Spurred by the growing electric car market, much investment into EV production, batteries and components has been announced. But this is now at risk as the EU debates its car CO2 rules that will define the size of the market. This report looks into the industrial opportunity cost of various car CO2 proposals on the table.
From China to Chile, battery electric vehicles (BEVs) are now the growth engine of the global automotive industry, accounting for the vast majority of new investment, innovation and model launches. If Europe anchors BEV manufacturing – including batteries, power electronics, and critical components – within its borders, it can rebuild its industrial base, increase its domestic gross value added (GVA) and secure growth and jobs.
But the risk today is industrial decline through strategic hesitation. Despite much investment announced and affordable mass-market BEVs finally hitting showrooms, the EU is once again proposing to revise its 2030-2035 car CO2 rules (which define the size of the EV market). Compared to the current regulation, the new Commission proposal weakens both the 2030 and 2035 targets, while the auto industry wants to reduce that ambition even more.
This report estimates the industrial opportunity costs for BEV production, as well as battery and its value chain investment from these proposals. To do so, T&E uses three scenarios: the current CO2 regulation (REF), the Commission proposal (EU) and the auto industry position (LOW). Aside from the car emission rules, the industrial policy – notably the recently proposed Industrial Accelerator Act (IAA) is critical to ensure the EV market brings a local manufacturing base.
This report estimates the industrial opportunity costs for BEV production, as well as battery and its value chain investment from these proposals. To do so, T&E uses three scenarios: the current CO2 regulation (REF), the Commission proposal (EU) and the auto industry position (LOW). Aside from the car emission rules, the industrial policy – notably the recently proposed Industrial Accelerator Act (IAA) is critical to ensure the EV market brings a local manufacturing base.
This shows that the 2030 Car CO2 target is critical to EV cleantech investment certainty across Europe. Put bluntly, 5-year averaging as proposed by automakers would kill the business case for batteries and their critical components. To ensure factories are built and critical technology is onshored, the EU should keep the 2030-2035 targets unchanged. In addition, strong local content requirements without loopholes (no small BEV should be called Made in EU if it uses a Chinese battery) must be swiftly adopted in the IAA.
To find out more, download the report.