The EU Officially Bans the Sale of Internal Combustion Engine (ICE) Vehicles from 2035 in Its Quest to Be “The World’s First Climate-Neutral Continent”

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By Kim Johnson | 3Q 2022 | IN-6626

With Europe aiming to be the first carbon-neutral continent by 2050, the European Union (EU) Parliament recently voted to make the sales of new Internal Combustion Engine (ICE) vehicles illegal by 2035.

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Market Disrupting Announcements Drive the Automotive Future

NEWS


News headlines are a daily influence in modern life, but few of them are changing the world as we know it, such as the recent Internal Combustion Engine (ICE) ban from the European Union (EU). With Europe aiming to be the first carbon-neutral continent by 2050, the EU Parliament recently voted to make the sales of new ICE vehicles illegal by 2035. This timetable is set to support a 55% reduction in carbon emissions from automobiles compared with emissions in 2021, up from a 37.5% Carbon Dioxide (CO2) reduction initially required last year. In response, automakers have insisted that a rapid transition to Electric Vehicles (EVs) can only be made possible with massive investments in charging infrastructure, as even customers who can afford an electric price premium have cited “range anxiety” (a driver’s concern that a vehicle has insufficient fuel or energy capacity to reach a destination) due to the lack of public charging stations as a challenge with converting to electric. Thus, to boost EV sales and mitigate range concerns, the EU has proposed legislation to install public charging points no more than 60 kilometers apart on major roads by 2025.

The Electric Vehicle Bandwagon Is Growing Globally

IMPACT


While the EU’s announcement of a 100% ICE vehicle ban is not the first of its kind, it is perhaps the first of its scale, leveraging the 27-nation bloc to accelerate the way that transportation is designed, fueled, and facilitated through infrastructure. According to the World Economic Forum, the EU joins over 40 countries and other regional and local governments that have signed legislation to accelerate the transition to EVs.

  • Norway: EVs hit 65% of Norway’s new car sales in 2021, and Battery Electric Vehicles (BEVs) are expected to be 75% to 80% of the Norwegian market in 2022. Norway has the earliest national target for phasing out new gas vehicle sales in the world by 2025.
  • United Kingdom, Germany, Denmark, Greece, Sweden, the Netherlands, Iceland, and Israel: These countries have ambitiously banned the sale of new gas and diesel cars from 2030.
  • China: China plans to phase out traditional gas-burning automobiles by 2035, calling for all new vehicles to either be “new energy” or hybrid by that time. By 2030, China has mandated to automakers that EVs make up 40% of new vehicle sales.  
  • Japan, South Korea, Italy, Portugal, Canada, and Hong Kong: These countries have banned the sale of new gas or diesel cars from 2035.
  • United States: In 2021, President Biden signed an Executive Order that sets a new target “to make half of all new vehicles sold in 2030 zero-emissions vehicles, including battery electric, plug-in hybrid electric, and fuel cell electric vehicles.” However, the United States currently lags behind in EV sales. According to Canalys, of the 6.5 million EVs sold in 2021, 3.2 million were sold in China mainland, 2.3 million EVs were sold in Europe, and 535,000 were sold in the United States. (In 2021, the 535,000 EVs represented about 4% of all new car sales in the United States, compared to China with 9% EVs and 14% EVs sold in Europe). Less than 1% of the 250 million cars, Sport Utility Vehicles (SUVs), and light-duty trucks on the road in the United States are electric, with 39% of EV registrations by state coming from California (a state executive order requires that, by 2035, all new cars and passenger trucks will be zero-emissions vehicles). As of 2022, 11 other states have followed California with plans to phase out new ICE car sales.  

Automotive manufacturers have been observing these market developments for years, while continually adapting and updating their own electric transitions. Several companies already have plans to make the switch to EVs before the EU deadline.

