answer any questions related to energy codes, all-electric new construction, high-performance buildings, and climate-resilient rebuild efforts. Please don’t hesitate to reach out. ATTACHMENT 5 Base 2021 IECC Upfront cost addition over base 2018 IECC:$4,789 or less (for house with basement) Lifecycle net cost savings (beyond paying off upfront costs):$1,247 or more1 Discussion:Building codes are routinely updated to reflect changes in technologies, building techniques, and health and safety considerations. Jurisdictions covering half the population in Colorado have already announced plans to adopt the 2021 IECC, and more are expected to do so, soon making the 2021 IECC the “default” local code. Surrounding Superior, some of the jurisdictions in the process of or planning to adopt the 2021 IECC include Broomfield, Boulder, Boulder County, Denver, Edgewater, Englewood, Erie, Fort Collins, Lakewood, Lafayette, Larimer County, Longmont, Loveland, Northglenn, Thornton, and Westminster. Louisville, Aurora, and Arapahoe County have already adopted it.2 This week, the Pacific Northwest National Lab (PNNL) prepared estimates of the upfront costs for fire-impacted rebuilds in Superior and Louisville specifically (see table below). This is an update from their previous statewide cost-effectiveness study from December 2021,notably incorporating here the 19% inflation and pandemic pricing escalation3 from the National Association of Home Builders (NAHB). The PNNL methodology is thoroughly vetted and trusted, and is peer reviewed by hundreds of experts in all affected fields of homebuilding, contracting, architecture, materials supply, and equipment supply. They are the entity charged by Congress to perform cost-effectiveness analyses for energy codes. Consequently, we believe these estimates are far more accurate than others that have been recently circulated. SWEEP and CEO believe that some of PNNL’s estimates are even at the high end given realities of what is already being installed in the field. The Colorado Residential Field Study from this past year shows that builders are already installing base 2021 IECC-level high-efficiency lighting, mechanicals, and some of the envelope components, even in areas without the 2021 IECC in place. It’s most accurate to show the cost difference between what builders are already doing and the extra that would be required with a new code. The biggest construction item not already meeting the 2021 IECC levels is ceiling insulation, so that’s where the extra incremental costs lay. Everything else is basically already at newer code values.4 4 Study forthcoming from Pacific Northwest National Lab under a project led by National Association of State Energy Offices. Data collected by Mozingo Code Group, 2020. For details, contact Shaunna Mozingo, sdmozingo@mozingocodegroup com. 3 PNNL (Colorado) 2 Colorado Energy Code Collaborative, Feb. 2022 1 Pacific Northwest National Labs, “Cost Effectiveness of the 2021 IECC for Residential Buildings in Colorado – 2015 Baseline,” Dec. 2021, https://www.energycodes.gov/sites/default/files/2021-12/ColoradoResidentialCostEffectiveness_2021.pdf 5 Notes: 1.Used DHW for R408 additional efficiency package 2.PNNL assumed that with a 90% lighting requirement, the entire home would be of the same lighting so no additional cost. Also, Colorado Residential Field Study from this past year shows that builders are already installing100% high-efficacy lighting. 3.Estimate ENERGY STAR appliances are difficult not to install so assume they are already installed (free ridership). Solar-Ready Appendix Upfront cost:minimal ($100-$200) Cost savings compared to retrofit:While not specifically calculated, they include avoiding the need to tear up walls, redo wiring, and potentially upgrade an electrical panel. They also avoid the situation where roof penetrations for attic vents, etc. are poorly placed in a way that prevents future solar. Jurisdictions with the Solar-Ready Appendix RB include Avon, Boulder, Boulder County, Breckenridge (via Summit County sustainability program), Craig, Denver, Fort Collins, Frisco (via Summit County sustainability program), Golden (via sustainability standards), Lafayette, Louisville, and Wheat Ridge (partial 2018 version: electric service reserved space