European Auto Industry Hits the Accelerator on Electrification

The European automotive industry eschewed electrification in favor pursuing fuel efficiency and greenhouse gas (GHG) emissions reductions through diesel for much of the last several decades. Then came the near simultaneous combination of the Volkswagen diesel emissions cheating scandal and the dramatic growth of Tesla. Following several years of tentative steps to electrification mainly with mild and plug-in hybrids, in recent weeks and months, many of those same companies have decided that now is the time to put the accelerator to the floor and go all electric.

Jaguar, Ford of Europe, and most recently Volvo have announced that they will stop offering vehicles with internal combustion engines (ICEs) within this decade. Jaguar, which has struggled in recent years, was first with its announcement that it plans to offer only battery EVs (BEVs) by 2026. Ford of Europe announced that by 2026 all of its passenger vehicles will be either plug-in hybrid EVs (PHEVs) or BEVs. By 2030, the company will transition to BEVs exclusively. Volvo Cars announced a goal to have all of its sales be either PHEVs or BEVs by 2025, and get to 100% BEVs by 2030.

What Is Driving This Pivot?

This transition is driven primarily by regulations and competition. Companies make altruistic-sounding announcements all the time and in many cases even back them up with action such as Volvo’s long-standing commitment to safety technology. However, ultimately the overall course is decided by what is best for the business.

Countries around the world are moving to ban sales of new ICE vehicles by the mid-2030s or sooner. Many cities are also making moves to ban diesel vehicles from urban centers in the next few years, with gasoline vehicles not long after. Starting in 2020, automakers in Europe also had to achieve fleet average GHG emissions of 95 g/km. By 2030, emissions are expected to drop to 45 g/km, a level that will not be achievable with ICE vehicles.

Then there is the challenge of competition. Tesla is the biggest player in the BEV segment, but it is far from the only new automotive brand. Numerous new BEV manufacturers have sprung up in China in recent years such as NIO, XPeng Motors, Li Auto, and others. Until now, Chinese automakers have struggled to gain a foothold outside of their home market, but this new breed is turning out compelling new products and several are either starting to export to Europe, or soon will. Europe always had an advantage in availability of fuel efficient vehicles thanks to taxation policies that made gasoline and diesel far more expensive than it is in North America. These pressures make the transition to BEV all but inevitable.

Are These Targets Achievable?

While there is definitely growing consumer demand for BEVs in Europe, the industry faces many challenges in achieving these targets. Battery cell production and raw material production must ramp up dramatically while minimizing the environmental effect of mining. Public charging infrastructure must also continue its expansion, especially in cities where many drivers rely on street parking. Europe will also grapple with the shift in labor requirements. Battery and motor production is more automated than ICEs. Direct employment at automakers is likely to decline.

These are all challenges that can be overcome, especially with years to make the transition. The transition, however, won’t be easy or painless. But it must be done to meet the larger goal of addressing climate change and air quality.