Electric and hybrid penetration by 2030 based on new CO2 targets

What’s changing with fuel economy standards?

The European Union has proposed changes to the CO₂ tailpipe limits for light-duty vehicles as part of the “Fit for 55” package.

For 2030, here are the revised targets:

Passenger cars: Current 37.5% reduction to be replaced with a 55% reduction, versus 2021 levels

Vans: 31% replaced by 50% reduction versus 2021 levels.

Also proposed is a ban on the sale of any new light-duty gasoline or diesel vehicle beyond 2035.

In the US, the Biden administration is revising the light-duty vehicle economy “SAFE” standards. Current EPA standards require a 1.5% reduction each year, while California had struck a voluntary deal with a few OEMs for a 3.7% reduction. Here is a possible scenario:

US EPA aligns with California for a 3.7% reduction from model year 2023 – 2026

For model years 2027 to 2030, the standards will get even tighter, perhaps a 6 – 7% reduction each year.

Biden has also signed an executive order setting a target of 50% electrification (including plug-in hybrids and fuel cell vehicles) by 2030.

Note the words “proposals, scenario, possible” etc. peppered throughout – much of the above is uncertain but one thing is sure, we are looking at significant tightening of fuel economy standards in the two major automotive markets.

What does this mean for future powertrain mix?

The point of this exercise is to arrive at a powertrain mix (ICE vs hybrid vs pure EV) based on CO2 targets alone. This will help test whether the EV targets are aligned with the CO2 reductions sought (and vice versa).

Here are some assumptions:

CO2 from ICE vehicles is taken from latest certification / published number for the fleet average in Europe and US.
A “hybrid” is considered to be 20% more efficient compared to ICEs. This assumption can be changed to get a sensitivity to ICE improvements.
Plug-in hybrids are combined with other hybrids. If plug-ins grow significantly in market share, that could change these predictions (significantly).
No pure ICEs sold in Europe by 2030. Some level of hybridization needed (mild, full, plug-in).

The share of ICE/hybrid/EV is changed to meet the CO2 targets. The figure shows one of the possible scenarios. It is seen that in Europe, the EV market share is ~ 50 – 55%, while in the US it would be ~ 35% (this may seem small compared to the executive order, but remember that plug-ins are included in that 50% target)

What are the implications?

Here are some factors that could affect the above numbers:

The final standards could be very different than the proposals.
There could be significant technology improvements for both ICEs and batteries. As mentioned previously, a high plug-in hybrid market share could make an impact.
Europe allows other technologies such as H2-ICEs or for credits from use of renewable / e-fuels to be used for CO2 targets.
China may step up their electrification targets which could add further pressure on batteries.

But perhaps the biggest question, which needs to be addressed and could affect the above predictions, is whether there will be sufficient batteries to support such a massive transition. We are not talking about raw material availability, there are several studies which show that while not easy, raw materials will be made available. But the question is whether the mining will keep pace with the demand.

A simple calculation considering the number of light-duty vehicles sold in the above markets, and further assuming 30% EV share in China and 5% in rest of the world shows that the battery capacity needed will be ~ 2TWh (this is assuming 85 kWh per vehicle). And that is without considering electrification of heavy-duty or off-road equipment. We hope to follow up with an article which accounts for the battery capacity planned so far, but it’s perhaps not at 2TWh and also many of which are again targets and not reality yet.

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