After years of growing Europe into a bastion of diesel-fueled passenger vehicles – and with new regulations forcing a rethinking of all internal combustion engines – its major automakers are announcing an about face.
Top executives from BMW, Daimler/Mercedes, and the VW Group – VW, Porsche and Audi in the U.S. – have been issuing forceful electric car projections of late that could make Tesla’s plans for 500,000 vehicles in 2018, and a million by 2020 seem only ordinary.
In an industry where big talk and poor follow-up and execution have been seen before, the skeptical will retain reasons for disbelief until they see more proof, but automakers are forecasting big numbers and putting plans in motion suggesting this is for real.
Forces Driving the Change
In 2014 European new vehicle purchases were 53-percent diesels in a 12.3-million annual market – down from 15.6 million peak – and major carmakers of Europe have long touted their benefits which were profitable to them, and seemingly let them meet regulations.
The will to switch to electric cars certainly was not anything major, but with tightening EU emissions goals of 95 grams CO2 per kilometer by 2020 plus a new tougher testing protocol being implemented for 2017, the avoidance behavior just won’t cut it anymore.
The new Worldwide Harmonized Light Vehicles Test Procedure (WLTP) is expected to hold vehicles to closer account in terms of the gap between official mpg and greenhouse gas ratings and results from driving in the real world.
This could be a problem for automakers who already are not on track to make the goal under the more-liberal New European Drive Cycle (NEDC) procedure, and who face millions of euros in potential penalties.
For years it had been known – and a blind eye had often been turned – that on-road emissions can exceed “by an order of magnitude” in some instances what the lax NEDC tests indicated.
When the scandal of Volkswagen’s Dieselgate emissions cheating fiasco hit last September affecting ultimately more than 11 million cars, outrage grew and a reactionary public decided they’d had had enough of diesel vehicles.
This sentiment actually only played into pre-existing conditions. Environmental advocates and others had already been complaining and working to even ban diesels from places like London from a technology that – while it might be made as clean as gas engines with enough emissions controls – was not being held to account by ineffective European standards.
Not Just About Diesels
Although diesels and most poignantly the VW Dieselgate scandal have precipitated a tipping point, EU regulatory demands equally confront gasoline engine vehicles which are just as likely to experience unrealistic test results.
“[A] recent analysis indicates that the ‘real-world’ performance – that is, achieved when driving on-road under normal conditions – is much worse than suggested by the official values (measured in the laboratory using the NEDC driving cycle),” said a report by the International Council on Clean Transportation (ICCT). “An ICCT meta-analysis of on-road driving data on average, the vehicles tested show NOx emission levels that are an order of magnitude higher than the Euro 6 limit. Remarkable performance differences among the vehicles tested were found, with a few vehicles performing substantially better than others.”
Want specific examples of inaccurate estimated under NEDC tests? How about the 2015 Toyota Prius. The U.S. EPA says it gets 48 mpg combined, but it’s rated in Europe for 67 mpg if converted to U.S. mpg – and emissions are accordingly under-stated.
Just as bad, if not worse, is the test for electric vehicles. The 2015 Nissan Leaf which the EPA says can travel 84 miles on a full charge is rated 120 miles in Europe.
The new WLTP plan has automakers so concerned, there’s even a move away from conventional downsized engines because 2017 tests will show while they do OK under NEDC, they will emit more in the real world.
This too will cost automakers to reverse a trend and go toward larger engines expected to work less hard, and emit less on the road.
As for Tesla’s rise to success and taking some share from the majors, EV fans often cite this, and it is another factor spurring change.
To be sure, it’s a confluence of elements pushing the market forward, and bottom line is the pinch appears to be on, and Europe’s automakers now say they are on board with plug-in cars.
Volkswagen Group AG has 13 brands, but Americans are most familiar with Volkswagen, Audi, and Porsche.
These latter two particularly have been affected by Tesla, and VW Group is otherwise the focal point of the big bad diesel scandal, and is working to make good.
