As I delve into the captivating world of renewable energy and sustainable mobility, I can’t help but feel a sense of excitement and optimism. The hum of change is palpable, and it’s music to my ears. While challenges persist, the opportunities that lie ahead are worth fighting for, particularly in the urban landscapes where emissions, congestion, and safety constitute major issues.
If we continue down the status quo path, these mobility problems will only intensify as population and GDP growth drive increased car ownership and vehicle miles traveled. But the mobility industry is not sitting idle. It’s unleashing a dazzling array of innovations designed to revolutionize the way we move, from mobility-as-a-service and advanced traffic management to freight-sharing solutions and new transportation concepts on two or three wheels.
At the heart of this transformation are three key drivers: regulation, consumer behavior, and technology. Governments and cities worldwide are setting ambitious targets and offering incentives to accelerate the shift to sustainable mobility. Consumers are becoming more aware and accepting of alternative modes, with a surge in shared bicycle and e-scooter usage. And the industry is pouring billions into developing cutting-edge solutions, from electrification and autonomous driving to connected vehicle technology.
The Tipping Point in Passenger EV Adoption
The tipping point in passenger electric vehicle (EV) adoption occurred in the second half of 2020, when EV sales and penetration accelerated in major markets despite the economic crisis caused by the COVID-19 pandemic. Europe spearheaded this development, where EV adoption reached 8% due to policy mandates such as stricter emissions targets for original equipment manufacturers (OEMs) and generous subsidies for consumers.
In 2021, the discussions have centered on the end date for internal combustion engine (ICE) vehicle sales. New regulatory targets in the European Union and the United States now aim for an EV share of at least 50% by 2030, and several countries have announced accelerated timelines for ICE sales bans in 2030 or 2035. Some OEMs have stated their intentions to stop investing in new ICE platforms and models, and many more have already defined a specific date to end ICE vehicle production.
Consumer mindsets have also shifted toward sustainable mobility, with more than 45% of car customers considering buying an EV. However, the continued acceleration of electrification is putting significant pressure on OEMs, their supply chains, and the broader EV ecosystem to meet these targets. This is particularly obvious with respect to setting up the required charging infrastructure.
Regional Differences and Accelerated Scenarios
Regulatory pressure and the consumer pull toward EVs vary greatly by region. Europe is mainly a regulation-driven market with high subsidies, while in China, consumer pull is very strong despite reduced incentives. In the United States, EV sales have grown slowly due to both limited regulatory pressure and consumer interest, although the regulatory trend is set to change under the new administration.
On a global level, we expect EV (BEV, PHEV, and FCEV) adoption to reach 45% under currently expected regulatory targets. However, even this transformative EV growth outlook is far below what’s required to achieve net-zero emissions. EVs would need to account for 75% of passenger car sales globally by 2030, which significantly outpaces the current course and speed of the industry.
We believe Europe, as a regulatory-driven market with positive consumer demand trends, will electrify the fastest and is expected to remain the global leader in electrification in terms of EV market share. In line with the European Commission’s target, which requires around 60% EV sales by 2030, several countries have already announced an end to ICE sales by 2030. Seven OEM brands have also committed to 100% EV sales by 2030 within the European Union. In the most likely accelerated scenario, consumer adoption will exceed regulatory targets, and Europe will reach around 75% EV market share by 2030.
China will also continue to see strong growth in electrification and remain the largest EV market in absolute terms. Uptake results from strong consumer pull despite low EV subsidies and no official end date for ICE sales. However, the government’s dual-credit policy has led to an increased EV share in OEMs’ portfolios. Our adoption modeling yields a Chinese EV share above 70% for new car sales in 2030 in the accelerated scenario.
In the United States, the Biden administration announced a 50% electrification target for 2030, strong investments in charging infrastructure, and more stringent fleet emissions targets. EV uptake will result mainly from regulatory support in California and other states that follow its CARB ZEV regulation. US OEMs support electrification targets and have declared ICE bans by 2035, meaning the United States will follow Europe and China in EV uptake with a small delay. It is expected to exceed current regulatory targets and reach 65% EV sales by 2030 in the accelerated scenario.
Implications for the EV Value Chain and Ecosystem
Achieving the accelerated scenario of around 75% EV sales by 2030 in the European Union will have significant implications for the entire EV value chain and ecosystem. In parallel, the industry must decarbonize the full lifecycle of vehicles to get closer to a net-zero target.
Incumbent automotive suppliers need to shift production from ICE to EV components, and Europe will have to build an estimated 24 new battery gigafactories to supply local passenger EV battery demand. With more than 70 million EVs on the road by 2030, the industry will need to install large numbers of public chargers and provide maintenance operations for them. Renewable electricity production needs to increase by 5% to meet EV charging demand. Finally, emissions from BEV production must decline since BEVs currently have 80% higher emissions in production than ICE vehicles.
The transformation of the automotive industry toward electrification will disrupt the entire supply chain and create a significant shift in market size for automotive components. Critical components for electrification, such as batteries and electric drives, and for autonomous driving, like light detection and ranging (LiDAR) sensors and radar sensors, will likely make up about 52% of the total market size by 2030. Components only used in ICE vehicles, such as conventional transmissions, engines, and fuel injection systems, would see a significant decline to around 11% by 2030 – about half the size of 2019 levels. This drastic shift will force traditional component players to adapt quickly to offset decreasing revenue streams.
The scale of disruption will be significant, with the Institute for Economic Research Ifo in Munich estimating that more than 100,000 jobs will change in the German automotive industry by 2030 – roughly five to ten times the scale of jobs compared to the phaseout of coal power that Germany announced for 2038.