only). Others considering or in the process of adopting it, that we know of, include Broomfield, Erie, Larimer County, and Northglenn.6 The Solar-Ready Appendix RB requires conduit, space on the electrical panel, space reserved on the roof free from obstructions and shady objects, adequate roof structural capacity, and notation on construction documentation and a permanent certificate. It exempts roofs shaded for more than 70% of daylight hours annually. Costs are minimal – in fact, so low that hardly anyone has bothered to calculate it in a study. The costs are primarily for the conduit. For a reference point, we can look at costs for EV-ready, which require a conduit plus a 240-volt outlet and are estimated at $200-$325 (see below), so solar-ready conduit-only will be below that. 6 Colorado Energy Code Collaborative. 5 Pacific Northwest National Lab, Rob Salcido, cost estimates prepared for Louisville and Superior, Feb 9, 2022. Note: Although this cost memo primarily deals with single-family residential, we note that if Superior is considering the solar-ready appendix CB for commercial, it should consider amending it as Lafayette and Louisville have done to apply to “new commercial construction, including new multiple-family dwellings containing three or more dwelling units, but excluding townhouses.” This fixes the issue where the residential solar ready appendix RB applies to single-family, duplexes, and townhomes and solar-ready appendix CB applies to commercial buildings ≤5 stories, leaving a gap for multifamily and commercial buildings three stories tall or greater than five stories tall. EV-Ready for Single Family Upfront cost addition over base 2018 IECC:$0-$3257 Cost savings compared to retrofit:$1,000-$1,325 Discussion:Jurisdictions surrounding Superior and across the state are finding common ground on requiring one EV-ready space per dwelling unit; see table below.8 The cost to build an EV-ready parking space in a single-family home is $200-$325 during new construction.Furthermore, Xcel has rebates to cover up to $500 of91011 home EV-wiring costs (or up to $1,300 for income-qualified households).The cost to12 retrofit a home for EV charging is $1,000 -$1,325.Xcel has a customizable home1314 wiring estimator for retrofits, and the costs within that range from $481 (unfinished garage, 25 feet from panel to charging location) to $1,493 (finished basement, 100 feet from panel to charging location).15 EV-Ready Requirements Aspen 1 EV-capable (being updated) Avon 1 EV-ready Boulder County 1 EV-ready per garage or carport Boulder 1 EV-ready Breckenridge 1 EV-ready Denver 1 EV-ready 15 Xcel Energy, https://ev.xcelenergy.com/home-charging-advisor 14 Utah Clean Energy 13 Xcel Energy,https://ev.xcelenergy.com/home-charging-advisor 12 Xcel Energy, https://ev.xcelenergy.com/home-wiring-rebate 11 For low-rise multifamily and smaller commercial buildings, the cost per EV-ready parking space is $739-$905 during new construction and $2,779-$5,540 for retrofit depending on the number of parking spaces and the type of parking facility. https://caletc.aodesignsolutions.com/assets/files/CALGreen-2019-Supplement-Cost-Analysis-Final-1.pdf 10 Utah Clean Energy 9 New Buildings Institute, forthcoming cost study for Building Decarbonization Code. $49 for materials and $65 for labor, at a labor rate of $130/hour, plus 35% indirect costs. 8 Colorado Energy Code Collaborative 7 Utah Clean Energy Dillon 1 EV-ready Durango In progress Eagle County In progress Fort Collins 1 EV-capable (being updated) Frisco 1 EV-ready Lafayette 1 EV-ready Lakewood 1 EV-capable Louisville 1 EV-ready and 1 EV-capable Pueblo County In progress Steamboat In progress Summit County 1 EV-ready Westminster In progress Vail In progress Electric-Ready Upfront cost addition over base 2018 IECC:$600 Cost savings compared to retrofit:While not calculated,they include avoiding the need to tear up walls, redo wiring, and potentially upgrade an electrical panel. Even more importantly, the costs of retrofitting may discourage homeowners from considering a switch at all. Electric-ready is a very “mild” option for taking steps towards electrification. The cost of the additional electric-ready infrastructure, including electrical capacity and wiring, is estimated at $300 for a water heater