KPMG 2022 auto poll KPMG 2022 auto poll KPMG 2022 auto poll

Electrification of automobiles is the biggest change we've seen in the auto industry over the past 100 years. But Canadians have a guarded enthusiasm towards electric vehicles. While only four per cent of Canadians currently own an EV, nearly half (49 per cent) are more likely to buy an EV today compared to a year ago or pre-pandemic, according to KPMG in Canada's 2022 Auto Survey. And 71 per cent would consider buying an EV the next time they buy a vehicle. But there are several concerns holding them back, from the time it takes to charge an electric vehicle to battery performance in winter weather. While "range anxiety" is a major and often stated concern for Canadians considering the purchase of an electric vehicle, this is evolving into "charging anxiety" as the market matures and the need for more public EV charging infrastructure expands.

Major automakers are already on track to convert a majority of their production to electric vehicles in the coming years. According to KPMG's latest Global Automotive Executive Survey, production of electrically powered vehicles by all major original equipment manufacturers (OEMs) will rapidly accelerate through 2025, which could result in as many as 13 million global electrified (EV and hybrid) vehicles being produced annually among the top 12 OEMs, including Tesla. If capital spending is any indicator, North American OEMs are moving quickly. By 2025, General Motors, Ford and Stellantis (formerly Fiat Chrysler)—all of which have recently increased their capital spending budgets—are collectively expected to spend more than US$92.5 billion on EV development.¹

And an increase in choice for automotive consumers is on the horizon. More than 50 new electric models are expected to be introduced some time this year. GM, for instance, expects to introduce 20 electric vehicles by 2023. Ford recently announced it will double production of its electric F-150 Truck, America's best-selling vehicle. Hopefully the research and development efforts that preceded production will overcome what appears to be a disconnect between the optimism of OEMs, commitment to net-zero and the concerns of Canadian consumers, of whom 79 per cent say they won't even consider buying an EV unless it can run for a minimum of 400 kilometres on a fully charged battery.

Rather than pumping litres of gas, EV owners will charge kilowatts (kW) to the EV's battery pack. The KPMG in Canada survey found that 74 per cent of Canadians believe charging at home will be enough for them to drive where they need to go every day. But two-thirds (66 per cent) say they're skeptical about charging an EV through a regular household electrical outlet, indicating more consumer education is needed about home charging. While 87 per cent say they have "no intention" of "rationing electrical usage" in order to charge an EV, this won't be an issue since EVs use power draws similar to many household appliances.

Household charging is going to be impacted by Canada's changing urban landscape. Many Canadians who live in apartments, row housing and condominiums don't have an immediate solution to home-based charging, so they need the ability to charge an EV away from their home. KPMG found that 85 per cent of Canadians are expecting gas stations to offer the ability to quickly recharge EVs sometime within the next five years. But Canadians also want the ability to charge their car at work (87 per cent), at shopping malls (also 88 per cent) and on the street (63 per cent).

AER (all-electric range) refers to how far an EV can travel on a full charge, which depends on battery capacity, as well as factors such as weather and topography. Extreme hot or cold weather will drain the battery faster, as will driving in a mountainous region. According to the Electric Vehicle Database, the average range of EVs is 315 km, though every model is different, and ranges are improving as technology advances.² For example, the Nissan LEAF currently offers a range between 270 to 385 km on a full charge, while Tesla offers a range between 491 and 614 km. Mercedes-Benz recently unveiled its Vision EQXX concept, a compact car that, according to the company, can travel more than 1,000 km on a single charge.

Range itself is not the only issue. The main impediment to EV adoption for some consumers is the time it takes to recharge an EV. Range anxiety—worry or fear that your battery will run out of power before reaching your destination—is now evolving into "charging" or "queuing" anxiety. If it takes 40 minutes to charge an EV at a public charging station, that's still a long time compared to fuelling a gas-powered vehicle, which takes about five minutes. The KPMG survey found that just over half of Canadians (51 per cent) aren't willing to wait longer than 20 minutes to charge their EV at a charging station and one in five (18 per cent) won't wait more than five minutes. Only one in five (19 per cent) will wait an hour, but no longer than that.

Most Canadians (85 per cent) believe charging anxiety will intensify as drivers will have to wait in line to use a public charging station—in part due to the current lack of EV charging infrastructure that could potentially lead to long queues during peak periods. We're already seeing this emerge in more mature EV markets, such as Norway, California and New Zealand, where many drivers don't have home-based chargers and rely instead on public chargers.

Charging time depends on the vehicle's battery capacity and the type of charger. There are three types of charging: Level 1 uses an ordinary 120-volt household outlet, which is convenient but slow (about 200 km after 20 hours).³ Level 2 is a dedicated 240-volt power source, which offers faster charging times for residential use (three to seven times faster than Level 1), but requires professional installation. And Level 3—often referred to as DC fast charging—is the fastest method, typically found at public charging stations. Tesla has its own proprietary Supercharger network, which can charge most of its vehicles in about 20 minutes to 50 per cent capacity.

According to data compiled by Canada Drives, a Tesla Model 3 (Tesla's lowest-cost model at $53,990) with a range of 423 km takes 36 to 50 hours to charge at Level 1, 12 hours at Level 2, six hours at Level 3 and 15 minutes for 282 km of range at a Supercharger station. To compare, the Nissan LEAF ($37,498, at the lower end of the EV cost scale), with a range of 240 km for the entry-level trim, takes 30 hours to charge at Level 1, eight hours to charge at Level 2 and 40 minutes to charge to 80 per cent capacity at Level 3. While higher-end models typically have more range and faster charge times, most Canadians aren't willing to pay for those features: the KPMG survey found that 41 per cent are willing to spend between $30,000 and $49,999 for an EV, while 34 per cent want a new car that costs less than $30,000 (which doesn't leave many options in the EV space).

