China and Europe, both significantly large automotive markets, are pushing the EV trend forward, quickly, and its influence is and will be felt in other areas of the world — including North America.
Almost overnight, it seems, automakers are all but falling over themselves in a race to out-electrify each other. Manufacturers that never before paid more than token lip-service to the idea of electric vehicles (EVs) are committing billions of dollars to their rapid development. And consumers, especially here in North America, are collectively saying, “ho-hum!”
In spite of being enticed by up to $14,000 in incentives in some markets, for at least part of last year, EVs accounted for just 1 per cent of the market in Canada, and not much more than that in the U.S., in 2018.
So what’s the big attraction for manufacturers if the demand is not market-driven? Regulation! The automakers are being forced down that road.
It’s not regulation here in North America that’s driving that direction, however — although there is still some tightening of emission and fuel-consumption requirements on the books. It’s regulation in China and Europe that is compelling the worldwide migration to EVs.
China is the planet’s largest car market, with 22.7 million sales in 2018 — one-quarter of all the new cars sold world-wide. And it has been nurturing its homegrown EV industry for more than a decade, with various subsidies and incentives to the industry and consumers that are estimated to have exceeded US$60 billion from 2009 to 2017.
In 2018, approximately 1.2 million of what China calls “New Energy Vehicles” (NEVs), including both pure battery-electrics (BEVs) and plug-in hybrids, were sold in that country.
That penetration is said to be increasing rapidly in 2019, in spite of significant cutbacks in consumer incentives, and is expected to top 2 million by year-end. Looking further ahead, some forecasts predict NEVs will comprise 50 per cent of China’s market by 2025.
While direct incentives to buyers are expected to disappear after 2020, they’re being replaced by a NEV quota system, similar to California’s and Quebec’s ZEV programs, and a complex NEV credit system for manufacturers/importers. It combines the fuel consumption performance of an automaker’s combustion-engined vehicles with various NEV numbers and criteria, such as EV efficiency and range.
Like a carbon cap and trade system, it permits the buying and selling of surplus credits, and imposes penalties for credit deficits, including fines or production bans for the overproduction of inefficient IC-engined vehicles. The intended net effect will be to drive up the price of combustion-powered vehicles and drive down the price, thus increasing the attraction of NEVs.
If you’re an international automaker planning/hoping to sell in China, just do the math. Can you afford to ignore an electric-vehicle market that’s potentially more than 10 million vehicles, and growing, within five years? Then factor in the European scene. About 15.6 million new cars were sold there in 2018, almost as many as in the U.S. (17.2 million).
While Chinese regulations might seem motivated as much by industrial and political considerations as environmental, Europe is zealously committed to addressing the impact of climate change, and thus reducing the generation of CO2 — almost, some may suggest, to the exclusion of any other considerations.
While Chinese regulations might seem motivated as much by industrial and political considerations as environmental, Europe is zealously committed to addressing the impact of climate change, and thus reducing the generation of CO2 — almost, some may suggest, to the exclusion of any other considerations.
According to the International Council on Clean Transportation (ICCT), the European Union agreed in 2017 to reduce the average CO2 emissions from new cars by 15 per cent in 2025 and by 37.5 per cent in 2030, both relative to an already substantially diminished 2021 baseline of 95 g/km. (To put that number in perspective, the CO2 output of a 2019 Toyota Prius, based on Natural Resources Canada’s annual Fuel Consumption Guide, is 105 g/km.)
Add in the adoption of World Harmonized Light Vehicle Test Procedures (WLTP), which incorporate real-world, on-road driving test protocols with mobile test equipment, and the magnitude of the challenge becomes evident.
Then combine the EU’s requirements with those of China and it quickly becomes apparent that, by 2025, the only means of satisfying the regulations applicable to more than 40 per cent of the world’s new-car sales will be with some level of electrification in many, if not most of them — regardless of what regulations we in North America may adopt.
That’s why so many international automakers have already committed to the massive adoption of EVs.
As for North America, we’re in something of a regulatory limbo. Current regulations in force in the U.S., and thus in Canada via harmonization, still require steady ongoing reductions in CO2 output from cars, not dramatically different than Europe’s. But there is strong presidential pressure to freeze those regulations at 2021 levels. All of which means, in terms of influencing the direction of powertrain technology on a global scale, we’re pretty much along for the ride!