and $300 for a stove. (No additional costs are incurred for electric readiness for a furnace, because central air conditioning or other space cooling would be provided anyway.)A separate option from electric-ready would16 be the electric-preferred option described below. Electric-Preferred Upfront cost addition:$525 (all-electric) to $1,600 (high-efficiency gas + electric-ready) Lifecycle net cost savings (beyond paying off upfront costs):$727 for all-electric Discussion:Electric-preferred offers a choice between all-electric, high-efficiency gas plus electric-ready infrastructure, or an additional efficiency package from R408 plus electric-ready infrastructure. 16 Utah Clean Energy, Request for Code Amendment, Aug 2021, pg 19, https://utahcleanenergy.org/wp-content/uploads/sites/12/2021/11/Joint-Application-of-UCE-and-SLC-to-the-UBCC -w-supporting-materials-inline.pdf. High-efficiency gas option:The high-efficiency gas option requires a minimum 96% efficient gas furnace, a minimum 0.92 UEF on-demand water heater or 0.90 UEF boiler (and potentially a specified minimum UEF storage water heater TBD) plus electric ready. For the furnace, the Colorado Residential Field Study from this past year shows that about half of new gas furnaces here are 92-93% AFUE and about half are 95-96% AFUE. As above, the cost impact should be between what builders are already doing and the extra that would be required. The difference between a 92-93% and 95-96% AFUE gas furnace is $200-$500.17 18 For water heaters, the 2018 IECC and 2021 IECC both require federal minimum efficiency standards of 0.63 UEF water heaters. The difference between that and a 0.92 UEF on-demand water heater is $500.19 The cost of the additional electric-ready infrastructure, including electrical capacity and wiring, is estimated at $300 for a water heater and $300 for a stove. (No additional costs are incurred for electric readiness for a furnace, because central air conditioning or other space cooling would be provided anyway.)20 In total, $500 (upper end of range) + $500 + $300 + $300 = $1,600 for the high-efficiency gas option. Note: the high-efficiency gas option should clarify that the high-efficiency gas furnace or high efficiency gas water heater cannot be used to satisfy the R408 additional efficiency package requirement. All-electric option: ●Cold-climate heat pump with electric strip: $15,200, minus current Xcel rebates of $1,000, = $14,200 ●ENERGY STAR heat pump water heater (50 gal) installed $2,000-$2,800, minus current Xcel rebate of $800, = $1,200-$2,000 ●Electrical modifications to go all-electric: $700 ●External gas piping for the development (per home): $0 (normally a savings of $2,500, but the rebuild homes in Superior already have this infrastructure) ●Gas meter & utility hookup charge, and internal gas piping for 3.5 gas appliances: -$2,300 (e.g., savings for all-electric) ●Radiant cooktop: $1,800 (for a relatively nice one); alternately an extra $1,100 for induction ●Total equipment/infrastructure costs: $17,700 (compared to $17,175 for gas [95% efficient gas furnace and 16 SEER A/C]) ●15-year net present value of heating costs: $9,200 (compared to $10,477 for gas) ●Total incremental cost for all-electric new home over 15 years: $370 20 Utah Clean Energy 19 Home Depot website comparison of in-stock 0.64 UEF gas storage water heater ($800) and 0.93 gas tankless water heater ($1,300), Feb 9, 2022. 18 Manufacturer model database review from electrification expert David Petroy, January 23, 2022. Note: Mr. Petroy notes that some comparisons may show wider differences because more efficient models are more likely to have higher-end “bells and whistles” that don’t affect performance. 