Fully electric by 2030? How realistic is it for the Europe’s car production to phase out ICEs in a decade?

We have seen in the past years the exotic niche of fully electric cars becoming “the future strategy” for volume cars in the plans of almost all big OEMs.

Dieselgate, the climate debate, the Paris Agreement, new legislative requirements and Elon Musk, all have their share in the rise of EV-technology to stardom in the automotive industry.

The objective of the 2015 Paris Agreement was to “pursue efforts” to limit the increase of average global temperature to 1.5°C above pre-industrial levels. Subsequently different national activities have been initiated to translate the Paris Agreement into concrete agendas, so called NDCs (Nationally Determined Contributions).

In March 2019 the European Parliament has announced in a resolution its intention to reach a net-zero GHG-emissions target (green-house-gases) calling for strong intermediate targets for 2030. In December 2019 the EU Parliament and Council among others issued Regulation 2019/631. The regulation imposes C02 emissions caused by new passenger cars and light commercial vans to be reduced by 37,5% and 31% respectively until 2030 compared to 2021 with a step of 15% in 2025.

Is the goal set for 2030 actually at the right level in order to reach the long-term objective of being GHG-emission free by 2050? 

A statistic published by ACEA (European Automobile Manufacturers Association) shows the average age of the European fleet is 11.5 years. There is no European data available on the average lifespan of cars in the European Union. But data published by Statista in 2014 shows an average duration of 18 years for Germany. In 2020 the average age of the German fleet according to Statista was 9.6 years with a higher European average. 

If we assume that at least 20 years will be needed to fully replace the European car stock with zero-emission vehicles, the last cars with an ICE (internal combustion engine) should be rolling off the assembly lines no later than 2030. In the light of these facts it is fair to say that the targets defined in Regulation 2019/631 are by far not enough to reach the long-term objective of 2050.

The climate strategy and action plan (“Green Deal”) which was presented by the EU Commission also in December 2019 suggests the reduction of GHG-emission by 40% in 2030 compared with levels of 2019 (55% vs 1990) and climate neutrality by 2050. A climate law which is expected to be finalized in Q2/2021 will make these goals binding. 

Interestingly some automakers are already being more aggressive in their plans than the targets set by the regulation. Volvo and Ford Europe have announced that they will cease manufacturing cars equipped with an ICEs between by 2030. The CEO of Volkswagen brand Ralf Brandstätter has shortly announced to go to 70% production electric vehicles by 2030 doubling the earlier commitments.  Other OEMs confirm that they will meet the EU climate requirements but are still being much more vague about the phasing out of ICEs. Most indicate that during sometime between 2030 and 2040 they will switch to full-electric production but emphasize that they will follow customer demand.

If the EU climate law is passed during the next few months through the EU Parliament and Council it will force carmakers to reach zero-emissions by 2050. This would mean that the Regulation 2019/631 will have to be revised and subsequently the car makers will have to accelerate the transition to fully electric.

Besides if the widely discussed Euro-7-Norm which regulates other emissions (such as NOx, HC, CO, NHMC and particles) is put in vigor from 2025 there will be additional pressure on diesel and gasoline powertrains for new cars and will further accelerate the transition.

The expansion of charging infrastructure is already a heavily discussed topic. According to the European Commission alone with the current regulatory targets 3 million public charging points would be need until 2030 not including charging facilities in homes, offices and factories. According to the European Alternative Fuels Observatory in 2020 there were approximately 225.000 in Europe of which only 11% were fast charging stations.

Further what are the industrial and technological conditions for energy supply, battery cell capacity and the consumer market response that will allow the complete European fleet to run on electric power?

Firstly, let’s analyze this through the example of Germany which represents the largest economy in Europe. What level of additional electricity supply needs to be established to provide the additional electric power needed by EVs and secondly how much of it will have to be converted to green electricity to eliminate the CO2 emissions?

A statistic made by the KBA (German Federal Transport Authority) shows the total annual mileage driven by domestic passenger cars and light commercial vans at 684 billion kilometers for 2019. A rough calculation assuming 100% of the passenger car fleet to be fully battery electric with an average consumption of 0,18 kWh/km we end up with over 120TWh additional electric consumption created by electric cars (recuperation not considered). Germany’s total energy bill in 2019 was approximately 2.500TWh whereof 520TWh (520.000GWh) was electricity consumption with 41% coming from renewable sources. In consequence a fully electric fleet – without considering light and heavy trucks – will require an increase of more than 20% in electric power supply and the conversion of over 400TWh into renewable sources in order to meet the 2050 objective. This does not include a potential increase in the overall electric power consumption of households and industry.

To make the transition there are major investments required in the German grid where most of the electric power from renewables is produced up north away from the main hubs of industrial activity and the states with higher populations densities. Since 2009 the government has initiated in three tranches the expansion of the high-voltage power grid by 7.600km. It is unlikely that these projects took into account the additional power requirement of electric vehicles since the decision were taken years before the transition in the automotive industry was even visible. More will have to be done to transfer green electric power to where it is needed and also to store it to overcome the fluctuations of demand.

While the share of renewables in the EU27 is slightly below that of Germany electric cars will lead to similar increases in electric power demand in all countries subject to the EU regulations. To ensure all countries will make the necessary investments to cope with the higher output and increase the portion of electric power supplied by renewables will be one of the exciting challenges for Europe. 

Secondly, it is important to see whether current plans in battery cell capacity in Europe will support the transition to a pure EV production in Europe (exports are neglected).

