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Forecasters predict ever larger sales of battery electric vehicles (BEV) in Europe, but the pace of increase is about to stumble for two to three years as manufacturers take advantage of European Union (EU) regulations allowing a highly profitable and perhaps last hurrah for gasoline vehicles, according to Schmidt Automotive Research (SAR).
BEVs took just over 2% of the European market for cars and SUVs in 2019 and are set to soar by 2025, with mainstream forecasters seeing a market share of between 21 and 23% in 2025. In 2020, BEV sales more than doubled as manufacturers rushed to meet harsh new carbon dioxide (CO2) emission standards.
But there is going to be a pause until the EU regulations tighten again in 2025 and carmakers are taking advantage of this by switching back emphasis to internal combustion engine (ICE) production, including profitable hybrid technology, SAR said in a report.
European countries like Britain have banned the sale of new ICE cars by 2030. Other big producers in Germany and France have yet to decide whether to join this ban.
SAR editor Matt Schmidt said between 2022 and 2024 BEV penetration into Western Europe will rise only about 3 percentage points and will reach just 15% in 2025.
This would be a significant shortfall for much of Europe’s carmakers, particularly for Volkswagen, which has a BEV target in Europe of at least 25% for 2025. Western Europe dominates European sales and includes Germany, France, Britain, Italy and Spain. VW and other manufacturers might be able to make money selling time-limited ICE cars but could face a massive overhang of unsold electric cars. VW has promised to spend €35 billion ($43 billion) on BEVs with the aim of manufacturing 70 different models by 2030. Other car makers have invested hugely in all-electric models with similar targets for market share in 2025.
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“BEV penetration growth is also expected to be tempered by a returning ICE market regaining traction following the Coronavirus impact. BEV volumes are expected to increase from 1.045 million (8.5% market share) in 2021 to 1.31 million (10%) in 2022, 1.54 million (11%) in 2023 and to 1.86 million or 13.0% penetration in 2024,” Schmidt said.
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Data specialist IHS Markit
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Schmidt said for Western Europe, BEV sales will account for 55% of sales in 2030, which would mean actual sales of 7.7 million in a 14 million market. This takes account of a likely tightening of CO2 targets for 2025 by the EU later this this year.
The EU CO2 rules insist sedan, hatchback and SUV makers raise average fuel efficiency by curbing CO2 emissions which in the world of gasoline and diesel translates to the equivalent of about an average 57 miles per U.S. gallon in 2020/2021, up from 41.9 mpg in 2015, tightening again by 15% in 2025, and hitting 92 mpg by 2030.
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The rules for 2025 are expected to be tightened again this summer, giving carmakers another incentive to make profits from ICE cars before the regulations make them unaffordable. VW has said it will be impossible to produce and sell little ICE powered VW Ups or Polos by 2030 and make money.
VW has said 70% of its European sales will be BEV by 2030, while Jaguar and Ford have gone for 100% electric by then. Britain has said only new electric cars and some gasoline electric hybrids will be allowed to be sold by 2030. Other big European nations are considering this but have not decided yet.
If German elections in September end with success for the Green Party that might be the end of new ICE car sales in Germany. Opinion polls show this is a possibility.
