Updated Analysis on the EU Green Deal

The European Commission has announced proposed legislation that
will see a 55% reduction in light vehicle emissions from 2021 until
2030, with a transition to a 100% reduction by 2035 also part of
the proposals.

The proposal for light vehicles is part of a wider package of
measures from the European Commission relating to its ‘Fit for 55’
package of legislation aimed at slashing greenhouse gas emissions
across the European Union by 55% by 2030. As a consequence, if the
proposal is ratified by the European parliament, it will mean that
all new cars registered by 2035 will be zero emission vehicles
(ZEVs), while it also effectively amounts to a ban on ICE vehicles
in all but name by that point.

This will have massive implications for the electrification
strategies of the major OEMs operating in the EU market. Below, we
present data for passenger car powertrain type market share in EU
by 2030 as a result of the 55% CO₂ reduction target.

The data highlight the far greater emphasis on BEVs under this
new proposal. A 39.4% BEV share was forecast to be required to meet
the 37.5% reduction in CO2 by 2030 in the EU. Under the 55%
CO₂ reduction scenario this share is expected to reach
55.3%.

This acceleration of electrification across the EU will not only
affect OEMs. The market for lithium-ion batteries in the EU (for
passenger cars) would evolve, as the demand in 2030 would be pushed
from 354 GWh for the current 37.5% reduction target to 468 GWh for
the proposed 55% reduction target.

Such scenarios will also have a marked impact on some Tier 1
supplier business strategies as the demand for components for
traditional internal combustion engine (ICE) powertrains will of
course drop off at faster rate than anticipated under the original
37.5% reduction target. Indeed, rather than 60.3% of passenger car
registrations in the EU still using ICE by 2030, only 44.2% would
use them under the 55% reduction proposal.

It should also be noted that these will not be the final targets
and there is likely to be plenty of discussion as it is passed
between the European Parliament and European Council in the months
to come, as part of the process of it becoming EU law. This
certainly was the case before the 2025 and 2030 targets were agreed
in April 2019. However, there appears to be more and more political
momentum from the environmental lobby and from politicians of a
progressive nature, recognizing that previously imposed targets
have not gone far enough and that there needs to be a far more
aggressive target in place if the automotive industry is going to
meet the ‘Fit for 55’ targets.

“100% reduction from 2021 to 2035 level is
definitely a stringent proposal, this is by far the highest level
of stringency as compared to any other key markets with a steeper
year-on-year CO₂ reduction being expected over a period
of five years from 2030 to 2035 on new passenger car sales. To meet
2030 standards of 55% CO₂ reduction to 2021 level, we
may require 55% battery electric vehicle in the overall fleet which
equates to an overall battery demand of468 GWh by 2030.However, for
2035 we will indeed require significant investment into battery
electric vehicles and state wide charging
infrastructure.”

—Vijay Subramanian, Director – Global
CO₂ Compliance Forecasting, IHS Markit

Source: http://ihsmarkit.com/research-analysis/updated-analysis-on-the-eu-green-deal.html