EU emissions targets would mean 55% EV sales in 2030, analysts say

PARIS – Under the European Union's proposed new emissions targets, automakers selling vehicles in the trade bloc will need to increase their mix of full-electric vehicles to 55 percent by 2030, according to analysts' forecasts. 

That represents a more than 500 percent increase from EVs current market share in western Europe, which is about 9 percent. 

The European Commission's "Fit for 55" proposal, issued Wednesday, calls for a 55 percent cut in CO2 from 2021 levels by 2030 -- ahead of an outright ban on sales of internal combustion engines on Jan. 1, 2035. It will likely be the subject of intense negotiations and will require approval of EU member states.  

An interim 2025 target of a 15 percent reduction remains in place, setting the stage for mass electrification toward the end of the decade. 

Reaching those CO2 targets from the current fleet average of 95 grams per km will require a seismic shift toward full-electric vehicles, analysts say. A 55 percent reduction would mean an average of about 42 g/km of CO2, although each automaker will have its own targets based on 2021 levels.  

"This will have massive implications for the electrification strategies of the major OEMs operating on the EU market," Tim Urquhart and Ian Fletcher of IHS Markit wrote in a report on Wednesday.  

Electrified vehicles reached an 18.4 percent market share in the first half of 2021 in the 18 western Europe countries, according to Matthias Schmidt of Schmidt Automotive Research, approximately evenly split between full-electric and plug-in hybrids. 

The current 2030 target of a 37.5 percent cut from 2021 levels would have shifted that mix to nearly 40 percent full electric, with the plug-in hybrid figure holding steady at 10 percent, IHS Markit said. A 55 percent cut would require 55.3 percent EVs, IHS said.  

That still leaves about 45 percent of sales – at 2019 levels, about 7 million vehicles in Europe – with some kind of internal combustion engine. The mix of plug-in hybrids will hold steady at 9.6 percent; full hybrids would decline slightly to 11 percent from 14 percent; and mild hybrids, which offer only modest emissions gains, would decline to 23.4 percent from 34.2 percent in the first half of 2021, IHS said. 

Just a tiny fraction, 0.01 percent, would have a non-hybrid combustion drivetrain. 

Nonetheless, automakers have clearly been preparing for the stiffer targets, which were signaled at the end of 2019 when the new European Commission under President Ursula von der Leyen was seated. The EC's "Sustainable and Smart Mobility" package in late 2020 called for no less than 30 million zero-emission cars on European roads by 2030. 

Nearly every automaker that sells in Europe has recently presented analysts with a detailed road map for electrification. These "EV Day" events have outlined everything from battery chemistry to profit margins to partnerships on gigafactories, with announcements of tens of billions in EV investments.

"There may be some rumblings of discontent about the severity of these new targets," IHS said, but "it seems unlikely that it will present any shocks of knee-jerk responses, given that this has been the broad direction of travel for the industry for some time."  

A recent report from the environmental group Transport & Environment ranked Volvo and VW as best prepared for the transition, followed by Renault Group, with Jaguar Land Rover and Toyota at the bottom of the list. 

Automakers "that have been bolder and invested heavily early on in electrification will have a significant advantage," IHS Markit said.  

The EU, however, has eased the landing for automakers in the proposal, notably with requirements that member nations finance expanded networks of fast-charging stations to ease "range anxiety" for EV owners.  

They would require fast-chargers every 50 km (31 miles) on countries' "core networks" of roads, with 3.5 million charging points by 2030 compared with 165,000 in 2019. 

"Targets being set at country level removes additional pressure for [automakers] to invest in charging," Jefferies analyst Philippe Houchois wrote.   

The new proposals also give a lifeline to plug-in hybrids, which have come under criticism for having higher real-world emissions than as-tested levels. Zero- and low-emissions incentives would continue to apply to plug-in hybrids with CO2 emissions under 50 g/km until 2030. 

"PHEVs could, in our view, evolve with larger batteries and efficient range extenders delivering better life-cycle emissions," Houchois noted. 

One debate the proposal is likely to touch off revolves around inequality, with residents of wealthier countries such as Norway (57 percent EV sales in the first half of 2021) able to absorb the costs of the transition but those in poorer countries such as Greece (2 percent EV sales in the first half) struggling to afford more-costly EVs and put in a comprehensive charging network. 

"As is the case with the distribution of charging infrastructure, there is a clear split in the affordability of electric cars between central-eastern Europe and western Europe, as well as a pronounced north-south divide," said Eric-Mark Huitema, the director general of the European automaker lobbying group ACEA.

Von der Leyen said on Wednesday in Brussels that an EU-wide transition fund would help the less-well-off with direct payments and also support innovations that could lower costs.  

Pointing specifically to EVs, she said: "If demand rises and the supply rises, prices tend to come down."