In 2019 the European car production was approximately 21 million units for passenger cars and light commercial vehicles. Recent projections point at approximately similar levels in 2027. Assuming no growth in European car production in 2030 compared to 2019 and an average battery size for fully electric cars of 70kWh an annual production capacity of 1.500GWh hours will be required alone in Europe. For simplicity reasons this amount doesn’t consider neither the demand for aftermarket nor the demand of the truck market for batteries. Current durability of car batteries and trends towards electrification on the truck market suggest a further very significant capacity requirement.

According to forecast by the Chinese battery manufacturer Farasis a capacity of approximately 400GWh is projected for the middle of the decade with many unknowns. Optimistically in 2021 the capacity will be in the range of 100 GWh.

It becomes clear that battery cell capacity will be the limiting factor for the transition and a major push must happen to reach the required cell production capacity by 2030. 

In all these considerations we have not yet included the customer. 

Let’s imagine that you are considering buying a car in 2027 and you have the certitude that ICE-technology will be taken off the market after 2030. If you were to buy an ICE car and consider selling it after 5 years, what would the residual value be? And if you rather tend to decide to buy an EV you would surely take into account the capacity and the geographic distribution of the charging-network.

With all these aspects the auto-market might face from 2025 onwards extremely cautious buyers who discard the purchase of diesel or gasoline cars. At the same time the restrictions of battery cell capacity might not allow OEMs to offer an electric vehicle to every customer.

If the network for charging stations is unable to keep up with the production capacities of EV cars the overall demand might be hit even more until there is a catch up in infrastructure. Customers who hold on longer to their old high-emission cars, which is certainly counterproductive to meet the climate goals, is a realistic threat during the transitionary period.

In conclusion with the expected climate law of the European Union and in order to meet the 2050 goal of zero emissions the regulatory demands must increase forcing OEMs for a faster shift to fully electric cars by 2030. From todays’ view the production capacities for battery cells will represent a major bottleneck and more investment needs to be placed to the creation of Giga-factories. Simultaneously the expansion of charging infrastructure, the transition to fully green electric power production, supply and storage must be ramped up in line with the EU’s Green Deal Strategy.

The expected smooth transition strategy from ICE to electric could be flawed. The limited battery supply before 2030 and customers’ negligence to buy diesel or gasoline cars could lead to a significant drop of sales between 2025 to 2030. The resulting volume impact must be factored into the strategic planning of the automotive industry.

Sources:

[1] REGULATION (EU) 2019/631 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 17 April 2019

[2] Kraftfahrt-Bundesamt. Kraftverkehrsstatistik. 2019. Retrieved from URL https://www.kba.de/DE/Statistik/Kraftverkehr/VerkehrKilometer/vk_inlaenderfahrleistung/vk_archiv/2019/verkehr_in_kilometern_kurzbericht_pdf.pdf?__blob=publicationFile&v=5

[3] ACEA. Average age of the EU motor vehicle fleet, by vehicle type. 2019. Retrieved from URL https://www.acea.be/statistics/article/average-age-of-the-eu-motor-vehicle-fleet-by-vehicle-type

[4] Statista. Typische Lebensdauer von Autos in Deutschland nach Automarken. 2014. Retrieved from URL https://de.statista.com/statistik/daten/studie/316498/umfrage/lebensdauer-von-autos-deutschland/

[5] ACEA. Vehicles in use Europe. January 2019. Retrieved from URL

[6] UNEP (2019). Emissions Gap Report 2019. Executive summary. United Nations Environment Programme, Nairobi. Retrieved from URL http://www.unenvironment.org/emissionsgap

[7] European Parliament. P8_TA(2019)0217. European Parliament resolution of 14 March 2019 on climate change – a European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy in accordance with the Paris Agreement (2019/2582(RSP)). Retrieved from URL https://www.europarl.europa.eu/doceo/document/TA-8-2019-0217_EN.pdf

[8] Statista. Durchschnittliches Alter von Pkw in Deutschland in den Jahren 1960 bis 2020. 2020. Retrieved from URL https://de.statista.com/statistik/daten/studie/154506/umfrage/durchschnittliches-alter-von-pkw-in-deutschland/

[9] European Commission. COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS. The European Green Deal. 2019. Retrieved from URL https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1596443911913&uri=CELEX%3A52019DC0640#document2

[10] Bay, L. / Tyborski, R. (02.03.2021). Das Ende des Verbrennungsmotors ist nah – welche Hersteller wann aus der Technologie aussteigen. Handelsblatt. Retrieved from URL https://www.handelsblatt.com/unternehmen/industrie/autobranche-das-ende-des-verbrennungsmotors-ist-nah-welche-hersteller-wann-aus-der-technologie-aussteigen/26938578.html

[11] Enerdata. Global Statistical Yearbook 2020. Retrieved from URL https://yearbook.enerdata.net

[12] Statista. Entwicklung der Automobilproduktion in Europa in den Jahren 2011 bis 2019. 2020. Retrieved from URL https://de.statista.com/statistik/daten/studie/192560/umfrage/entwicklung-der-automobilproduktion-in-der-europaeischen-union/

[13] European Alternative Fuels Observatory. 2021. Retrieved from URL https://www.eafo.eu/alternative-fuels/electricity/charging-infra-stats

[14] Zipse, O. (23.02.2021). Euractiv Services. Plugging into the Green Deal: Europe needs charging infrastructure. Retrieved from URL https://www.euractiv.com/section/electric-cars/opinion/plugging-into-the-green-deal-europe-needs-charging-infrastructure/