What challenges are emerging from the automotive industry’s transition to electrification?

09 February 2022

The number of electrically-chargeable vehicles (EVs) is growing in Europe. While this offers several benefits, it also raises various challenges for governments, workers and drivers. The Autovista24 team discusses some of the most pressing issues caused by electrification.

Show notes

Electric cars buck trend and gain 18% share of 2021 EU new-car market

Battery-electric vehicle-based tax deficit could lead to UK road-pricing scheme

Transport Committee Report: Road Pricing

Norway electric vehicle taxation plans dropped from country’s budget

Thousands of jobs at risk as regulations push for electrification

CLEPA: An Electric Vehicle-only approach would lead to the loss of half a million jobs in the EU, study finds

Electromobility could cost Italy more than 70,000 jobs, unions warn

Financial Times: European auto suppliers warn shift to electric would put 500,000 jobs at risk

Diess remains CEO as VW future-facing investments near €90 billion

Episode synopsis

Despite the overall decline in European new-car registrations in 2021, even after the COVID-19 pandemic decimated the market in 2020, EV registrations surged by 66% year on year. This expanded their market share to 19%, up from 11% in 2020.

Hybrid-electric vehicles (HEVs) also enjoyed phenomenal year-on-year growth, with 2021 marking a historic landmark as they overtook diesel cars to become the second-most popular fuel type in the region. Registrations of diesel cars were a third lower than in 2020, capturing just 17.6% of the market. Petrol remained the most dominant fuel type, accounting for 40% of the new-car market, but this was down from 48.2% in 2020.

As more EVs are launched on the market and consumer acceptance improves, an ongoing upward trend in EV uptake across Europe is assured. Sales of internal-combustion engine (ICE) cars will ultimately end by 2035, including HEVs and plug-in hybrids (PHEVs). Although these vehicles will not suddenly disappear from the roads, new cars will either be battery-electric vehicles (BEVs) or hydrogen fuel-cell vehicles (FCEVs).

Taxation trouble

The rise in the number of BEV registrations could cause headaches for governments around Europe when it comes to taxation. Currently, many countries tax vehicles based on their emissions. But BEVs and FCEVs are zero-emission vehicles (ZEVs), and as such they are tax-exempt.

A case in point is the UK which will have a £35 million (€41.4 million) hole in tax income by 2050 with the increase in BEVs on the road, according to the government’s Transport Committee. This is because emissions-based vehicle excise duty (VED) is supplemented with fuel duty – neither of which apply to ZEVs.

Therefore, a new motoring-taxation scheme needs to be introduced, and soon. This is a problem for many countries. If governments wait to introduce taxes, they risk the wrath of voters who are buying ZEVs to avoid paying the fees due on ICE vehicles. But, if taxes are introduced too soon, there is a risk that the increasing uptake of ZEVs will stall, causing emissions figures and air pollution to increase. It is a conundrum driving discussions in offices of power around the continent.

Jobs at risk

Electrification and greener and more sustainable economic practices will eliminate the need for pistons, fuel pumps, particulate filters, and countless other automotive parts that are not required for EVs. This puts the roles focused on producing such components at risk.

Job-loss estimates spiral into the hundreds of thousands in the EU, particularly during the crunch period of 2030 to 2035 ahead of the end of new ICE sales. Certain concerned bodies such as unions are calling for government intervention to help stem the losses. That said, electromobility has the potential to create a wide variety of new positions. These include software developers, electric-component producers, and infrastructure personnel. The automotive industry will need to strike the best balance possible between the electric gains and losses.