According to Jefferies’ Simon Powell, electric vehicle manufacturing is currently facing the “embedded carbon” challenge.
“To get the environmental dividend that governments are seeking, users will need to store them longer and drive them farther than they would with a traditional combustion-energy vehicle,” said Powell, director of global thematic research for the company. said CNBC’s “Road signs Asia” On Wednesday.
He explained that a “large amount” of carbon is released when materials like steel, aluminum and glass are made and put together to make vehicles. He said the problem is exacerbated with electric vehicles, which are currently heavier on average than their gasoline-powered counterparts.
“When they leave the factory, these (electric vehicles) are at a disadvantage,” he said. “They contain more steel. The brakes are bigger. The batteries are certainly heavier.”
The relatively higher weight of electric vehicles today is due to manufacturers focusing on the range of these cars, Powell said. In contrast to cars, which have been powered by combustion engines for decades, the charging infrastructure for electric vehicles is much less developed worldwide.
However, Powell predicted that the “embedded carbon” in electric vehicles is expected to decrease to levels comparable to conventional vehicles.
“The way this whole thing is being resolved is green steel,” he said. “The use of hydrogen in the steel manufacturing process must also be examined.”
“I don’t think a lot of people are talking about greening the steel industry,” the analyst said, admitting that decarbonising the sector around the world will be “very challenging.”
Most of the metal today is made from coking coal, while making low-carbon steel is both more resource-intensive and more expensive.
“I think it’s going to take a long time. We’re talking about big investments with … long paybacks, long time horizons,” said Powell.
In the meantime, investors should also monitor battery technology development as more energy dense cells will help reduce the weight and potentially embedded carbon of electric vehicles, Powell said.