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Why Car Manufacturers in Europe are Determined to Sell Electric Cars

Why Car Manufacturers in Europe are Determined to Sell Electric Cars

Even though Europe is the second biggest market for electric cars after China, ahead of North America, but for many car manufacturers, they are still not selling enough electric cars. This is mostly because of Europe’s ambitious goal to become net neutral on carbon emissions by 2050.  

As a result, car manufacturers are facing immense pressure to increase their electric car sales. Otherwise, they’ll have to bear hefty fines for not following the new emissions rules and guidelines, designed to address the growing issue of global warming. 

According to the new rules, the European Union (EU) gave car manufacturers a goal. They had to reduce carbon dioxide emissions from their cars by 40% from the year 2007 to 2021. 

Even though 2021 is just around the corner, these automakers are nowhere near their target. This could be because many consumers still prefer cars like SUVs, which are heavier and have much higher emissions. 

Back in December 2018, the EU further decided to bring more cuts in carbon dioxide emissions. Specifically, they brought a 37.5% cut by 2030 as compared to emission levels in 2021. This further cut was brought about just when the automakers were about to face fines from the previous targets.

To put it in simple words, car manufacturers are facing a do or die scenario. They either have to push more and more electric cars to the European consumers or pay a hefty fine. 

Why Electric Cars Aren’t Garnering Popularity

According to LMC Automotive, in 2018, only 1.3 million of the almost 95 million cars sold were electric cars. This is even less than 2% of the total cars sold. This may sound alarming, citing most European countries now offer mouth-watering incentives for buying electric cars. 

So what is the biggest hurdle? Why are electric cars still not mainstream? Well, the difference in time between refueling and recharging. 

A standard petrol or diesel tank in your average car might take three to four minutes to fill up. In comparison, an electric car running on a battery takes much longer to charge up. The exact time can vary according to the model of the car and the type of charger being used. 

According to Electrify America, a subsidiary of Volkswagen, a 240-volt charger takes around an hour to add twenty to thirty miles to the driving range. Although it depends on the car’s capability as well. However, this is probably too much for most consumers.

Similarly, a direct current fast charger can take anywhere between five and thirty minutes to add a hundred miles. Still too long for most consumers. 

There’s also the problem of limited charging points, which many countries aren’t in any haste of setting up.

Who is Pressuring Automakers to Increase Low-Emission Car Sales

EU legislators have established a general benchmark. By 2021, any new car sold shouldn’t have emissions exceeding 95 grams of carbon dioxide, on average, per kilometer. 

On the other hand, individual automakers have different targets as other factors come into play, such as the starting weight of the companies’ cars in 2007.

According to the European Commission’s website, those automakers who’ve had less than 300,000 new car registrations in a year, have the option to apply for an exemption.

What happens to Automakers Who Don’t Comply?

For every extra gram of carbon dioxide they emit according to their target, these automakers will be fined 95 euros. 

Based on this, and according to the 2018 carbon dioxide emission level reports, Evercore ISI analysts predict the total penalty for all automakers to come to a total of 33 billion euros or 37 billion dollars.

Although, as automakers tried to sell more and more electric and hybrid cars in 2019, the actual fines would probably be lower. According to BloombergNEF, the sales of plug-in hybrid and full-electric cars is expected to increase by 32% in Europe in 2020, which is more than any other region in the world. 

What Investments Do Electric and Hybrid Cars Require

According to Evercore ISI, to make sure cars comply with the goals set for 2021, automakers will have to include car parts that can cost from 800 to 5000 euros for every car. This can significantly increase the prices of almost all popular cars in Europe.  

Mild Hybrid cars, which use electric motors along with the usual combustion engines, can cost from 800 to 1200 euros extra per car. Plug-in Hybrid cars, which have an electric motor that can completely take over, can cost an additional 2000 to 5000 euros per car. 

Why the Car Industry is Hesitant to Accept Electric Cars

The three main reasons behind their slow acceptance are the risky customer demand levels, shortage of charging points and any proper charging infrastructure, and the threat to the employment level in the industry.

According to the European Automobile Manufacturers’ Association (ACEA), in Europe, 75% of charging stations are found in four countries only. Moreover, these countries cover barely one-quarter of the entire continent.

There are almost 150,000 charging stations all across the European Union. However, out of those, one quarter is in the Netherlands alone. Furthermore, nearly 20% are in Germany, and 30% are in the UK and France. Looking into the data, the bigger picture is not really impressive for the rest of Europe.

Simply putting an end to combustion engines in cars in 2030, will put more than 600,000 industrial jobs in Germany at risk. Moreover, out of these, 75% of jobs are at the automaker and their supplying companies, according to Germany’s auto industry association VDA.

Many jobs will become obsolete as it takes less time and parts to construct an electric car as compared to a normal one. For instance, a typical combustion engine car has around 1400 parts, whereas an electric car only uses about 200 parts.

There are about 126 combustion engine-making plants in Europe, the largest being Volkswagen’s in Germany, which employ more than 110,000 people. While pure electric cars are much simpler, plug-in hybrids are still a little complex to produce. 

These take almost half as much more time or around nine hours to produce than conventional cars. 

Bottlenecks in the Supply Chain

Automakers’ and the industry’s efforts to increase electric car sales already had them overly relying on Asian battery manufacturers, which led to bottlenecks in the supply chain. 

However, with the outbreak and consequent measures to control the coronavirus, the supply chain problems have become worse.

Companies like Audi have even had to delay their electric car production due to a shortage of battery cells. Moreover, Volkswagen and Volvo might also have to bear similar problems. Samsung SDI, their battery supplier, put out a warning because of the virus.

Jaguar Land Rover went as far as flying in parts in suitcases to the UK from China, as Britain’s largest car manufacturer learned of the virus’s impact on the supply chain.

Plans for Launching more Electric Cars

Fiat Chrysler intends to launch twelve electric car models by 2021. These will include both hybrids as well as pure electric cars of various kinds.

In March 2019, the Volkswagen Group announced its plan to launch by 2028, almost seventy different models of electric cars. Additionally, they are spending 30 billion euros over the next five years to do so.

Similarly, BMW and Italy’s Ferrari have also said that they plan to launch more models of electric cars by 2021.

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