In recent days, the École Polytechnique of Paris published a report “A comparison of Chinese, European and US regulatory frameworks for the transition to decarbonized road mobility“, which, in addition to comparing industrial policies from China, Europe (EU + UK) and USA support green transition in the mobility sector proposes several general guidelines to achieve this goal decarbonisation goals and restore the competitiveness of the European automotive industry, which is so important to its economy.
OBJECTIVES OF THE AUTOMOTIVE TRANSITION REPORT
The electrification of mobility goes far beyond the mere conversion of thermal drives to electric ones and covers the whole life cycle of a PEV vehicle (Plug-in hybrid + 100% electric). This is a very complex transition involving the automotive industry and related sectors such as mining, chemicals, energy and battery manufacturing, disposal, and recycling. Through a comparative analysis regarding all the key phases of the life cycle of electric vehicles Chinese, European, and American regulations that support the transition to decarbonized road mobility and assess the dynamics of the relevant sectors in the implementation of these regulations, the École Polytechnique report aims to four main goals:
- To provide a clear and objective assessment of the current situation of the Chinese, European, and American automotive industry.
- Identify the reasons that led to this situation and learn from it.
- Summarize how the European and American industries involved in the transition to electric mobility have positioned themselves.
- Summarize the challenges facing the European automotive industry during this crucial transition for its future.
Finally, as expected, the report formulates general guidelines for achieving decarbonization and recovery targets competitiveness of the automotive industry’s old continent.
THE AUTO INDUSTRY AND THE GREEN TRANSITION: A COMPARISON OF CHINA, EUROPE AND THE USA
It will be at the end of 2022 China represented globally 57% share of sales, 60% of the fleet of electric cars, and 75% of battery production capacity. It seems clear that the other players (Europe and the US) who instead largely control ICE technology are forced to catch up with Chinese electric car manufacturers.
China’s virtually undisputed dominance is the result of a long-term effort that began as early as the 1960s with massive investments in the strategic sector of Rare Earth and continued in the 1990s to produce the first alternative energy vehicles. The Chinese government’s strategic determination is to make the world’s leading car manufacturer through massive investments (estimated between 110 and 160 billion euros by 2022) in all sectors involved in the life cycle of a battery car, from the extraction of raw materials to battery recycling, through the introduction of laws and regulations that stimulate increased sales and finally by resort to protectionist measures help Chinese companies overcome foreign competition.
as for United’s current policy, unless suddenly interrupted by the results of the 2024 election (eg if Trump wins), could lead to the creation of an important production center for electric cars by the end of the decade. This is thanks to ambitious sales targets set at the federal and California levels high level of funding provided by the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) at all stages of the PEV production chain (approximately 10 billion between 2023 and 2032). It should be noted that the tendency towards local production of battery components and others, supported by tax breaks, confirms this protectionist trend also in the USA especially at the expense of Europe.
And in instead Europe what happened? At a time when European car manufacturers are heavily dependent on Chinese-made batteries, our continent, the target of China’s cost-competitive PEV exports, has several loopholes in its regulatory framework to achieve a highly ambitious target by 2035, which consists of allowing the sale of only (new) emission-free cars. First, the report explains that the imminent application of the new Euro 7 standard, as originally proposed by the European Commission, risks diverting funding from electric vehicle development and could lead to the premature demise of ICE vehicles. The absence of a compromise on future emission limits (but in fact, something has moved recently) creates uncertainty for the industry and may jeopardize its future. The report also condemns a systematic and coordinated approach lacking a regulatory framework that should lead to the electrification of mobility. And then the parameters for battery production are not ambitious enough to compete with China and the US.
WHAT SHOULD EUROPE DO TO KEEP UP
In light of the situation just described, and especially about how China and the US are moving, the École Polytechnique report suggests steps to follow to restore the competitiveness of the European automotive industry. The picture is not yet compromised: given the situation and the challenges facing the sector, European car manufacturers could catch up with Chinese competitors by the end of the decade whether decisive action will be taken in the next 18 months. As a result, the European Commission should consider in the very short term a holistic approach to the development of ad hoc regulatory and financial frameworks to:
- Ensure conditions of market parity while China and the United States use protectionism without problems.
- Secure a quick supply of raw materials where local resources are insufficient to meet demand in the short or medium term. Also, supporting the development of alternative technology reduces dependence on countries producing raw materials and mitigates the risk of their shortage.
- Speed up localization of raw material processing production of battery cell components where Europe is lagging behind China and where too low a level could jeopardize both the achievement of ROO requirements by the end of 2026 and the long-term CO2 emissions targets from batteries.
- Support rapid development of affordable and economically sustainable electric cars where there is a high risk of rapid and massive penetration of Chinese BEVs with a better quality/price ratio.
- Accelerate development of high-speed public charging networks accelerates the mass adoption of electric mobility.
- Support the development of extensive battery recycling ecosystems and multi-stakeholder engagement, as the circular economy has a strong potential for technological and economic development.
- Accelerate the development of innovative battery technology to gain a competitive advantage over other regions of the world.
At the same time, the report suggests that EU member states must be prepared to continue supporting the development of the electricity market through financial and/or non-financial incentives, while European car manufacturers must demonstrate some organizational ambivalence to continue to sell profitable ICEs and quickly develop capable electric cars to compete with Chinese automakers. Therefore, it offers higher quality, but at competitive prices.
More information can be found in the Full version (in English) of news “A comparison of Chinese, European and US regulatory frameworks for the transition to decarbonized road mobility“.