17 Home Depot website comparison of in-stock like-for-like models, Jan 23, 2022. Low-GWP Refrigerants Upfront cost:None Lifecycle cost savings:None (but significant climate benefits) Discussion:This is a small fix. The code update should include the clarification that you allow low-global-warming-potential (low-GWP) refrigerants. This issue will most likely be fixed in the 2024 mechanical code and/or IECC, but local jurisdictions are encouraged to adopt it sooner, given the significant climate impacts of certain refrigerants. This push is backed by the American Heating and Refrigeration Institute (AHRI) along with the Natural Resources Defense Council and other climate organizations.21 Discussion of Varying Cost Estimates We are currently comparing and providing alternative analysis on certain items from the initial cost analysis included in Louisville’s council packet for their February 1, 2022 meeting. We are providing input to the consultants and city staff on these cost estimates. In the meantime, here are a few notes on key differences between the Feb 2022 PNNL estimates and the two builder estimates: ●PNNL calculates $3,005 for the extra wall insulation required in the 2021 IECC, compared to $3,600 from the builders. ●PNNL includes a $399 savings in floor insulation for moving from R-38 in the 2018 IECC to R-30 in the 2021 IECC. ●Mechanical ventilation is required in the 2018 as well as the 2021, so there should be no additional cost. ●PNNL assumed that with a 90% lighting requirement, the entire home would be of the same lighting so there should be no additional cost. (The Colorado Residential Field Study confirms this.) ●PNNL assumes that ENERGY STAR appliances will already be installed – free ridership. ●In the Louisville-specific high-efficiency gas option, the builders assume it’s an extra $5,000 to go from a 92% to a 96% AFUE furnace, whereas PNNL estimates $1,150. SWEEP estimates only an extra $200-$500 based on reviews of in-stock products from major retailers. ●Builders assumed $1,000-$1,920 for EV-ready and EV-capable whereas SWEEP estimates this is less than $525. It’s important to note that many estimates and studies available are specifically for multifamily, which cost more than for single-family. Another cost estimate being circulated is by Home Innovation Research Labs on behalf of the National Association of Home Builders. We urge caution in using this study, given a number of methodological concerns. For example: 21 We can provide exact code language, additional information, and further contacts upon request; contact Christine Brinker at SWEEP, cbrinker@swenergy.org. ●It only evaluates cost effectiveness using a simple payback metric, which ignores the longer-term savings from energy code changes. Lifecycle cost is a better metric. ●It uses a profit margin higher than any reported historical profit margin. ●The excessively high profit margin of 24% was applied twice, once reflecting the subcontractor ’s profit and again to reflect the builder ’s profit. ●The cost of code changes were 2-3x higher than other current data sources, including the authoritative analysis from PNNL. ●Administrative code changes, which in practice require no, or negligible, incremental cost, were assigned a value of $114 applied to each house. ●Costs were included for RE149 Lighting: exterior controls, and RE49 Baffles at attic access but energy savings were not. ●The methodology is not publicly-vetted. ●It uses a smaller number of foundation types, fuel types, and locations. ●It’s based on data from 1,500 homebuilders nationally, whereas PNNL uses permit data from over 20,000 permit offices. ●It omits conditioned basements from the more efficient thermal distribution system option (from RE209) where there would be no additional cost, and only includes slab and crawl space homes where there would be an additional cost. ●It uses a misleading cost-effectiveness comparison of additional efficiency package options.22 22 Comparison of 2021 IECC Residential Cost Effectiveness Analyses, ICF, 2021 housing credit qualified allocation plan 2021 to 2022 Amended . With respect to its programs, services, activities, and employment practices, Colorado Housing and Finance Authority does not discriminate on the basis of race, color, religion, sex, age, national origin, disability, or any other protected classification under federal, state, or local law. Requests for reasonable accommodation, the provision of auxiliary aids, or any complaints alleging violation of this nondiscrimination policy should be directed to the Nondiscrimination Coordinator, 1.800.877.2432, TDD/TTY 800.659.2656, CHFA, 1981 Blake Street, Denver, Colorado 80202-1272, available weekdays 8:00am to 5:00pm. This plan was adopted by the Colorado Housing and Finance Authority Board of Directors on November 18, 2021, and approved by the Governor of