Automakers have over-estimated the market for electric vehicles and will waste millions as they are eventually forced to reinstate plans to dump internal combustion engines (ICE), according to a report published by Jefferies University.
But this is still very much a minority view, and frontline forecasters are sticking to their view that particularly in Europe the electric revolution is for keeps and ICE power’s days are numbered. LMC Automotive retains its prediction battery electric car sales in Europe will accelerate to 61.2% of the market by 2030, up from 9.6% last year, while Schmidt Automotive reckons 60% of sedan and SUV sales in Western Europe will be battery electric vehicles (BEV) by the end of the decade.
The report, authored by Michael C. Lynch, president of Amherst, Massachusetts-based Strategic Energy & Economic Research, expects global BEV sales will be closer to the lower 20% of the International Energy Agency’s (IEA) 3 scenario forecast of 20/40/60% by 2030.
The report said general praise of electric cars’ abilities has been exaggerated, and massive sales predictions for 2030 have little chance of being met. The improvements in battery technology, lower prices, and the needed infrastructure improvements aren’t likely to take place. Media coverage has been dominated by enthusiasts who exaggerate electric cars’ qualities and ignore their drawbacks, including the high price. The environmental advantages of BEV versus ICE power is often close to non-existent. The industry’s obsession with mobilizing massive investments to try and make BEVs equal performers with ICE will fail. Long-range, high-speed travel is beyond BEV’s pay grade. This blind-alley should be replaced by a realistic view of electric car advantages – terrific commuting and local everyday shopping and school run vehicles – and cheaper, less powerful batteries should be the goal with demand spurred by utility, not taxpayer subsidies.
Manufacturers’ massive investments are in jeopardy.
“Half a trillion dollars are at risk. It is estimated that over $500 billion has been committed by automakers on BEVs and batteries over the next 5 to 10 years. German automakers are planning $185 billion by 2030, Chinese over $100 billion, while Ford and GM intend on spending $60 billion by 2025. The major Japanese automakers have only committed $40 billion, perhaps because they are also promoting both hybrid gas-electric vehicles and hydrogen fuel cell vehicles as more promising alternative,” the report said.
Ford Motor has just announced it would launch 3 new battery-electric cars and 4 vans in Europe by 2024. Ford and other major car manufacturers including Renault, Peugeot, and Volvo, have declared they will be all-electric in Europe by 2030. Volkswagen has said 70% of its European sales will be all-electric by 2030, Mercedes hopes to achieve all-electric by then, while Jaguar will do it by 2025.
This move to embrace all-electric vehicle lineups in Europe has been forced by European Union (EU) legislation which makes carbon dioxide (CO2) emissions so strict from ICE vehicles, that battery-electric will really be the only option. In turn, the rapid growth in electric car sales has been ignited by huge government subsidies.
According to Schmidt Automotive, battery electric vehicle (BEV) sales will reach a market share of 60% in Western Europe by 2030, or 8.4 million vehicles. BEV sales more than doubled in 2020 to just under 750,000 and jumped again in 2021 with sales of 1,143,000 or 10.3% of the market.
This represents a rarefied and high-priced market either of the very well-heeled, or those with vehicles paid for by their employers. Some manufacturers worry that as entry-level ICE cars are priced out of the market, people on average incomes will be forced out of their cars and on to public transport. This has ominous implications for the future of mass car manufacturers used to piling ‘em high and selling ‘em cheap.
Stellantis CEO Carlos Tavares warned last year automaker’s finances will be hard hit under these circumstances.
“Over the next 5 years we have to digest 10% productivity a year in an industry which is used to delivering 2 to 3% productivity improvement. The future will tell us who is going to be able to digest this, and who will fail. We are putting the industry on the limits,” Tavares said.
Stellantis was formed by a merger of Groupe PSA and Fiat Chrysler Automobiles in 2021 and comprises brands including Peugeot, Citroen, Opel, Vauxhall, Fiat, Chrysler, and Alfa Romeo and is the second biggest brand grouping in Europe behind Volkswagen.