Aside for committing billions in settlements to EV charging stations – which can then serve its own future products, along with those of other manufacturers – it’s said its Strategy 2025 will see 30 new battery electric vehicles by 2020.
This is alongside plug-in hybrids and “mobility solutions” also in the works and VW Group CEO Matthias Muller announced double-digit billions for electrified vehicles requiring batteries amounting to “150 gigawatt-hours, a huge procurement undertaking.”
“The company estimates that such vehicles could then account for around a quarter of the global passenger car market,” said the company in a statement. “The Volkswagen Group forecasts that its own BEV [battery electric vehicle] sales will be between two and three million units in 2025, equivalent to some 20 to 25 percent of the total unit sales expected at that time.”
This year at the Paris Motor Show, BMW’s top brass sat out to convene on what to do with looming threats and challenges in the marketplace.
The outcome was announcement of a similar percentage that VW Group made for plug-in vehicles on the same timeline – 15-25 percent of all BMW and Mini brand vehicles are to plug-in by 2025, said CEO Harald Krueger.
“With more range and more infrastructure being available, you’ll see more electrified vehicles,” said Krueger. “We need some time for this movement and development, but it’s nothing that’ll go away.”
Considering 2015’s sale of 2.25 million vehicles, and assuming further growth, this could project to well over half a million plug-ins per year when the company hits this ambitious pace.
At the Paris Motor Show Mercedes parent Daimler – coincidence of coincidences – also projected 15-25 percent of all sales will be plug-in by 2025.
In 2015, the automaker’s profits were up 23 percent to 8.9 billion euros and global sales were up 12 percent at 2.853 million. By 2025, it’s hoping to be selling more, but 25 percent of current sales is 712,000 plug-in cars.
The announcement for the rise of plug-in cars was made by CEO Dieter Zetsche along with the introduction of the company’s new EQ electrified vehicle brand – sort of a counterpart to BMW’s i brand, done Mercedes style.
Mercedes, like the other upscale manufacturers trades on brand perception, and Zetsche all but confirmed Tesla has put a dent in that perception saying Tesla was on its target list as it aims to be the global leader by 2025.
“At that point in time, obviously yes. We had set for ourselves a target five years ago … to become the number one car premium manufacturer. That was supposed to be reached in 2020, [but] it seems that we are awful close already,” said Zetsche.
“So we can set a new target to ourselves and that is equally to be the leader in electric premium vehicles as well — latest by 2025,” he continued. “This includes not just our current competitors, but new entries as well, including Tesla,” he said.
Given automakers’ percentages of plug-in sales are today closer to 1-2 percent – more or less – announcements by the crowned heads of the European car industry are tantamount to declaring a pending sea change in how vehicles are propelled.
These companies are all reporting record profits and sales, and supported by the kinds of sales revenues Tesla is still working to secure with its Model 3 and beyond.
They also have engineering capability, design and production experience, supply chain support, and strong brand recognition – thus nothing really stopping them from keeping their promises short of any unforeseen lack of will to make it so.
How this will affect Tesla could be positive, as some believe including ostensibly Elon Musk who says he wants to instigate an industry, but the reverse has also been postulated.
A piece this month by veteran auto journalist Paul A. Eisenstein asks whether the sleeping giants that are the EU car industry may beat Tesla at its own game.
At this stage – while undoubtedly people have strong opinions – it’s all conjecture. Assuming European sales projections do come to pass, more certain is competition will increase, technology will improve, and costs will come down. This includes for the most-signifcant cost factor – batteries – which have already plummeted from upwards of $1,000/kWh to around $200/kWh, and all sorts of synergies besides could follow.
Electrified vehicle advocates might also therefore hope, if not assume, that the European market will continue growing from a projected 15-25 percent electrified cars in 2025 to higher percentages.
Indeed, European regulators – as true in California – have in their sites on full zero emissions as a goal by 2050, and it has been regulations to date that have given rise and coaxed the marketplace into being.
But for now though, only a few specific plug-in models have actually been announced or previewed as concepts for production between now and 2020, so much more will need to be shown.