There’s a lot of news out lately about automakers revising or adjusting their electrification plans and the main culprit that’s often identified is demand. That’s partially true. The bigger reason? The government. Specifically, corporations are mostly rational actors and will do what makes the most sense based on prevailing regulations. This is especially true for automakers.
This is going to be one of those Morning Dumps where I’m mostly going to guide you through a thesis based on what’s out there in the news because I think it tells a cohesive story. And that story is that automakers are following the lead of the government when it comes to electrification as much as they are following consumers, even if the corporations themselves are the ones nudging the governments.
Whether it is the reduction in output for electric Fiats in Italy, the delaying of small VWs in Germany, or the weakening of rules in the UK, it’s clear that many automakers aren’t going to jump until they have to jump.
Will doing so require automakers to go back on their climate pledges? Yes and no. It’s complicated, so let’s make it slightly less complicated.
VW Will Likely Slow Mass Production Of The Cheap VW ID. 2 All
Let’s start in Germany, part of the European Union and Europe’s biggest car-producing country. Last year, Volkswagen showed off the relatively cheap VW ID. 2all concept, an obvious preview of the VW ID.2 set to debut in production form this year. At around $27,000 and with cool retro touches, the vehicle is an important car for the electrification of Europe.
There’s a whole segment of cheap EVs in Europe that’ll include the Dacia Spring, Fiat 500e, Citroen e-C3, Renault Twingo, and a whole bunch of Chinese-built cars in the 20-25k Euro range. While it’s not clear how well all these vehicles would do in America, they make a lot of sense for small European streets where size and price trump range concerns.
Volkswagen was all set to put the sub-25K EUR ID.2 into production next year. That car is now rumored to be getting pushed back a year. Why? From Automotive News Europe:
VW and other European automakers had anticipated that they would no longer be able to sell small ICE cars profitably by the end of the decade because of tough Euro 7 anti-pollution rules. After strong lobbying from the industry, EU countries have agreed not to change the existing Euro 6 test conditions and emissions limits for cars and vans, meaning that small ICE cars can continue to be built without costly upgrades that would make them unprofitable.
VW will still unveil the production ID2all in 2025 and build small numbers of the model until the full ramp up the following year.
A Volkswagen Polo, which is ID.2-sized, starts at about 22,000 EUR in Germany. There are probably a lot of consumers for those, and if VW can keep building them for a while, profitably, it’s logical for VW to keep doing that.
Of course, there’s a bit of a wag-the-dog here as the auto industry is simultaneously causing governments to slow-roll requirements and then reacting to those changes.
Italian Unions Say Fiat 500e Production Slowed Over Incentives
The new Fiat 500e looks great and will go on sale here, unlike the ID.2, although I think that’s a mistake on Volkswagen’s part (bring it here, dammit!). In fact, you should go pre-order one right now. Just do it. Don’t think about it. Just get one. What’s the worst that’ll happen?
It was expected that in 2023 about 90,000 of the new electric Fiats would be produced for Europe in Italy, but only about 77,000 were actually made after production was stopped for 20 days. Why was it stopped?
Incentives for electric vehicles announced by Italy in July but not expected to come into effect until January weighed on the production of Stellantis’ full-electric 500 models last year, the FIM CISL union said on Friday.
It makes sense and goes to show that, while demand for electric cars is rising, people are also somewhat rational actors as well, and if they know incentives are coming they’ll just wait until they can save. The potential incentives package that Italy is considering right now could see consumers saving as much as 13,000 EUR on a car according to Bloomberg.
The package, under discussion by the industry ministry, would include financial incentives worth as much as €13,750 to allow citizens with an annual income lower than €30,000 to scrap their Euro 2 models, which are more than 20 years old, in favor of new electric cars.
The aim, according to the document, would be to “change Italy’s vehicle fleet, which is one the oldest in Europe, with at least 11 million EURO 3 cars or lower-grade vehicles.” The plan would also “support low-income families and the purchase of cars made in the country”.
That’s a lot of Lire. Also, people are smart. If you’ve got a 25-year-old Fiat Uno that needs all sorts of work and the government offers you essentially 65% off a Dacia Spring you’re probably going to try and get the Dacia Spring.