Charging Infrastructure: A Crucial Piece of the Puzzle
In line with EV uptake, the buildup of charging infrastructure needs to accelerate to avoid becoming a potential bottleneck and limiting consumer-driven EV adoption. Building charging infrastructure in sync with the EV fleet will be essential in the coming decade.
While first-generation EV buyers relied mainly on private charging in 2020, with 80% of EV buyers in Europe having access to private charging, the next generation will depend on public charging. More than 50% of Europeans will be living in multi-family homes without private charger access, and public chargers will ensure the practicality of EVs for long-distance trips, which prospective EV buyers still consider a main concern.
Regulatory processes to install chargers in private homes require simplification, and production capacity for wall boxes must increase. Production scale-up and simplified regulation in terms of shortened permit and building times are also necessary for public chargers, in addition to the creation of demand-based coverage. We estimate the industry needs to install more than 15,000 chargers per week by 2030 within the European Union.
Ensuring the EU-wide coverage of public charging is essential to avoid having chargers located only in profitable locations. EVs are poised to command on average more than 5% of electricity demand in 2030 in Europe. It will be important to reduce charging during peak load periods through “managed charging” by controlling charging time, duration, and intensity, with vehicle-to-grid (V2G) technology as an enabler.
Decarbonizing the EV Lifecycle
There is a clear path to reducing CO2 equivalent (CO2e) emissions from passenger cars in operation. A recent International Council on Clean Transportation (ICCT) analysis stated that the shift from ICE to BEV would reduce total lifecycle CO2e emissions by around 65% based on the current average energy mix in Europe and by 83% with entirely green electricity.
As the electricity supply evolves and charging with green energy for a larger fleet of EVs becomes feasible, materials and production will become the dominant sources of emissions in an EV’s lifecycle. Today, an EV’s production generates almost 80% higher emissions intensity compared with an ICE car, due mainly to the battery and the vehicle’s higher share of aluminum.
To reduce material emissions, two main issues matter:
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Increasing recycled content: Replacing virgin primary materials with recycled alternatives can save a large share of emissions associated with the initial generation of raw materials. Replacing 30% of primary material with recycled material can save 15 to 25% of production emissions. However, challenges include the immaturity of end-of-life (EOL) collection and supply bottlenecks from other industries competing for recycled materials.
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Shifting to green raw materials: Using primary materials produced in a low- or no-carbon process enables high-grade materials with low emissions footprints. Examples include inert anode aluminum smelting via hydroelectricity or steel produced through hydrogen-based direct reduced iron in an electric arc furnace (H2 DRI-EAF steel). Around 80 to 90% of today’s typical material emissions can be eliminated with 2030 technologies.
A determined approach to decarbonizing and combining these methods could produce vehicles with 10 to 30% of today’s production emissions by 2030 – a challenging feat but necessary to fulfill the Green Deal aspiration. Nevertheless, decarbonizing the supply chain and achieving Scope 3 emissions reductions may cause vehicle costs to rise at a time when OEMs are trying to lower prices to boost consumer interest and achieve sustainable long-term margins.
Going Beyond Regulations: Additional Measures for Emissions Reduction
Current regulation and targets are not sufficient if the road transport sector wants to fully contribute to the 55% CO2e emissions reduction target by 2030 versus 1990 as required by the Fit for 55 program. However, passenger cars have one advantage over other industries from a decarbonization point: the zero-emissions option, i.e., the BEV, is cheaper than the current alternative, the ICE, from a total cost of ownership perspective in some countries today and by 2025 at the latest in countries without incentives. This is not the case in most other industries, where decarbonizing results in higher costs for both producers and consumers.
With the average car age at ten years in Europe, it will take time for EV sales to have an impact at the parc level. The current regulation on sales is therefore not sufficient to meet the goal of a 55% emissions reduction from 1990 levels by 2030. Closing this gap will require further measures targeting the CO2e emissions of the vehicle parc. ICE vehicle kilometers traveled could be decreased by reducing private car kilometers, increasing shared mobility, and changing consumer perspectives on walking and biking.
At the same time, the most efficient lever is to accelerate the ICE parc turnover and remove highly polluting ICE vehicles from the fleet with, for example, “cash-for-clunkers” programs for old ICE cars. Another way to reduce CO2e emissions from ICE vehicles is to increase the share of bio- and e-fuels, as these have a low carbon footprint and are compatible with the existing ICE parc. However, the majority of bio- and e-fuels supply will be required to decarbonize marine, aviation, and commercial road transport, for which only limited zero-emissions alternatives exist today.
Embracing the Transformation: A Collaborative Effort
Electric vehicles are coming, and we are on the right track regarding decarbonizing the transport sector, though more actions need to be taken. It is an industry transformation taking place at unprecedented speed, and it is also crossing industry borders, involving energy infrastructure, mobility, and automotive players.
While a major challenge, it represents a huge opportunity for incumbents and new players to take a leading role in creating new multi-billion-dollar industries and jobs. The key will be to couple sustainability with economic viability through innovative technology and properly guided mobility transformation.
Based on its diverse mobility landscape, its focus on sustainability, and its proven technology leadership, Europe could emerge as a role model for other regions globally. And as I continue to explore this exciting journey, I can’t help but feel a sense of anticipation for the transformative changes that lie ahead. By harnessing the power of renewable energy and sustainable mobility, we can drive the change we need to create a cleaner, more efficient, and more equitable future for all.
Remember, you can always explore more about our renewable energy solutions to see how we’re playing a part in this transformation.