Hybrid Electric Car Demand To Go Up As EU Revises Its Climate Goals

Industry analysts predict that the year 2020 is going to be a good year for electric cars and other electric vehicles as the year could see unprecedented growth in their demand on account of the new European Union environmental regulations that came into effect on 1 January 2020. The Union, which is trying to fastrack its environment goals, had enacted the regulation that would require carmakers in the Union to restrict the carbon dioxide emissions from the vehicles manufactured by them to 95 grams per kilometre. Should a vehicle exceed that limit, the manufacturer will be fined €95 for every extra gram exceeded over the stipulated limit multiplied by the number of such units manufactured by the company. This target, as per industry observers, is very difficult for most carmakers to comply with in the short run, given that the only option left at their disposal is to increase the production and sale of electric vehicles.

The world has been making a beeline for electric cars in the recent past. The advent of lithium-ion batteries has brought with it the possibility to make electric vehicles with similar levels of performance characteristics as compared to vehicles with Internal combustion engines with comparable efficiency levels. The widespread usage of these batteries in electronic devices like laptops and cell phones has ensured that manufacturing of these batteries has expanded rapidly, leading to a fall in their unit prices. Over a period of past five years, several manufacturers have emerged across the world who are offering electric vehicles, and the number of these vehicles have also been increasing exponentially. Two countries which have been leading the charge in this field are China and the United States, which have for several years done extensive work for the development of and widespread adaptation of these vehicles. European Union, in its ambition to lead the world in innovation and business competitiveness, seems to have taken it upon itself to make the continent a leader in electric vehicle technology. These enhanced regulations in a way will make life more difficult for the manufacturers of internal combustion engines and will hasten the process of its replacement with electric vehicle technology.

Traditional Internal combustion engine cars are responsible for 12 per cent of carbon dioxide emissions in the European Union. The Union started putting emission targets on cars from the year 2009 when the first regulations were slated to come into effect in the year 2015. The target set for 2015 was 130 grams of  per kilometre and would apply for all new cars produced. This emission norm entailed that fuel consumption for petrol vehicles would be no more than 5.6 litres per 100 kilometres and would not be more than 4.9 litres per 100 km of diesel. However, the manufacturers in the European Union were able to meet these targeted norms in the year 2013 itself and by 2018 the emission levels of new cars manufactured in European Union and Iceland was as low as 120.4 g of  per kilometre as per data compiled by the European Environmental Agency. This, among other reasons, prompted the Union to revise its timeline to bring about more stringent emission norms. The Union enacted the new regulation on 17 April 2019 under regulation number 2019/631 for new passenger cars and for new light commercial vehicles applicable starting from 1 January 2020. The target this time around is average emission target for new cars will be 95 g   per kilometre which corresponds to fuel consumption of around 4.1 litres for 100 km for petrol vehicles and 3.6 litres for 100 km for diesel vehicles. These regulatory requirements are, however, subject to a phase-in period. These emission targets will apply to each carmaker’s 95 per cent least emitting new cars with the norms fully applicable to all newly manufactured cars from 2021. The penalty amount will remain the same as they were at the end of the 2015 regulation period, of €95 for every extra gram exceeded over the stipulated limit per kilometre multiplied by the number of such units manufactured by the producer. Emission credits are allowed to manufacturers who claim usage of innovative technologies that are able to reduce carbon emissions, but where the efficacy of the technology could not be proven with stipulated test data within the set period. The maximum credits permissible for such innovations would be 7 grams per kilometre per year and the emission savings have to be demonstrated via independently verified data.

Market watchers of the European car industry estimate that these new regulations will wipe out nearly €8.4 billion in profits from the coffers of the car manufacturers. The market observers point out that in order to meet the norms, lower-emitting plug-in hybrid electric vehicles which the new regulations are targeting to encourage will need to increase in number by at least sevenfold in between 2019 and 2021. This, the market watchers point out, will lead to a price war as more and more manufacturers rush to conform to these norms. Again, there is the risk of the real-world performance of these vehicles, which some experts point out are at least three times higher than the laboratory performance of these vehicles. Several experts point out that real-world conditions are quite different from the laboratory conditions and seldom, if at all, give a clear picture of how the vehicle will behave in the hands of a consumer who would subject the vehicle to less than optimum conditions as part of daily usage. They point out that consumers often forget to charge these vehicles which would put additional load on smaller engines of these lower-emitting plug-in hybrid electric vehicles, resulting in greater emissions than an energy-efficient internal combustion engine vehicle. In light of the above, the regulations this time around may not be able to achieve the same success as have been achieved the previous time around. Putting the additional burden on manufacturers could also lead to foul play by car manufacturers to circumvent the regulations, which would mean an additional threat that the fulfilment of these regulations would turn out to be contrary to the expectations.

The only option left then would be to adopt fully electric vehicles which under the framework of these regulations are considered fully emission-free. There are several manufacturers in the European Union who are at various stages of development as far as electric vehicle technology is concerned. There are some who are lagging behind others and would struggle to meet the regulations in time. There are others who are better prepared, and there are still others who would pool together resources with zero-emission car companies like Tesla Motors to meet their norms target.

There are several new electric vehicles lined up for rollout in 2020 in Europe namely: Volkswagen ID.3 by Volkswagen to be priced close to £26,000, Vauxhall Corsa-e by Peugeot to be priced close to £26,490, Tesla Model Y offered by Tesla Motors to be priced close to £30,300, Ford Mustang Mach-E offered by Ford motors for a price tag close to £35,000 and Fiat 500 Electric offered by Fiat Chrysler Automobiles which is set to be priced close to £28,000 apiece.