FRANKFURT (Reuters) – Britain will ban the sale of new petrol and diesel cars from 2035 in an attempt to reduce air pollution, a step which accelerates a shift toward electric vehicles. Following are some of the possible challenges and consequences related to the decision:
Exhaust pipes of a car are pictured in London, Britain February 4, 2020. REUTERS/Peter Nicholls
ELECTRIC/HYBRID MARKET SHARE
In the European Union only 2% of new passenger car registrations were for electric cars in 2018, with 3.8% hybrid, 35.9% diesel and 56.7% petrol, according to European auto industry association ACEA. Global sales of electric vehicles reached 1.26 million in 2018, or 1.5% out of the 86 million global car sales according to JATO Dynamics.
THREAT TO JOBS
Jobs are at risk because electric cars take less time to build. A combustion-engine car has 1,400 components in the motor, exhaust system and transmission. An electric vehicle’s battery and electric motor has only 200 components, according to analysts at ING.
The average combustion engine takes about 3.5 hours to make, while the average transmission requires 2.7 hours of assembly. An electric motor takes about 1 hour to assemble, according to consultants AlixPartners.
German auto industry association VDA has said a ban of combustion-engined vehicles in 2030 would threaten more than 600,000 German industrial jobs, of which 436,000 are at car companies and suppliers.
A new study published in January said around 410,000 German jobs are at risk by 2030, according to Germany’s National Platform for Future Mobility.
In Europe, there are about 126 plants making combustion engines, employing 112,000 people (66,000 making powertrain, 46,000 making transmissions). The largest engine plant in Europe is Volkswagen’s factory in Kassel.
The switch to hybrid and electric cars will create 25,000 new jobs for carmakers between 2015 and 2030, consultants Alix Partners said in their Global Automotive Outlook study for 2017.
TIPPING POINT
The threat of a ban for sales of new combustion-engined cars in 2035 will likely accelerate a shift to electric cars in Britain, given that residual values of combustion and hybrid cars will likely also be impacted.
The ban will spur plans by established carmakers to launch more purely electric cars, a push that may increase economies of scale and lower the cost of electric vehicles.
Analysts forecast a tipping point when the cost of battery electric vehicles will reach parity with combustion-engined equivalents between 2020 and 2030, Barclays analysts say.
By 2025 the total cost of ownership between electric and combustion will reach parity (once taxes, fuel costs etc are included) – this time frame being brought forward if diesel gets higher taxation.
As a result, Europe could become a 100 percent pure battery electric vehicle market by 2035, according to ING.
BRITAIN’S BAN, A CHALLENGE FOR GERMANY?
According to European Auto Industry Association ACEA, exports of vehicles to the European Union from Britain in 2017 amounted to 2.3 million vehicles, worth about 38.4 billion euros. And 804,332 vehicles were shipped from Britain to the European Union, exports worth 14.5 billion euros.
Britain was the largest single export market for German manufacturers world-wide amounting to around 20% of overall global exports. (Fewer cars are imported to China and U.S. because German carmakers already have factories in those markets).
Reporting by Edward Taylor, editing by Ed Osmond