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The future of the Automotive Industry following the EU's ban on ICEs

Source: Pexels

As the clock ticks towards 2035, Europe gears up for a revolutionary shift in its mobility and transportation ecosystem. The impending ban on internal combustion engine (ICE) vehicles marks a bold leap towards a greener future. But what will it entail for the people of Europe, whether they own a car or not? 

The European Green Deal is a comprehensive policy framework proposed by the European Commission to address climate change, promote sustainability, and transition toward a greener economy. It encompasses various initiatives, including measures to reduce greenhouse gas emissions, enhance energy efficiency, and promote clean mobility. In this sense, the Green Deal has included a proposal to reduce car emissions by imposing a ban on the sale of new ICE vehicles by 2035. The plan faced extensive resistance, most notably from Germany, which came up with the proposal of allowing cars that run on e-fuels to still be produced after 2035. Although these e-fuels are technically carbon neutral, they are still inefficient, and their production process is energy-intensive. 

Until now, the emissions from transport accounted for a quarter of the total greenhouse gas emissions in Europe. However, with the already existing legislation, emissions have steadily decreased year by year: by 12% in 2020, 12.5% in 2021 and 5.3% in 2022. This is said to mainly be a consequence of the surge in both the supply and demand of electric vehicles on the European market, proving the efficacy of the plan and increasing our hope for a greener and cleaner continent.

Source: EEA

Peeking at the automotive market as it is right now, the average person might still find EVs to be too expensive, since the difference in price between traditional vehicles and electric ones is, most of the times, staggering. The economists at BloombergNEF have taken this into account and conducted an analysis, which showed that the 2 categories should reach price parity between 2025 and 2027, depending on vehicle type. This is largely thanks to the expected decline in battery prices due to lower material costs and economies of scale.

Source: BloombergNEF

Another important point to consider is the change in demand for oil. It is likely that, due to a reduction in a need for traditional fuels, the EU will rely less on imports, therefore enhancing energy independence and stability. Following the recent Ukraine conflict, it has become evident that the compromise of political steadiness can jeopardize the entire continent’s energy supply, so any extra prevention is more than welcome. Since Europe's oil imports largely come from politically volatile regions, reducing oil dependency could lead to enhanced energy security and less exposure to the geopolitical tensions that often accompany energy trade with unstable regions. The IEA published a report stating that oil demand is expected to slow down globally after 2028: “In particular, the use of oil for transport fuels is set to go into decline after 2026 as the expansion of electric vehicles, the growth of biofuels and improving fuel economy reduce consumption.” 

However, adverse consequences should also be taken into account. For example, jobs in the automotive sector might take a hit: the transition to EVs will mean less jobs related to manufacturing processes of ICEs. This decline in workplaces is already noticeable in countries that are rapidly adopting EV technology. Furthermore, this change might impose economic challenges to areas with a high number of traditional automotive manufacturing facilities, such as Germany. As of now, Europe produces around 25 percent of all passenger cars and 19 percent of commercial vehicles worldwide. Several smaller components suppliers, who specialize in manufacturing parts for ICEs, will have to close shop.  Although this revolution, if the automotive industry will also create new opportunities for professionals, they might need support for additional skill development. Workers in traditional automotive manufacturing roles may need to acquire new skills related to electronics, software, and sustainability practices to align with the demands of the EV market. New regulation and policies need to be put in place to ensure a smooth transition for the affected individuals.

Additionally, even if you do not plan on ever getting behind a wheel, you might still notice the effects of the ICE ban. As cities reduce reliance on ICE vehicles, there's a corresponding increase in infrastructure that supports alternative modes of transport. This includes broader sidewalks, bike lanes, and more accessible public transportation options. With some luck, car-centric infrastructure might soon become a relic of the past.

Looking ahead, the journey to 2035 will reshape Europe in terms of mobility. As we transition away from ICE vehicles, every individual's choices become crucial in sculpting a sustainable legacy for future generations.



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