Toyota, Nissan And JLR Lobbied For UK To Delay EV Mandate
Remember that headline I wrote in September about the UK rolling back its EV mandate?. This one:
The UK Just Rolled Back Its Gas Car Ban And Automakers And Politicians Are Super Mad About It
Well, guess what? Some automakers probably weren’t that mad because some automakers were behind it according to a big scoop from The Guardian:
Several of the world’s biggest carmakers lobbied the UK government to try to weaken or delay rules to accelerate electric car sales and cut Britain’s carbon emissions.
Toyota, Jaguar Land Rover (JLR) and Nissan were among the companies to ask for delays in enforcement of the zero-emission vehicle (ZEV) mandate that obliges them to sell increasing proportions of electric cars or face heavy fines, according to documents seen by the Guardian.
However, Volkswagen, Ford and Tesla argued that the ZEV mandate should be tougher.
I mean. Of course. It’s a great report and it’s interesting to hear what different automakers said:
Elon Musk’s Tesla, which pioneered electric car sales and has just been overtaken by China’s BYD as the biggest seller of EVs, said the rules were “not sufficient to drive more than organic market evolution” and said “it is possible that targets that look a stretch today will quickly be surpassed”. Ford said it “believes that the suggested trajectory can be met by many manufacturers across the UK market, and will ensure that those that are lagging accelerate their development appropriately, with the option of trading certificates to make up any shortfalls”.
Germany’s Volkswagen, the world’s second-largest carmaker, said the targets were “ambitious but seem to be generally feasible”.
This is all somewhat maddening, really. I love internal combustion and I want to always be able to have an internal combustion car for pleasure but, at the same time, most people don’t care about how a car feels and just want something nice, and an EV is often better for them and better for the environment in the long-term. Do I want an EV for a daily driver? Absolutely.
The take rate on EVs in China is a good example of how when electric cars get cheap enough, people will buy them. There are also good surveys that back up the notion that price and, to a lesser extent, infrastructure, are what’s holding back buyers. China’s mostly solved the price problem. How? First, it poured a huge amount of money into making it cheaper for consumers to buy EVs. Second, by its highly urbanized nature, it’s easier to get people to accept lower-range vehicles, which tend to be cheaper.
It’ll be harder here but, as with China, it’s going to be the role of the government to force the action. The Inflation Reduction Act is biased not towards getting people to buy EVs, but towards getting manufacturers to build EVs here using materials sourced from friendly places. And that’s a reaction to the Chinese government getting its industry built first.
There are companies like Volvo and Hyundai-Kia that are sticking to pledges to become entirely EV-only brands by the end of the decade. There are companies like Ford and GM that are mostly in but, at the same time, are cutting production or delaying vehicles to juggle current demand. And there are companies like Stellantis and Toyota, in particular, that are taking their time and are arguing for a slowdown in regulations.
Who is this good for? Ironically, Chinese manufacturers with no incentive to slow down and a lot of incentive to move into other markets. It’s good for Tesla, too, because Tesla never has made a gas-powered car and can already make cheaper EVs.
And it’s easy to say that if EVs need government support they’re not really that popular, but that’s also wrong. We live in a world where fossil fuels are subsidized by as much as $7 trillion a year and few people pay at the pump what a gallon of gasoline is actually worth. Here’s a good old piece by Jason Camissa that explains why SUVs and cars all have that weird overbite to avoid stricter fuel regulations, a reaction to government rules.
It’s the way the world works, and automakers are likely not going to make these changes on their own. It’s up to elected officials, which means, to some extent, it’s up to people to shift the Overton Window far enough that it’s untenable to not support full electrification. If that’s what you want. If you want the opposite then it’s up to you to shift the Overton Window back the other way.
How Are Automakers Doing On Their Pledges?
Well, this is a nicely timed article. Automotive News has a great wrap-up on automakers and their pledges to be carbon neutral.
The reality? If you care about limiting the warming of the planet to 1.5 degrees Celsius as many scientists think we need to do… it’s not happening fast enough. At the same time, most of those commitments are for like 15-20 years from now.
From the report:
Stephanie Brinley, associate director of AutoIntelligence for S&P Global Mobility, said automakers still have time to make their overall targets, and are unlikely to abandon them or backslide.