Colorado on December 16, 2021. ATTACHMENT 6 50 CHFA requires all projects to obtain green building certification and accepts several certification programs. Applicants are encouraged to engage a third-party green building consultant and perform requisite charettes to determine the best pathway for the project. The accepted green building certification programs are: • 2020 Enterprise Green Communities (EGC) • Leadership in Energy and Environmental Design LEED v4.1 (LEED) • National Green Building Standards NGBS ICC-700- 2020 (NGBS) In addition to green building certification, there are two additional requirements: • Electric vehicle ready parking spaces, and • Post-construction Energy Use Intensity Reporting. While not required, a project achieving a higher level of energy efficiency certification in addition to the required green building certification is considered more competitive as the project would meet a Guiding Principle and be in alignment with Colorado’s Climate Action goals and meeting 100 percent Renewable Energy by 2040. 8.A Green Building Certification Options CHFA accepts green building certification under 2020 Enterprise Green Communities (EGC), Leadership in Energy and Environmental Design v4.1 (LEED), or National Green Building Standard ICC-700 (NGBS) as described below. The Applicant must: 1. Submit the Energy Efficiency and Sustainability Election Form, signed by the developer and architect, indicating which certification program the project will pursue (EGC, LEED, or NGBS) at Preliminary Application. The form can be found at chfainfo.com/arh/lihtc/Pages/application.aspx. 2. Submit evidence of project registration under EGC, LEED, or NGBS at Carryover Application or State Credit Milestone Documentation; 3. Provide proof of EGC, LEED, or NGBS certification or proof of final filing for certification at Final Application and before issuance of 8609(s). section 8 Energy Efficiency and Sustainability Requirements 51 8.B Electric Vehicle (EV) Ready Parking Spaces All projects (excepting 100-percent HousingHomeless/Special Needs projects and acquisition/rehab projects) must have a minimum number of EV-ready parking spaces. • For projects with 10 or fewer parking spaces, at least one parking space must be EV-ready. • For projects with more than 10 parking spaces, at least 10 percent of the parking spaces must be EV-ready. An EV-ready parking space is a parking space accessible to raceway and electrical panel capacity which can support EV electricity load, and an outlet or other termination point to enable simple installation and use of standard Level 2 EV chargers. Specifically, the space is provided with one 40-ampere, 208/240- volt dedicated branch circuit for servicing electric vehicles and terminates in a suitable point (such as an electrical outlet, junction box, or a Level 2 EV charging station) that is located in close proximity to the proposed EV-ready parking space(s). Generally, one termination point can support 2 EV-ready parking spaces. Only a junction box or electrical outlet capable of supporting EV charging is required as the termination point; installation of Level 2 chargers is not required, though is encouraged. 8.C Post-construction Energy Use Intensity Reporting Once constructed, all buildings are required to annually assess and report their energy performance using the free ENERGY STARTM Portfolio Manager tool. Note Annual energy benchmarking via ENERGY STAR Portfolio Manager is already required by the City and County of Denver for buildings over 25,000 sq ft,1 by the City of Boulder for new buildings over 10,000 sq ft and existing buildings over 20,000 sq ft,2 and by the City of Fort Collins for multifamily buildings over 5,000 sq ft.3 The reporting structure is usually such that building owners have until June 1 to report on energy use for the previous calendar year. EGC 2020 requires that all applicants provide projected operating energy use intensity (EUI); collecting actual energy use will help CHFA and other partners understand energy savings and costs in publicly funded affordable housing and better design energy efficiency incentives moving forward. 