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Fuel for Thought: The Evolving Global EV Landscape
Automotive Monthly Newsletter and Podcast
This month's theme: The Evolving Global EV Landscape
Global compliance is still a significant concern that governments will look to regulate and OEMs will continue to strive to achieve. Consumers play a large role in the direction and success of both sides of this equation with COVID having had its impact as well. It continues to be a complex situation depending on the market, with OEMs and other supply chain participants looking to find common ground to increase efficiencies and profitability. Below we will highlight some of the key considerations in each market.
In mainland China, the corporate average fuel consumption (CAFC) target will tighten from Phase 4 to Phase 5 in 2021, reducing market target reference from 5 L/100km to 4 L/100km. The more stringent CAFC standards also go along with new energy vehicle (NEV) requirements tightened for 2021-23 period (the "Dual Credit" policy). The overall mainland China market in 2020 has nearly 8 million CAFC credit deficits. On the other hand, the administrative and economic incentives during recent years have driven strong electrification growth in the mainland China market; comparing to NEV requirements, the market is about to generate roughly 3.6 million NEV credits in 2020. Under COVID-19, the Chinese government has taken measures to further promote the growth for electric vehicles, from the continuation of NEV subsidy and with a delay of China 6 emissions standards full implementation, and also the possibility of using 2021 NEV credits to back write off 2020 deficits. The newly finalized dual credit policy still requires 14%, 16%, and 18% NEVs in 2021, 2022 and 2023.
Calendar year (CY) 2020 is a crucial year for the European market to aggressively reduce passenger car CO2 emission standards from 130 g/km to 95 g/km. In recent months, OEMs have been gearing up their electrified products to comply with these CO2 targets. Major volume OEMs PSA and VW have been launching BEV products (e.g. Peugeot 208e, VW ID.3) at an attractive price point, also thanks to recently increased subsidies in major markets like Germany and France. Premium OEMs are also not lost in the race, having started their first wave of pilot BEVs (e.g. Audi e-tron, Mercedes EQC, Porsche Taycan). Together with the massive extension of plug-in hybrid models this year, customers look at a much broader range of electrified products to choose from.
For the overall EU28 market in CY 2020, CO2 compliance value is forecasted to be 104.9 g/km, 7.1 g/km over the market average of 97.8 g/km target. This includes a 3.4 g/km reduction from excluding the top 5% highest emitters and 5.8 g/km super credit enabled from <50g CO2 vehicles that are predominately PHEV and BEV. Among the top 10 manufacturer pools, which account for nearly 90% of EU28 passenger car sales, only one car manufacturer is expected to meet 2020 target in our baseline forecast. Market-wide excess CO2 premiums is projected to be as high as €8.6 billion in CY2020.
In March 2020, the U.S. Safer Affordable Fuel-Efficiency (SAFE) Vehicle Rule was finalized to set relaxed fuel economy and CO2 standards for post model year (MY) 2020. The SAFE rule only requires an annual increase of approximately 1.5% in stringency from MY 2021 through MY 2026, compared with around 4-5% under the Obama-era rule for MY 2021-25. In MY 2020, the US market is forecasted to reach 42.4 mpg for passenger car fleet and 29.9 mpg for light-duty trucks on average, including applicable credits like air conditioning and off-cycle credits. Even with a drop in light vehicle sales from COVID-19 pandemic conditions, the overall US market is projected to over-comply starting from MY 2022.
The BEV market in the US accounted for 1.5% total new light vehicle registrations (+0.1% YoY), with Tesla having the lions share. Battery Electric Vehicle sales in North America will be significantly bolstered by tight competition and eager buyers within a unique regional segment: the electric pickup truck. Numerous manufacturers have announced EV truck intentions with the earliest expected at the end of 2021 and early 2022 with offerings from GM, Rivian, and Tesla. Other models are also expected from Ford and FCA. Multiple startups have also announced plans to compete in the segment, including Nikola, Bollinger, and Lordstown Motor Company. These brands are expected to produce multiple offerings that span the spectrum between lifestyle and work-oriented trucks. Electrification also offers unique benefits to the truck segment including improvements in low-end torque, acceleration, and fuel costs. While questions persist regarding market size, price sensitivity, and competitive positioning, you can be sure that within the most American of vehicle segments, this will undoubtedly be a market to watch.
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