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When is Europe going electric?

In 2020, 10.2% of all cars sold in Europe were electric (either hybrid or fully electric). This is a huge increase with respect to last years’ data. In 2019, for example, BEVs (Battery Electric Vehicles) and PHEVs (Plug-in Hybrid Electric Vehicles) accounted for only a 3.3% share of the market in Europe (EU + EFTA + UK).

In total, around 1.4 million BEVs and PHEVs were registered in Europe during 2020. This means a 137% increase compared to 2019.

This is significant also if compared to the global data. EVs (Electric Vehicles) global market share was 2.5% in 2019 and 4.2% in 2020 (43% increase).

In the graph below we can observe the difference from 2018 to 2020 of monthly plug-in vehicle sales.

Source: EV-Volumes

We ought to consider that the total market for vehicles has been highly impacted by COVID-19 all over the world, with the total market share decreasing by 14% compared to 2019. This is clearly visible from the EV-Volumes graph below, showing BEV+PHEV sales in 2020 and 2019 and percentage growth in EV Market and Total Market.

Source: EV-Volumes

Even though we are generally witnessing a very positive trend, there are a lot of discrepancies between European countries. In Norway, for example, the market share of plug-in cars was 74.7% in 2020!

Another remarkable example is Germany, where EV sales increased by 254% over 2019, with a more than average proportion of them (around 50% vs the global average of 31%) being PHEVs (plug-in hybrid).

Other countries, such as Italy or Spain, show significantly lower EV market shares.

In general, though, we can notice the advantage of European countries (compared to the rest of the world) for EVs penetration rate, as shown in Exhibit 2 of a McKinsey article (below).

Source: EV-Volumes

The encouraging data we are analyzing is mainly due to new policies that are being introduced within almost all European countries.

Just in November 2020, for example, the British Prime Minister Boris Johnson released his "Ten point plan for a green industrial revolution", which establishes ten points to “build back better, support green jobs, and accelerate our path to net zero” and sets up a ban on sales of internal combustion engine vehicles by 2030, 10 years ahead of schedule.

Johnson’s proposal needs to be seen from a global perspective. China said that half of all new cars must have full-electric or plug-in hybrid powertrains by 2035. Japan said it plans to halt or at least limit gasoline and diesel engine sales by 2035. The US, with the new Biden preceidency, will follow similar paths (they’ve already re-entered the Paris Agreement and plan to morve forward with the Green New Deal legislation).

The EU recently released its new Mobility Strategy (A fundamental transport transformation: Commission presents its plan for green, smart and affordable mobility) to reach carbon neutrality by 2050. Emissions from transportation will decrease by 90 percent by 2050, but new necessary targets must be reached by 2030. “In order to meet the targets put forward in the 2030 climate target plan and ensure a clear pathway from 2025 onwards towards zero-emissions mobility, the Commission will propose a revision of the CO2 standards for cars and vans by June 2021.”

New emission regulations pose important challenges for automakers. They force them either to adapt to these new policies to make sure they will be effective or face potentially huge economic penalties. These policies are not usually legally binding, but they contribute to the creation of a certain atmosphere within investors, consumers and other stakeholders, that plays a fundamental role towards more and more investments in the electric market.

As reported in an Automotive News article, an analysis in November 2020 from BloombergNEF estimates that “without a ban on fossil-fuel engines and other incentives, EVs would make up 42 percent of new-car sales in the UK in 2030 and 56 percent in 2035”. This means, as said by Bloomberg, that relying only on market forces would mean the UK blows past its climate goal of net-zero emissions by 2050. Below is shown the Bloomberg graph reported in the article.

In summary, the policies introduced by European countries force automakers to increase investments in electric vehicles and halt those in new fossil-fuel drivetrains.

Carlos Tavares, CEO of the new automaker Stellantis (formed by the merger of PSA and FCA) said in early 2021 that the group plans to "make electric vehicles affordable for the middle class" in the near future. He also projected that the new automaker will have “39 electric vehicles available by the end of 2021”.

Volvo CEO and President Hakan Samuelsson told the Financial Times Future of the Car Summit in December 2020 he "would be surprised if (we) wouldn't deliver only electric cars from 2030”.

Most of the European automakers are moving (or preparing to move) in the same direction.

One of many predictions about the future of the EV market (particularly in Europe) has been shared in the Automotive News article. Peter Wells, professor of business and sustainability and director of the Center for Automotive Industry Research at Cardiff University in Wales, predicts the possibility of seeing a domino effect in the industry.

He predicts there is going to be a pivotal moment, around 2025 or 2026, when a huge amount of EVs starts to emerge. From that moment on, the 2030 deadline for sales of internal combustion engines will start to look reasonable.

In summary, he predicts that the switch from gasoline and diesel vehicles to electric will happen faster than anticipated.

Cover picture: Pixabay



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