1 Information on Energize Denver Benchmarking Ordinance: denvergov.org/content/denvergov/en/environmental-health/ environmental-quality/Energize-Denver/CommercialMultifamilyBuildingBenchmarking.html 2 Information on Boulder Building Performance Rating & Reporting: bouldercolorado.gov/sustainability/boulder-building-performance-rating-reporting 3 Information on Fort Collins Building Energy & Water Scoring Program: fcgov.com/bews/ 52 8.D Higher Levels of Energy Performance While not required, the Guiding Principles used in determining the awards of Federal and State Housing Credits will consider projects achieving higher levels of energy performance in addition to the green building certification and other requirements outlined above. To achieve a higher level of energy performance, the project must obtain additional certification under programs such as ZERH, PHIUS, PHI. Projects achieving this additional certification will minimize total lifetime costs and contribute to Colorado meeting its 100 percent Renewable Energy goals by 2040 and Climate Action goals. For more information regarding these goals, visit: https://drive.google.com/file/d/0B7w3bkFgg92dMkpxY3VsNk5nVGZGOHJGRUV5VnJwQ1U4VWtF/view Other higher level energy efficiency certification programs may be considered, provided the program requires net zero carbon emissions or net zero carbon emissions ready. EGC Self-Certification process through CHFA: The EGC Self-Certification process through CHFA applies to projects awarded in 2020 that are certifying through ZERH, PHIUS, or PHI. Projects must meet all mandatory requirements of EGC as described in the 2015 EGC Workbook. Additionally, new construction projects are required to earn at least 35 optional points and rehab projects are required to earn at least 30 optional points, as minimum point thresholds and also described in the 2015 EGC Workbook. Step 1 Carryover Application This section applies to projects awarded in 2020 that pursued an advanced pathway. Using the EGC Certification Workbook from the Preliminary Application, the Applicant completes the following worksheets: 1. Energy Efficiency and Sustainability Election Form Re-submit the fully executed Energy Efficiency and Sustainability Election form for Carryover Application, indicating CHFA Self-Certification in combination with certification under ZERH, PHIUS, or PHI. 2. Intended Methods If the plans for implementation of any criteria have changed since the Preliminary Application, the Applicant will mark the applicable cell with an “X” under the “Carryover Housing Credit Application” section and provide a description of the change on the “Waivers and Workarounds” tab. 3. Waivers and Workarounds If the Applicant is requesting any waivers of specific mandatory criteria, the Waivers and Workarounds worksheet should be completed. All waiver requests must include valid reasons why the project cannot meet that mandatory criterion and provide a reasonable “work-around” solution that attempts to meet the intent of that criterion. Waiver requests must be approved by CHFA. The Energy Efficiency and Sustainability Election Form and the other required worksheets should be sent electronically with the Carryover Application. 53 Step 2 Final Application This section applies to projects awarded prior to 2020 or those projects pursuing an advanced pathway and awarded in 2020. Applicant implements the project’s green features and elements during construction. At Final Application, the Applicant completes the following worksheets from the EGC Workbook: 1. Energy Efficiency and Sustainability Election Form Re-submit the fully executed Energy Efficiency and Sustainability Election form for Final Application, indicating CHFA Self-Certification in combination with certification under ZERH, PHIUS, or PHI. 2. Intended Methods In the “Final Housing Credit Application” section, the Applicant indicates whether the criterion is still being met for all Mandatory Criteria and the Optional Criteria selected for the project. The Applicant also indicates the amount of optional points achieved. If there are any changes from the Carryover stage, they must be described on the Waivers and Workarounds tab. 3. Waivers and Workarounds If the Applicant is requesting any waivers of specific mandatory criteria, the Waivers and Workarounds worksheet should be completed. All waiver requests must include valid reasons why the project cannot meet