The affordability concern has been echoed by Stellantis CEO Carlos Tavares. The high upfront cost of electric vehicles could lead to volume declines because fewer consumers can afford them. "What has been decided is to impose on the automotive industry electrification that brings 50 per cent additional costs against a conventional vehicle," he said.⁴ According to Tavares, there are two options for the industry: increase the price of EVs and sell fewer of them, or incur lower profit margins on vehicles. Both options could lead to cutbacks and thousands of lost jobs, the CEO said.

While electric vehicles are generally more expensive to purchase than gas-powered ones, they also tend to be more affordable to maintain in the long run. Current fuel (charging) costs are lower, with no oil changes required (on average, a typical EV battery will cost less than $530 per year to charge at night⁵). And because there are fewer moving parts, EVs are cheaper to maintain. The KPMG survey found that 82 per cent of Canadians long for the day when they no longer need to take their car in for oil changes and other maintenance needs. But while 64 per cent of Canadians believe a battery-powered car is cheaper to maintain, they do worry that the cost of replacing the EV battery will be more than the car is actually worth (83 per cent). And 64 per cent are concerned about reliability in cold weather.

Overcoming range and charging anxiety requires better EV charging infrastructure and smart EV routing—as well as a change in mindset. For example, consumers charge their mobile phones at every opportunity, and eventually EVs will be the same. To date, however, Canada has 6,566 EV charging stations (as of Dec. 13, 2021), which includes 5,655 Level 2 EV charging stations and 1,203 DC fast charging stations.⁶ In comparison, Canada has 11,908 retail gasoline stations, the equivalent of 3.1 per 10,000 Canadians, and they take a fraction of the time to refuel compared to EVs.⁷

Canadians are divided almost equally on whether the government should provide consumer incentives to buy EVs or invest in charging infrastructure; in the KPMG survey, 53 per cent say they want the government to provide incentives to make it easier to buy an EV, while 47 per cent would prefer the government invest in charging infrastructure. Another 84 per cent expect auto manufacturers to invest in a national charging infrastructure.

Even if full charging is reduced to 20 minutes for most cars, it could result in the need for as many as four times the number of public charge points we have today, depending on Canadians’ future preferences on charging at home versus during their travels.

The Canadian government has invested more than $1 billion in related initiatives since 2015⁸, including consumer incentives and the development of an EV charging network across Canada. But to meet the government's target of shifting completely to zero-emission light-duty EVs by 2035, there is significant work to be done on building out this infrastructure and making EVs on Canadian roads a reality.

It also means ensuring Canada has enough clean power to support these vehicles. As an illustrative example, if we assume there are 20 million EVs on Canadian roads by 2035, their charging times will impact the practical number of charging stations that would be required. Even if full charging is reduced to 20 minutes for most cars, it could result in the need for as many as four times the number of public charge points we have today, depending Canadians’ future preferences on charging at home versus during their travels. And the corresponding increase in electricity consumption, assuming an electric vehicle will use about 4,000 kWh per year, will represent an estimated 36 per cent increase on the per capita energy consumption from what it is today. Indeed, 69 per cent of Canadians in the KPMG survey believe green or climate change initiatives are getting ahead of capacity, and 59 per cent think EVs will over-load the electrical grid and make EVs too expensive to operate, given electricity prices. Other challenges include the cost of real estate, particularly in urban markets where land is at a premium; the need for standardized charging infrastructure to support any type of EV; and the need to build out additional infrastructure for utility vehicles, delivery trucks, public transit and commercial vehicle fleets.

The survey also found that Canadians don't appear to have an interminable allegiance to the major automakers. Indeed, the top brands that EV buyers are most likely to purchase are Tesla (at 21 per cent), Toyota (at 20 per cent), and Honda (nine per cent). But nearly half of Canadians (49 per cent) say they would buy an EV made by a major technology company (or rival EV upstart) versus an established OEM—which points to a willingness on the part of Canadian consumers to buy from emerging players in the automotive space. In fact, 62 per cent of respondents would rather buy a car from a company that specializes in battery-powered automobiles.

The current findings are consistent with the sentiment of leaders in the industry: The KPMG 2021 Global Automotive Executive Survey found that a majority of automotive executives expect Google, Apple, Amazon and Huawei to enter the car market with their own branded vehicles. At the 2022 Consumer Electronics Show, Sony announced it would enter the EV market.⁹ What does this mean for the future of the automobile industry? We can expect to see more mergers and acquisitions, while some OEMs will struggle as the existing investment in their capital base becomes less relevant. In the automotive executive survey, 85 per cent of automobile executives say they're considering investments, acquisitions and partnerships in new technology companies in the coming years.

It's an electrifying future for an industry on the precipice of major change. Pole position is up for grabs as auto industry participants rally for market share. The willingness of Canadians to consider buying from major technology companies—and the fact that Tesla remains the No. 1 choice of Canadians for EV purchases—means that the tides are shifting.

If they want to stay relevant, manufacturers need to pay close attention to the sentiment of the Canadian consumer and why many remain reluctant. The changes being made to vehicle production will be irreversible and getting it wrong will be perilous to the OEMs which have seen extreme volatility over the last two years. Many Canadians (69 per cent) believe that phasing out gas-powered vehicles over the next 10 years is a positive step towards climate change efforts and the reduction of greenhouse gas emissions. But while many Canadians are willing to consider the purchase of an EV—and are even enthusiastic about the idea—they first want to see improvements in infrastructure and battery technology before they fully commit.

What does this all mean for Canada's automotive industry manufacturers and public infrastructure leaders? Connect with our automotive and mobility professionals to help navigate the road ahead.