Box 3.2. Implications of EU fuel economy standards on electrification of the car fleet

The European Council and the European Parliament recently agreed to tighten the fuel economy standards for the new car fleet in 2030. This is expected to provide a significant boost to the deployment of electric mobility (EC, 2017b). This development is seen as crucial to curb GHG emissions in the European Union, especially in light of the recent decline of diesel sales shares and a continuous tendency for consumers to purchase large and heavy vehicles (IEA, 2019c).

In this analysis the characterisation of the New Policies Scenario, which includes the new European Union regulation on grammes of carbon dioxide per kilometre (CO2/km) for passenger cars, the share of electrified vehicles (including HEVs, PHEVs and BEVs) attains 31% of all sales in 2025 and 63% in 2030. Due to flexibility mechanisms embedded in the regulation (including multiplicative factors that allow increase in the weight of PHEVs in the final accounting mechanism required to meet the policy requirements), the relative shares of HEVs, PHEVs and BEVs are subject to some degree of variability (Transport & Environment, 2019). In our estimate for the New Policies Scenario, PHEVs and BEVs taken together account for almost half of the electrified vehicles in 2030, about evenly split between the two options.

Technology shares in the European Union car market, 2010-30

Notes: ICE = internal combustion engine; HEV = hybrid electric vehicle; BEV = battery electric vehicle; PHEV = plug-in hybrid vehicle; Other include compressed natural gas; liquefied petroleum gas and hydrogen fuelled vehicles. The carbon intensity per kilometre of new car sales is expressed in World Harmonised Light Vehicle Test Procedure (WLTP), converted from the New European Driving Cycle (NEDC) using (ICCT, 2019).

Source: IEA analysis developed with the IEA Mobility Model (IEA, 2019a).

Increasing shares of EVs are necessary to comply with the EU fuel economy standards in 2030. In our central estimate, PHEVs and BEVs account for 26% of the EU car market in 2030.

Regional insights

Figure 3.2 provides details on the EV uptake (in terms of market share) projected in the New Policies and EV30@30 scenarios on a regional basis. It illustrates various road transport modes in selected car markets.

PAGE | 124

IEA. All rights reserved.

Figure 3.2.

Sale shares of EVs by mode and scenario in selected regions, 2030

6 This is also confirmed in the roadmap of NEV sales target from 2020 to 2040 (Marklines, 2017).

PAGE | 125

IEA. All rights reserved.

7 The EEA consists of European Union member states and Iceland, Liechtenstein and Norway.

PAGE | 126

IEA. All rights reserved.

•Spill-over effects of the transition to electric cars and buses for the two-wheeler market, thanks to cost reductions induced by scale and technology shifts in battery cell manufacturing.

In the EV30@30 Scenario, European leadership in the electrification of transport is strengthened by: strong policy support; capturing commercial opportunities in areas where EVs are most competitive; and high fuel price regimes with fuel taxation rates that exceed those of any other major global market. In this scenario, EVs account for almost half of all vehicles sold in 2030.

India

EVs share of sales across all modes in India reach nearly 30% in 2030 in the New Policies Scenario, almost in line with its target (Government of India, 2018). Vehicle electrification is primarily in the two-wheeler segment with BEVs accounting for four-out-of-ten new units in 2030. EVs also penetrate the LDV and urban bus markets, reaching 14% of all passenger cars and LCVs, and 11% of all bus sales.

The deployment of EVs in India was spurred by the aim in 2017 of a full transition to electric vehicles by 2030. In 2018, a 30% target was established and is being supported by a number of policy measures such as standardisation, public fleet procurements and targeted economic incentives, both for vehicle uptake and charging infrastructure deployment.

In the EV30@30 Scenario, as a global frontrunner in the transition to electric mobility, India reaches EV sales shares across all modes (except two/three-wheelers) of 29% in 2030 (54% including two/three-wheelers). In 2030, in India 72% of two-wheelers, 31% of cars and 24% of buses are electric.

Japan

EVs sales shares for all modes (excluding two/three-wheelers) in Japan reach 21% in 2030 in the New Policies Scenario, mostly LDVs and, to a lesser extent, buses, which achieve a lower market penetration than in Europe and China.

Japan is one of the global leaders in the transition to electric mobility and is in line with the targets for the sale of “Next Generation Vehicles” (including EVs) outlined in the interim report by the Ministry of Economy, Trade and Industry (METI) Strategic Commission for the New Era of Automobiles (Government of Japan, 2018) and recent updates of fuel economy standards. Japan makes concrete progress towards the long-term goal for its automakers to cut GHG emissions per vehicle by 80%. The relevant uptake of BEVs and PHEVs matches the global leadership of Japanese manufacturers on vehicle electrification technologies from HEVs to BEVs, and growing engagement in the development of solid state batteries.

In the EV30@30 Scenario, EV market shares in Japan scale up rapidly to 37% in 2030 across all modes of transport. This is close to the market shares projected for China and Europe.

United States and Canada

In the New Policies Scenario, by 2030 EVs sales across all modes (excluding two/three-wheelers) in the United Sates are 8% of the market. In Canada, they attain a 29% market share, in line with other front running countries in the electrification of transport (Government of Canada, 2019). This also reflects an evolution in the development of electric mobility that occurs at two speeds in Canada and the United States:

PAGE | 127

IEA. All rights reserved.