that mandatory criterion and provide a reasonable “work-around” solution that attempts to meet the intent of that criterion. Waiver requests must be approved by CHFA. The Energy Efficiency and Sustainability Election Form and the other required worksheets should be sent electronically with the Final Application. The other worksheets should be sent electronically. CHFA Self-Certification Waivers This section applies to projects awarded prior to 2020 or those projects pursuing an advanced pathway and awarded in 2020. • CHFA may waive compliance with specific mandatory criteria if the Applicant can demonstrate that the criteria creates a substantial hardship or is inadvisable for a specific project, and that an alternative proposal (a “Workaround”) will meet the intent of the criteria. • Applicant needing a waiver will use the form found in the Waivers and Workarounds tab of the EGC Workbook and submit electronically with the Application. Applicants will be notified via email of any waiver approvals. • CHFA will review these documents and will provide a clarification letter if clarification is needed. 54 Additional Resources Energy Outreach Colorado – Affordable Housing Rebate Program For more information about the program, please contact: Energy Outreach Colorado 225 East 16th Avenue, Suite 200 Denver, CO 80203 Office Phone: 303.226.5068 energyoutreach.org/grants/affordable-housing-energy-efficiency/affordable-housing-energy-rebate-program DSIRE Database of State Incentives for Renewables and Efficiency (DSIRE) www.dsireusa.org ENERGY STARTM energystar.gov/index.cfm?fuseaction=find_a_product ENERGY STAR Portfolio Manager energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager/ Enterprise Grants Green Communities General Information and Funding Sources greencommunitiesonline.org International Passive House Association (iPHA) https://passivehouse-international.org/ LEED U.S. Green Building Council usgbc.org/leed National Green Building Standard (NGBS) homeinnovation.com/green Passive House Institute (PHI) passivehouse.com/ Passive House Institute US, Inc. (PHIUS) phius.org/home-page passivehouseacademy.com 55 U.S. Department of Energy Zero Energy Ready Home (ZERH) energy.gov/eere/buildings/zero-energy-ready-homes Xcel Energy’s free Energy Design Assistance (EDA) www.xcelenergy.com/programs_and_rebates/business_programs_and_rebates/new_construction_ and_whole_building/energy_design_assistance 56 The federal statute governing the HUD Investment Partnership Program (HOME) permits participating jurisdictions to use HOME funds to assist in the development of eligible housing. The Native American Housing Assistance and Self Determination Act of 1996 (NAHASDA) also provides funds to assist in the development of eligible affordable housing. The use of a federal HOME grant or NAHASDA funds in the form of a bona fide loan that is repayable and has a certain repayment date are no longer considered a “federal subsidy” that would reduce basis or the APR, even if the interest rate is below the Applicable Federal Rate. In addition, the prohibition on the 30 percent basis boost for HOME-assisted properties in a Qualified Census Tract (QCT) or Difficult Development Area (DDA) has been eliminated. section 9 Use of a HOME or NAHASDA Funds Building Code: Affordable Housing and Electric Vehicle Charging Options 03-08-2022 John Phelan Energy Services Senior Manager Kirk Longstein Project Manager ATTACHMENT 7 2Question for Council 1.What feedback do Councilmembers have on the options to modify the Electric Ve hicle (EV)building Code for affordable housing before second reading? 32021 Building Codes Nine ordinances adopted on first reading February 15; second reading scheduled for April 5 •Building Code Purpose: Safeguard public health, safety, and general welfare by regulating structural strength and stability, sanitation, light and ventilation, and energy conservation •Local Amendment Purpose: Strategic alignment to Citywide plans and policies above and beyond those in the I-Codes 4CityPlan and Policy Alignment 5EV Infrastructure for Affordable Housing Infrastructure Cost EV Adoption EV infrastructure code requirements have an upfront cost impact •Is already fast growing •Provides immediate cost savings for vehicle owners •EV infrastructure cost is lowest at the time of construction Tr ade-offs 6Definitions Electric Vehicle Charging Infrastructure Types ·EVSE-INSTALLED –Ty pe 2 charging stations, installed during construction. ·EV READY -Full circuit installations including 208/240V, 40-amp panel capacity, raceway, wiring, receptacle, and overprotection devices similar to a dryer circuit. ·EV CAPA BLE –Installation of panel space and conduit (raceway) to accommodate the future build-out of EV charging with 208/240 V, 40-amp circuits EV Infrastructure. 