European regulators clamp down; the US can make ground
The US sold around 328,000 EVs in 2020, equivalent to 2.3% of its total vehicle sales, while European sales, at around 1.4 million EVs, represent 10.5%.
Paving the way in Europe are new CO2 emission standards. They are, according to many observers, the single biggest accelerant of the eMobility transition. These standards have forced automakers down a decarbonized pathway and will be the fundamental drivers of change.
Taking 2021 as a baseline, cars and commercial light-duty vehicles (LDVs) must emit 15% less CO2 from 2025. From 2030, cars must emit 37.5% less CO2, and LDVs 31% less. For every gram that each vehicle exceeds the emissions targets, a €95 (US$115) fine applies. However, there are still concerns that these measures might not be stringent enough to get 30 million zero-emission vehicles on Europe’s roads by 2030, so the European Commission will review the CO2 standards (pdf) for cars and LDVs by June 2021, and heavy-duty vehicles the year after.
The regulations are also designed to accelerate European EV sales. They stipulate that new EV car and LDV sales must make up 10% of automakers’ total sales in 2021, rising to 15% in 2025. From 2030, it becomes 35% for cars and 30% for LDVs. The reward is the relaxation of the emissions cap, but there is no penalty, erroneously we think, for noncompliance.
For automakers in Europe, the regulations mean a complete overhaul of powertrains, massive investment in research and development, and disruption to long-standing supply chains in order to deliver cleaner vehicles with lower lifetime emissions. As a result, they will bring more than 200 new electric and plug-in hybrid models to market this year, giving private and fleet customers greater choice and accelerating, in turn, the pace of electrification.
The US is making significant strides too. EY analysis finds that automakers plan to bring more than 171 new EV models, including light vehicles registered for personal use, to market by 2025. This is part of Biden’s US$2t infrastructure plan. US$174b will boost the markets for EVs and include tax credits and incentives, the rollout of charging infrastructure (500,000 units by 2030) and support for automakers to build home-grown EVs and batteries.
The US is, of course, looking at the strategies employed by its European counterparts as a means to accelerate its own EV adoption. It could, for instance, define a “North Star” objective to inspire manufacturers, businesses and consumers to embrace electric, along with a target date for achieving carbon neutrality. Similarly, emission standards, and penalties for automakers that do not comply, may have a place, along with stimulus packages, modeled on the European Green Deal strategy, to advance cheaper, cleaner and healthier forms of private and public transport.
National and local initiatives favor electric
Already, national initiatives across Europe are securing EV success, while inroads are being made by various US stakeholders pushing for electrification too. Lessons are transferrable across geographies.
We are seeing many governments, the UK included, planning to banish the sale of new diesel and petrol ICE vehicles by 2030. Norway, one of the most progressive economies for EVs, is aiming for a 2025 target date. Meanwhile, several US states have announced a ban on ICE vehicles – Washington from 2027, California and Massachusetts by 2035, New Jersey by 2040, and Colorado by 2050. The District of Columbia is banning private and government ICE fleets by 2040. And 11 US states have committed to deploy 3.3 million zero-emission vehicles by 2025.
France, which aims for a five-fold increase in EV sales by 2022 compared with 2017, operates an effective bonus-malus scheme, which may resonate internationally. The “bonus” is an environmental reward of up to €6,000 (US$7,000) for vehicles costing less than €45,000 (US$55,000) that emit less than 20 grams of CO2 per kilometer. The “malus” is a tax of up to €20,000 (US$24,000) on the biggest polluting vehicles at the point of registration, which funds the bonus pay-outs.
Almost 300 low-emission zones within European towns and cities now ban polluting vehicles. Aside from accelerating EV uptake among zone residents, logistics and last-mile delivery businesses could be forced to either switch to EVs or pay a penalty to reach their urban customers. There are, therefore, environmental, social and commercial consequences of the electrification of transport.
As well as taking cues from Europe on ways in which to accelerate EV rollout, the US will pay heed, undoubtedly, to vulnerabilities too. Among them is the risk of polarization across federal lines. Despite inducements to electrify, EV take-up is disjointed across Europe. Economies that offer the best incentives and have the wealthiest populations account for the biggest take-up of EVs. But poorer nations are being squeezed out, with contingent implications for air quality and health.
The split is evident. Slightly more than 75% of all EV charging stations (pdf) are located in Germany, France, the Netherlands and the UK, and more than three-quarters of all EVs are sold (pdf) in those same countries, plus Norway. In the US, 38% of all EV sales in 2020 were in California. Work needs to be done globally to harmonize EV adoption and reverse polarization in poorer economies.