Autonomous and electric vehicles are often used interchangeably when it comes to future mobility, and although the two concepts overlap, there are key differences. It is important for investors to understand the difference between these two categories, especially when assessing expectations for current autonomous technology. In other words, even though electric vehicles have become mainstream, true driverless vehicles still don’t exist. This note discusses the distinction between electric and autonomous vehicle technology in the context of the S-Network Electric & Future Vehicle Ecosystem Index (FUTURE) and some of the components involved in each category.
Battery technology is the main underlying characteristic of electric vehicles.
The main feature of electric vehicles revolves around a clean, high-tech battery as the power source in place of (or sometimes in parallel to) a traditional motor. Most questions about electric vehicles are often about the battery rather than the vehicle itself (e.g. how long does it take to charge the battery? How far can the battery take the driver on a single charge? What happens when the battery needs to be replaced? Can the battery be produced cleanly and locally?). There are several types of electric vehicles classified according to battery use and power source:
- Battery Electric Vehicles (BEV): These are also referred to as “all-electric” or “all-electric” vehicles. BEVs use a battery to power an electric motor. This contrasts with an internal combustion engine (ICE) vehicle which converts fuel (gasoline) into energy to propel the vehicle. The battery is charged by plugging into a home power source or public charging stations. Examples: Tesla Model 3, Tesla Model Y, Ford Mustang Mach-E, Chevrolet Bolt
- Plug-in hybrid electric vehicles (PHEV): These vehicles use both a battery and an internal combustion engine for power. They charge their batteries through electrical power sources, internal combustion engine power, or regenerative braking (the electric motor acts as a generator that can charge the battery). Examples: Toyota Rav4 Prime, BMW 330e
- Hybrid Electric Vehicles (HEV): Hybrid vehicles also use both a battery and an internal combustion engine for power. These vehicles cannot plug into an electrical power source and use the energy produced by regenerative braking to maintain the vehicle’s charge. Examples: Toyota Sienna, Honda CR-V Hybrid
As manufacturers shift to producing cleaner, high-tech options, BEVs are rapidly gaining market share over PHEVs. In 2021, BEVs accounted for 70.8% of electric vehicle sales globally, with a large portion of PHEVs primarily in Europe. In the United States, 73.9% of electric vehicle sales were BEVs, compared to only 54.3% in 2016.(1) The table below shows the largest manufacturers of electric vehicles in the United States in terms of market share from 1H22 sales. Apart from Tesla, which is a pure BEV maker, the rest are legacy automakers and most of them currently produce both BEVs and PHEVs/Hybrids.
Autonomous vehicles include driver assistance features, but true self-driving cars do not yet exist.
Self-driving vehicles are commonly referred to as self-driving cars, but most of them only have a few self-driving features and still require a driver. The Society of Automotive Engineers (SAE) has developed range levels described in the table below. Many newer vehicles are already equipped with some Level 1 features (eg park assist, adaptive cruise control and automatic braking). Level 2 involves advanced driver assistance systems (ADAS) that still require a human driver (Tesla’s Autopilot feature is an example of Level 2 autonomy). Level 3 vehicles, which are still relatively new, are able to make more informed decisions about their surroundings (eg, going around a slower car), but still require the driver to be alert. Mercedes-Benz is the first manufacturer to produce an internationally certified Level 3 autonomous vehicle with its new 2022 S-Class.(2) Previously, the Honda Legend was the first Level 3 vehicle available (limited to Japan). Levels 4 and 5 are considered true autonomous vehicles. Although there are Tier 4 vehicles in the pilot phase, there are currently no real Tier 5 vehicles. TuSimple (TSP, 0.4% weight index) has built a heavy truck with Tier 4 which recently completed an 80-mile driverless journey from Tucson to Phoenix, Arizona. Waymo, which is owned by Alphabet Inc. (GOOGL, 4.1% index weighting) and was formerly known as the Google Self-Driving Car Project, has launched a Tier 4 taxi service in Phoenix and currently has partnerships with major manufacturers including Volvo, Nissan, Stellantis and Mercedes Benz.
Although there is a difference between electric and autonomous vehicles, there is significant overlap with the companies and technologies that produce these vehicles. Both areas are still in their infancy and as new technologies emerge, the future mobility ecosystem has new opportunities to increase its market share over traditional vehicles.
The S-Network Electric & Future Vehicle Ecosystem Index (FUTURE) is the underlying index of the First Trust S-Network Future Vehicles & Technology ETF (CARZ).
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(1) Global EV Data Explorer – Analysis – IEA
(2) Mercedes is the first to sell a Level 3 autonomous vehicle in 2022 (insideevs.com)
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