Gasoline Vehicle Sales Overtaking Diesels in EU-15: The Rise of the Mild Hybrid?

Diesel’s market share in the EU-15 fell from 50.2% to 46.3% of new car registrations in the first half of 2017, according to the European Automobile Manufacturers Association (ACEA). In absolute numbers, 152,323 less diesel cars were sold, and ACEA notes this drop was offset by an increase in the sale of gasoline vehicles, not apparently, electric vehicles. According to ACEA, this will make it tougher to meet CO2 reduction targets, as gasoline engines emit more CO2 than diesels. However, the NGO Transport and Environment has challenged this notion recently in a study showing that actually, it is the opposite: diesels emit more CO2 now than gasoline engines. (See post Sept. 18, 2017)

ACEA notes that for the first time since 2009, gasoline vehicles have overtaken diesel to become the most sold car type in the EU-15, accounting for 48.5% of new passenger car sales, up from 45.8% a year ago, which translates into 328,615 extra petrol cars sold year-on-year. EVs accounted for 1.3% of total car sales (a market share which remains stable), hybrids for 2.6%, and cars powered by propane or natural gas for 1.3%. This is shown in the figure below.

New Passenger Cars in the EU-15 by Fuel Type First Half of 2017

Notes: APV = Alternatively-powered vehicles; HEV = Hybrid electric vehicles; ECV = Electrically-chargeable vehicles

Source: ACEA, September 2017

“Alternative powertrains will undoubtedly play an increasing role in the transport mix, and all European manufacturers are investing heavily in them,” stated ACEA Secretary General Erik Jonnaert. “To this end, more needs to be done to encourage consumers to buy alternatively-powered vehicles, for instance by putting in place the right incentives and deploying recharging infrastructure across the EU.”

The European Commission is about to solve this problem by adopting some kind of zero emission vehicle (ZEV) mandate or quota. European Commission Energy and Climate Commissioner Miguel Arias Cañete at Renovate Europe (a campaign to reduce energy demand in EU buildings) this week commented on the issue as follows:

“…However, the main issue on which I would like to see the European Parliament taking a firmer stand is the issue of charging points for electric vehicles. Today we are in a chicken and egg situation, where the sale of electric vehicles is being held back by the lack of charging points – and investment in charging points is low because of the limited sales of electric vehicles. The electrification of transport is crucial for decarbonising the transport sector. Indeed, the Commission is currently preparing a Mobility package to be adopted in November which will include, amongst others, the revision of the post 2020 CO2 standards for cars and vans.

 

Let me be clear: the setting of new standards for cars and vans for the period after 2020 will be a very different exercise from the past one. As a matter of fact, beyond setting a general emission reduction target for cars and vans, we are considering, for the first time, different kinds of incentives to accelerate the penetration of clean vehicles into the market.

 

One option we are looking at is a mandate to require a minimum share of a manufacturer’s fleet to be zero- and/or low-emission vehicles. The other option would be to opt for a crediting system to allow for a more flexible approach which would provide a continuous incentive for innovation. Personally, I do not like mandate or quotas.”

The reality is that even with the introduction of a ZEV mandate and incentives to purchase EVs, the uptake will take time, and the biggest issue, as indicated by Cañete is the installation of charging infrastructure around Europe. Morgan Stanley estimates that 1-3 million public charging points could be needed in Western Europe by 2030. Currently, there are fewer than 100,000. Shell has jumped into the game with the plan to install charging infrastructure in the UK and the Netherlands earlier this year, and the announcement this week of its purchase of charging firm NewMotion. NewMotion had already signed a deal with Total to allow its customers access to its electric vehicle charging network.

Meantime, there is another alternative to EVs: mild 48V gasoline hybrids. Volvo, Mercedes, Volkswagen and PSA Peugeot, among others, are planning to introduce these models. According to Evercore ISI, an investment banking firm, by 2020, 48V hybrids are expected to outpace European sales of full hybrids, including plug-ins that can be recharged with a cable and driven in electric-only mode. By 2025, the firm says they will equip 55% of all cars sold. Total manufacturing cost comes in €500-1,000 (US$600-$1,200) below an equivalent diesel, and they can help meet the EU’s 2021 95g CO2/km target. Mild hybrids have also been projected by U.S. EPA to play in the U.S. market as well to meet fuel economy and GHG emission standards.  For European refiners, there would be an opportunity to rebalance gasoline-diesel and sell more gasoline into the market. There could be an opportunity for ethanol as well depending on what happens with the Renewable Energy Directive II discussions. Let’s see.

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.