European Market: Banning ICE vehicle sales in 2035 to be climate neutral by 2050
Boosting local production of EV batteries, 2020 sales of EVs double to 750k units
On July 14, 2021, the European Commission of the European Union (EU) released a package of proposals called “Fit for 55” consisting of concrete measures to reduce net greenhouse gas emissions to zero in the region by 2050. In the transport sector, the Commission requires stricter CO2 emissions standards for vehicles and sets targets to reduce vehicle CO2 emissions by 55% from 2030 and by 100% from 2035 compared to 2021 levels. This will effectively ban sales of new internal combustion engine vehicles such as gasoline engine cars including hybrid vehicles (HV) in 2035.
While automakers comprising the European Automobile Manufacturers’ Association (ACEA) said “banning a single technology is not a rational way at this stage,” they are pleased that the Commission’s proposals include the new regulation for deployment of alternative fuels infrastructure.
From May and July of 2020, European governments implemented their respective demand stimulus measures for the automotive industry which had been impacted by the COVID-19 pandemic. Their schemes accelerated electrification through purchase incentives for electric vehicles (EVs) and plug-in-hybrid vehicles (PHVs), but national governments including Germany, France and the U.K. will continue their purchase incentive measures after 2021.
To expand the use of electrified vehicles, it is indispensable to secure the supply of batteries, their key components, and to reduce their prices. European automakers are promoting in-house development and production of batteries, which account for 30-50% of the cost of an EV, to reduce costs and secure battery supplies.
Sales of electrified vehicles (EVs, PHVs and HVs) in Europe increased significantly in 2020, with EVs increasing by 107% year-over-year (y/y) to 746,000 units, PHVs expanding by 210% y/y to 619,000 units, and HVs growing by 51.3% y/y to 144,800 units. However, the sales proportion of electrified vehicles remains low at 6.2% for EVs, 5.2% for PHVs and 12.1% for HVs. Automakers are expanding their lineups of EV and PHV models to achieve the CO2 emissions targets.
In 2020, passenger car sales in 30 European countries decreased by 24.5% y/y to 11.96 million units due to the impact of the COVID-19 pandemic. Sales increased by 27.1% y/y to 6.49 million units for the period January-June 2021. However, when compared to the same period of 2019, sales are still 2 million units below the pre-COVID level (8.43 million units).
Passenger car production in 17 European countries declined by 25.3% y/y to 11.76 million units in 2020. Output during the period January-May 2021 grew by 35.5% y/y to 5.29 million units, but compared to the same period of 2019, output was 24.5% lower. The production volume has not returned to the pre-COVID level due to plant shutdowns and reduced output caused by semiconductor shortages.
|Sales of EVs, PHVs, and HVs in Europe
(Source: Created by MarkLines based on ACEA's data)
|Audi e-tron GT, new electric sport coupe
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