  • DS Automobiles: This French luxury brand is aiming to be 100% electric by 2024.
  • Volvo, Mini, Fiat, Daimler: These automakers plan to be all electric by 2030.
  • Stellantis: Stellantis is targeting 100% EV sales in Europe by 2030, with a 50% target in the United States.
  • Renault: Renault is targeting 100% electric in Europe by 2030.
  • Ford: Ford expects 40% to 50% of its global vehicle sales to be fully electric by 2030.
  • General Motors (GM): GM has pledged US$35 billion to introduce 30 EVs by 2025, with a goal of being all-electric by 2030.
  • Volkswagen: Volkswagen is aiming to increase sales to 70% EVs in Europe and more than 50% in the United States and China by 2030.
  • Toyota: Toyota shifted global EV sales targets to 3.5 million vehicles by 2030, up from 2 million, a target set in 2021. All models in the Lexus brand will be electric by 2030.
  • Honda: Honda is targeting an EV production volume of 2 million units per year in 2030, with a 100% EV sales target in North America by 2040.
  • Hyundai Motor: Hyundai's target of 1.87 million EVs annually by 2030 compares with its prior goal of 560,000 units per year by 2025.
  • Bayerische Motoren Werke (BMW): By the year 2030, at least half of the BMW Group's vehicle deliveries worldwide are set to be fully electric models.
  • Build Your Dream (BYD) Auto: BYD, China’s top EV manufacturer and the world’s largest EV automaker (if plug-in hybrids are included), announced in April 2022 that the company had stopped making combustion engine vehicles, and it would focus on full electric and plug-in hybrid cars only.
  • SAIC Motor Corp: SAIC Motor, the largest of the “Big Four” Chinese state-owned automobile manufacturers and ranked number 60 on the Fortune Global 100 companies, is targeting 1.5 million overseas sales units by 2025.
  • Tesla: When comparing all-electric vehicles, Tesla still leads the market, and the company is aiming to sell 20 million EVs per year by 2030. This is more than 50X what Tesla produced in 2019.

Despite Momentum, the Electric Vehicle Transition May Have Challenges Ahead

RECOMMENDATIONS


Governments around the world are driving a ground-breaking shift away from vehicles powered by fossil fuels to EVs, citing urban air pollution, human health, national security, and climate change as reasons for the switch. There are significant opportunities to reduce regional and global carbon emissions with these decisions. According to the Environmental Protection Agency (EPA), the transportation sector contributed to 27% of the 2020 greenhouse gas emissions in the United States, and a traditional gas-powered passenger vehicle with a 22-miles-per-gallon range emits an average of 4.6 metric tons of CO2 per year. With 284 million U.S. vehicles on the road in 2022, an EV transition could considerably reduce the United States’ total carbon emissions. In addition to reducing carbon, owners of EVs also report many other positives, such as lower ongoing costs (especially when gas prices are soaring), lower maintenance costs, immediate torque and acceleration response, a quiet engine, tax incentives, and the convenience of charging the vehicle at home.  

There are also challenges to the widespread adoption of EVs, and these obstacles will need to be met and addressed to achieve stated EV targets. Broader regional and national level challenges include insufficient EV charging infrastructure, a finite amount of critical minerals and metals available for use in manufacturing, high-carbon electricity grids (in many locations), risk of grid overloads, EV profitability, and inconsistent tax credits and incentives for EVs. Several of the consumer attitude challenges with EVs include: a high entry cost, limited driving range, access to consistent and reliable charging, time required to charge, and battery packs that can be expensive to replace.

Advancements in technology can help mitigate many of these issues, starting with improvements in battery storage, battery system costs, and EV range. Smart, adaptive charging technologies can allow unused power from car batteries to provide extra supply to the grid during peak demand, while conversely charging an idle vehicle during off-peak hours. Smart energy management systems can use Artificial Intelligence (AI)-driven technologies to integrate local renewable energy sources (e.g., solar or wind installations) with demand sources (e.g., EV charging, Heating, Ventilation, and Air Conditioning (HVAC) systems, and lighting), optimizing multiple assets connected to the grid, while ensuring a steady energy supply. Moreover, circularity systems and battery recycling companies will need to further develop end-of-life plans for EV batteries. Redwood Materials Inc. is a U.S. company founded by JB Straubel, the former co-founder and Chief Technology Officer (CTO) of Tesla, which recycles, refines, and remanufactures lithium-ion batteries into battery materials to be returned to the supply chain, without the need for additional mining of minerals and rare earth metals. Redwood’s technology recovers more than 95% of materials, including nickel, cobalt, lithium, copper, aluminum, and graphite from a lithium-ion battery. Finally, further educating the public and frontline auto sales teams about the benefits of EVs will be valuable, and providing consistent incentives and tax credits will help make the effective cost of owning EVs more affordable for all, while substantially reducing global carbon emissions.