And last year Tavares said this.
“I can’t imagine a democratic society where there is no freedom of mobility because it’s only for wealthy people and all the others will use public transport.” Tavares complained that the regulations on CO2 emissions had been political and were not designed by the industry. He said it would have been better to have approached the problem with a less radical approach and gradually replaced ICE vehicles with electric ones.
“I think we could have been more efficient with multiple technologies, not one single technology,” said Tavares.
The Jefferies report cites International Energy Agency (IEA) forecasts for global BEV market penetration with 3 scenarios between 20, 40, and 60% by 2030, and contrasts this with the number of automakers “who plan to have 50 or 100% BEV sales by 2030, and it becomes obvious that those goals are unrealistic, requiring assumptions of either massive increases in government support and/or major technological breakthroughs. Either is possible, neither is very likely.”
LMC Automotive expects global BEV sales to reach 33.2% of the market in 2030 at 30.7 million, up from 6.8% last year. China’s sales will hit 38.3% (12.2%) in 2030, while the U.S. will lag behind with 35% (2.8%)
Al Bedwell, analyst with LMC Automotive, said BEVs will win, not least because ICE ones will be outlawed by governments.
“In Europe and China, over time ICE cars simply won’t be allowed to be sold so there will be no choice. What you could get, if BEVs remain a lot more expensive than ICE, is that the market shrinks, but I don’t think the transition to zero-emission vehicles, primarily BEV, can be stopped unless net zero (CO2) goals are abandoned – and that seems unlikely,” Bedwell said.
Auto analyst Matt Schmidt, who publishes the monthly European Electric Cars Flash Report , said the idea ambitious targets wouldn’t be achieved was mostly from a U.S. perspective.
“Momentum is certainly there in Europe. Manufacturers are bringing more BEVs on dedicated platforms and aim to achieve economies of scale and meet new CO2 levels set to be implemented from 2025. That momentum increases further from 2027 when tighter EU rules are introduced for new models and profit parity will likely be met and the tipping point will likely be achieved where the majority of new car sales in Europe is headed towards 50%. From 2028 we will see manufacturers exit the ICE race as they can’t see a business case and go pure EV,” Schmidt said.
But the Jefferies report thinks this won’t work and carmakers will be forced to reinstate ICE production.
“Ultimately, it seems probable that many automakers will have to redesign their vehicle lines and retool their factories to accommodate a larger-than-expected share of ICEVs in their sales. This could translate into major financial losses and higher costs for consumers over the long run. The energy transition could will continue and be very successful, but with a much greater emphasis on decarbonizing power generation, and the much-hyped electric vehicle revolution could prove yet another object lesson in irrational exuberance.”
The report says for BEVs to succeed at the level assumed by governments and manufacturers they need to achieve more than the niche level they have reached as luxury vehicles. As for battery development, the assumption that prices will inevitably fall to the level of general affordability has come under pressure lately as supply chains buckle and political events like Russia’s war with Ukraine unexpectedly intervene. The report also disputes the claim BEVs are relatively clean, citing China’s dominance in electric carmaking, but with a “heavy reliance on coal”.
Wouldn’t it be more realistic for the automotive industry to acknowledge the strengths and weaknesses of electric vehicles and concentrate on smaller vehicles with less powerful batteries?
“Yeah, I basically agree,” Lynch said in an email exchange.
“I think the physics of energy storage now means that BEVs are going to be mediocre, expensive vehicles – ‘expensive toys for rich boys’. The weaknesses of the BEV are far more important for long-distance travel, as you say, and I agree that the BEV would make a nice cheap commuter car—if it can be made cheaper. Kind of like a microwave oven, which is very handy but not good for everything. But if microwaves were 50% more expensive than a conventional oven, their market share would be much lower,” Lynch said.