7EVCharging Options for Affordable Housing 2021 IBC Reference –10% EV installed, 20%EV ready, 40%EV capable ALTERNATIVE OPTIONS FOR AFFORDABLE HOUSING Option 1 –10% EV Capable Option 2 –10% EV Capable + 10%EV Ready Option 3 –10% EV Capable + 10%EV Ready + One EVSE Installed 8EVCharging Options for Affordable Housing Example –Oak140 (79 units) PA RKING SPAC ES REQUIRED BY LAND USE CODE = 58 2021 Building Code EV Parking Spaces Required EVSE-INSTALLED 10%6 EV READY 20%12 EV CAPABLE 40%23 To tal 41 9Example Oak140 –EV Spaces 2021 IBC Option 1 Option 2 Option 3 EVSE -INSTALLED 6 0 0 1 EV READY 12 0 6 6 EV CAPABLE 23 6 6 6 To tal EV Spaces 41 6 12 13 •To tal Parking Spaces Required by the Land Use Code: 58 •79 units 10Example Oak140 –EV Cost Ranges 2021 IBC Option 1 Option 2 Option 3 EVSE - INSTALLED $19,200 -$63,300 --$3,200 –$10,550 EV READY $33,600 -$48,600 -$16,800 –$24,300 EV CAPABLE $32,000 –$46,000 $8,400 –$12,000 $8,400 –$12,000 To tal EV Costs $84,800 –$157,900 $8,400 –$12,000 $25,200 –$36,300 $28,400 –$46,850 •To tal Parking Spaces Required by the Land Use Code: 58 •79 units 11Question for Council What feedback do Councilmembers have on the options to modify the Electric Vehicle (EV)building Code for affordable housing before second reading? Back up Slides 13Market Overview In 2018, the State of Colorado set a policy target of 940,000 EVs by 2030 The Colorado Energy Office reports that EVs represented 12.8% of new car sales in December 2021. Market studies from 2019 suggest EVs will represent 27% of new car sales nationally by 2030 20,965 35,183 56,166 88,488 128,306 212,483 296,845 414,724 2014 2015 2016 2017 2018 2019 2020 2021 New Electric Vehicles since 2014 Colorado DMV Registrations Demographics –who is buying an EV? Approximately 21%of EV car sales are purchased by households representing 60% of Fort Collins Area Medium Income (AMI) Household Income 15EV Charging Consumer Benefits Model above assumes gas per gallon cost of $3.02. The more the price of gas increases, the greater the savings. https://www.consumerreports.org/hybrids-evs/evs-offer-big-savings-over-traditional-gas-powered-cars/ https://www.kbb.com/car-news/how-much-does-it-cost-to-charge-an-ev/ Low Income Housing Tax Credits and EV Charging Infrastructure All projects must have a minimum number of EV-ready parking spaces. ü For projects with 10 or fewer parking spaces, at least one parking space must be EV-READY. ü For projects with more than 10 parking spaces, at least 10 percent of the parking spaces must be EV-READY. Colorado Housing and Finance Authority (CHFA) Low Income Housing Tax Credit 2021-2022 Qualified Allocation Plan EV Charging and Electricity Bills •EV charging is considered a “product” not a “service” •Electricity use typically tied to commercial building meter •Options for managing EV electricity costs – “behind the meter” decisions ü Include as operating expense ü Design fee structure to charge individual users Fort Collins Utilities Commercial Rate 18EV Charging Building Code requirements for Af fordable Housing City of Fort Collins Occupancy Classification for EV Charging Infrastructure EVSE -installed EV -Ready EV –capable Tier 1 ••• Residential 10%20%40% Tier 2 Affordable Housing XX%XX%XX% Tier 3 ••• Mercantile 5%15%20% Assembly 5%15%20% Institutional 5%15%20% Business 5%15%20% Educational 5%15%20% Factory 5%15%20% Tier 4 ••• High hazard 1%5%15% Storage 1%5%15% Utility and misc. group 1%5%15% EV Charging Incentives Federal •Infrastructure and Jobs Act •State of Colorado to receive $57M State •Grants for Commercial and Multifamily Developers including installation and maintenance •$9,000 max Local •Annual Group Buy program -City of Fort Collins partnership with local car dealerships & non profits •discounts up to 50% MSRP 19