Electric Cars About To Accelerate In Europe, But Hazards Lurk.
“This will be the key to reaching CO2 targets and help achieve what currently looks like optimistic EV forecasts”
The electric car revolution is about to get serious in Europe, and because the change is being imposed from above it is likely to lead to severe financial consequences for manufacturers, and popular disgruntlement.
When the message gets across that new cars are no longer affordable and public transport beckons, expect a serious political backlash.
A forecast that battery-only electric car sales in Western Europe will more than double in 2020 to 700,000 and reach close to 1 million by the end of 2021, from Berlin-based auto analyst Matt Schmidt (schmidtmatthias.de), marks the start of accelerating battery-only car and SUV sales.
Western Europe includes the five biggest markets of Germany, France, Britain, Spain and Italy.
EU rules on fuel consumption start to take effect in 2020, jump another steep step in 2025 before a final hurdle in 2030, when the target average fuel consumption for manufacturers’ output is the equivalent of 92 miles per U.S. gallon. The rules present a huge jump in fuel efficiency which can only be met by the mass adoption of battery-only electric vehicles. Even plug-in hybrids, which offer about 30 miles of battery-only range, are unlikely to be able to meet the rules after 2025.
Investment researcher Jefferies said in a recent report, if the auto industry makes no progress in curbing carbon dioxide (CO2) from 2018 towards meeting the EU’s 2020/21 regulations, it faces fines totalling the equivalent of $36 billion, twice its estimated profits, and could be forced to raise prices by up to 10%. And new EU Commission leader Ursula von der Leyen announced current targets for emissions reduction of 40% below 1990 levels by 2030, should be raised to at least 50%.
Unlike the mobile phone revolution, which was based on popular demand for a product that was seen as good value for money and quickly became an indispensible social and professional tool, electric car sales are being forced on buyers to make the auto industry drastically slash CO2 emissions.
Subsidies will help
Schmidt says governments across Europe in auto making countries are getting ready to subsidize both private and public car fleets to help manufacturers meet the targets, avoid fines and protect jobs.
“This will be the key to (manufacturers) reaching CO2 targets and help achieve what currently looks like optimistic EV (sales) forecasts. Battery-electric vehicle (BEV) sales will increase from 2019’s 335,000 to over 700,000 in 2020 and reach close to one million annually by 2021, although growth levels are then expected to slow with (manufacturers) likely touching the brakes once again up to 2025,” Schmidt said in a report.
Volkswagen has said 25% of its global sales will be battery only vehicles by 2025. Other big German rivals have slightly less ambitious targets. But forecasters like IHS Markit see only 10.2% of global sales as BEV by 2025, and 14.8% by 2030.
The rules will cause a huge shakeup in the European auto industry, which faces those bottom-line threatening fines if it fails to comply. That is well known to investors. But there is another significant threat, because global giant Volkswagen has said that by 2030 it will be impossible for it to economically make cheap small cars like the Up and Polo. This means middle-class European citizens will be priced out of the market for new small, affordable cars essential for the daily commute, and efficient running of family life. This is a factor that most European citizens are not yet aware of. When they are, watch out. This promises a Europe-wide reaction akin to the current unrest in France by so-called “Gilets Jaunes”, when exasperated citizens take to the streets.
So the industry must prioritize small, affordable electric cars, in stark contrast to its efforts so far which include the Jaguar I-Pace, Audi e-tron and Mercedes EQC priced at not less than 80,000 euros ($90,000). The cheapest electric car, according to French consultancy Inovev, is the tiny Renault Zoe, and that costs from 35,000 euros ($39,000 after tax).
The industry must develop vehicles like the Citroen Ami 1 concept car – 2 seats, maximum speed 30 mph, range possibly 100 miles; price? It would have to be under 10,000 euros ($11,000) after tax.
Consultancy Capgemini agreed the industry has to quickly follow the cheap, small car route.
“The low cost electric car is the key to success here, and as technology advances the industry should be able to produce cheaper batteries with improved range and efficiency. This will also be difficult because in the era of popular SUVs, small cars don’t sell well,” said Capgemini Global Automotive Lead Markus Winkler.
Winkler said government subsidies were important, while new forms of affordable transport usage like car sharing will gain momentum.
Last month, Germany raised the subsidy for electric cars costing less than 40,000 euros ($44,500) to 6,000 euros ($6,700) from 4,000 euros.
As we enter the 2020s, questions remain about the viability of battery electric cars.
As the number of electric cars in Europe accelerates, expect longer and longer lines at public recharging points. The fastest recharging now probably takes about 45 minutes. This will be a big obstacle to electric car buying.
9 electric car questions
- When will recharging match the time achieved by gasoline cars?
- Is there enough electric power available to meet increasing demand?
- When will battery costs become competitive with gasoline power?
- When will the first carmaker be threatened by EU fines bankruptcy?
- If electric car sales by 2025 reach 10%, what happens if a car company invested billions to meet a global market share of 25%?
- When and where will the first riot take place when some EU citizens discover they’ve been effectively barred from new car ownership?
- Is it still clear that if you include mining for rare minerals and recycling, there is a CO2 electric advantage over gasoline?
- At what point will EU legislators decide it’s time to change the emission standards?
- Should they call in the hydrogen fuel cell experts?