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The Make Or Break Factor For Electric Vehicles

Irina Slav

There is no carmaker without an EV plan--usually a costly EV plan. Volkswagen, by far the most ambitious among them, has plans to pour $66 billion (60 billion euro) in EVs and hybrid cars, eyeing 75 EV models and 60 hybrids by 2029.

The question is: who will buy them?

The noise that the media make about electric vehicles is often so loud it is difficult to distinguish between fact and wishful thinking. It is a fact that EV sales are growing and that they are growing fast. It is wishful thinking that within two decades, most cars on the roads will be electric. The discrepancy between fact and wishful thinking could play a bad joke on carmakers.

The likelihood of a bad joke is quite significant, Neil Winton, a former automotive correspondent for Reuters in Europe, warned in a recent article for Forbes. In fact, it is so significant that it could end up costing carmakers quite a lot of money.

Winton has reviewed the data: most industry market forecasts see the portion of EVs as percentage of the global fleet remaining modest well into the future. IHS Markit, for example, sees EVs accounting for a little over a tenth of the car market in 2025 and 14.8 percent in 2030. LMC Automotive puts the percentage of EVs on the roads in 2030 at 17 percent. Fitch has forecast that EVs will make up a measly 7.3 percent of car sales in Europe by 2028.

Meanwhile, Volkswagen plans to get as much as a quarter of its sales from EVs not by 2030, but by 2025. By 2030, according to the auto giant’s plans, this percentage should rise to 40 percent. Now, if VW was the only carmaker in Europe, the plan could probably work without a hitch. Yet VW is not the only carmaker in Europe, and all its rivals have their own EV plans.

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BMW plans on selling 25 EV models by 2023. To this end, the company has sealed a long-term battery supply deal worth more than $11 billion with Chinese CATL and another deal, worth over $3 billion, with Samsung SDI for electric drivetrains. This, by the way, is the same company whose executive Klaus Froelich said earlier this year that EVs were overhyped, adding that there were “regulator requests for [all-electric vehicles], but no customer requests.”

Accurate or not about the overhype, Froelich’s remark about the discrepancy between regulatory pressures and buyer preferences was spot on. The European Union has extremely ambitious emissions targets and to hit them, it needs less internal combustion engines on European roads. A lot less.

By 2021, according to the EU targets, local carmakers must have a fleet average emission level equivalent to 57.4 miles per U.S. gallon of fuel, Winton notes. This rises to 92 miles per gallon by 2030. Failing to meet these emission targets could cost carmakers as much as $37 billion. No wonder they are racing to make electric cars.

Sales of EVs are surging in Europe. During the first eight months of this year, some 320,000 EVs and hybrids were sold in Europe. That constituted 3 percent of total sales, which does not exactly bode very well for the future of EVs in Europe.

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Of course, not all EV sales forecasts are so gloomy. BloombergNEF, for instance, expects that EVs will constitute 57 percent of the global car market by 2040. Yet these forecasts also include electric buses, which are a huge thing in China and likely to become equally huge elsewhere, too. But VW, BMW, and their U.S. rivals with EV plans for Europe don’t make buses. They will have to rely on buyers who may be environmentally conscious but also range-conscious.

Range anxiety is the make-or-break factor for the future of EVs. You can tell people your cars are a lot better for the environment than a gasoline SUV, but the buyer will want to know how long they will be able to drive before having to charge it and, not to put too fine a point on it, how long charging will take. These are the issues carmakers had to address before making their megaplans that will cost them billions. These will also be the issues that might turn the EV cart over unless the industry, with the help of the EU, manages to change buyers’ thinking in a year or two.

By Irina Slav for Oilprice.com

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