What happened?

Most car manufacturers have showcased some kind of electric vehicle (EV) in recent years, but only few of those were produced in meaningful numbers. This is about to change, as a host of mass-market EVs have been announced for 2019 (e.g Mercedes, Audi , Volvo and Hyundai) and 2020 (e.g. Opel, Peugeot, Volkswagen, Ford, BMW and Toyota). This is no coincidence: European and Chinese emissions regulations require automakers to radically reduce the carbon emission levels of their cars by 2021. In practice, this means they are forced to ramp up EV production, even though the market perspective for these cars is quite uncertain.

What does this mean?

Since 2015, car manufactures have to make sure that the average CO2 emissions of the cars they sell on the European market fall below 130 gram/km. The next hurdle is the 95 g/km target set for 2021. Manufacturers failing to meet this target will face steep fines. Most regular combustion engine cars score well above 100 g/km (and a Toyota Prius emits 78g/km) and to compensate for the rest of their fleets, manufacturers are scrambling to bring more or less affordable EVs (or hydrogen cars) on the market. China has set similar carbon targets which also include specific targets for zero-emission vehicles (4% of all vehicles sold in 2020).

What’s next?

As EVs are still more expensive to produce than regular cars and, because of their limited range and longish recharging times, they don’t offer the same value to consumers. Consequently, car manufacturers are likely to lose several thousands of dollars on each EV they (have to) sell. This puts manufacturers in a difficult position. Moreover, the existing EV-recharging infrastructure will need to grow rapidly to accommodate prospective EV drivers (e.g. because they don’t have private parking space) and this is likely to involve additional investments from car manufactures as well.