“I think the temptation is always there, but most of the carbon commitments are set for 2040 or 2050,” Brinley said. “It’s hard to say that if they backslide in 2024 or 2026, that they won’t be able to achieve a commitment they made for 2040. It would be more concerning if that happened in the first half of the next decade.
“But consumers,” she said, “are the wild card. They just have to start buying this stuff, and right now, prices are elevated.”
Just make the EVs cheaper! Oh, it’s too complicated to do that? Then have the government help!
What I’m Listening To As I Write This
Romy is one of two voices you hear on any The xx album and her solo work is also really lovely. The track above is from her debut solo album Mid Air and I love how happy it is. I just want Romy to be happy.
The Big Question
Who is smart? The automaker that waffles or the automaker that commits?
Matt that’s a great track by Romy. Nice find, thanks for the share.
Maybe FIAT should keep making those EVs.Stock them up for when the incentives start so they can sell as many as possible!
A huge problem in the US is the lack of cheap EVs. The Bolt was on a relative tear last year when suddenly it was the last regular EV car standing, at least without the Leaf’s battery & charging problems.
When EV makers want to push the Cybertruck, Hummer EV, Rivians, Chevy Blazer, high level trim Teslas, etc., they shouldn’t be surprised when people can’t afford them. People need regular cars, and that means they need regular EVs. Norway or China get this. The age of EVs as just luxury accessories is over.
Consumers have fuck all to do with it, the vast majority of greenhouse gas emissions come from commercial industries.
But I’m glad that green activists act like I’m the bad guy because I drive a car that gets 25MPG instead of 30MPG or don’t want to double my payment for a comparable EV
Most people is just that gullible man. The worst part is the technology to exponentially decrease our use of fossil fuels has existed for ages… nuclear energy
“Also, people are smart. If you’ve got a 25-year-old Fiat Uno that needs all sorts of work and the government offers you essentially 65% off a Dacia Spring you’re probably going to try and get the Dacia Spring.”
And what’s to stop Dacia and dealers from jacking the price to pocket as much as possible of that sweet, sweet incentive for themselves?
The fact that they have to sell to the rest of the market that is not eligible for incentives prevents price-jacking. That’s why incentives specifically targeted at low to middle income buyers work so well.
I think it depends on the market shopping for Dacia Springs. If the majority of the target customers are also the target for the incentives why wouldn’t Dacia dealers jack up the price? Maybe not the balance of the entire rebate but enough to make more profit than selling a few more cars at the non adjusted price. The higher price might even shift those better off customers into a more expensive Dacia.
Re EVs – I get a small ad here asking me to invest in Olympian Motors, they certainly aren’t shy, self describing themselves as a “Disruptive electric vehicle company in New York” with a modular platform that is “An emerging competitor to Tesla, Rivian and Lucid” and whilst I sort of like their two tone and retro aesthetic and proper dials and lack of display screens, proudly advertising that you have a laminated windscreen as a safety feature… I dunno. Oh well their website says delivers start in 2024 so I’m sure we’ll see reviews soon!
Oh the SUV overbite thing is crazy. Look up 2017 Lexus NX Australia and compare to the US version, well at least you guys can probably rock crawl a bit better in your Lexi than us antipodeans can!
Not answering the question, but I was just thinking there’s a certain segment of the population who must be having whiplash from what’s going on:
* electric cars = bad, liberal indoctrination, climate change is a hoax, govt can’t make me
* buy american = good
* anything biden does = bad
* american jobs = good
* China = bad
* Ford = good
* Asian = bad
But then
* Ford pushing electrification = bad Ford? How can it be?
* Biden encouraging US jobs and automakers and keeping China at bay = uhhh bood? Gad?
* Kia and Hyundai offering attractive, affordable, and mostly electric new models = uhh
If an automaker knows they don’t have what it takes to be an EV leader, then I think it’s smarter to waffle. Battery tech is developing fast. Let the ones with the expertise and resources do the R&D. In the end there will be a common standard anyway.
Common standard? Not so sure about that, but I’d at least say licensing the tech from another company that has more experience will be a bit cheaper if they are able to wait a bit.
I know I’ve said this before, but banning ICE is stupid. Ban the thing you want to ban, which is burning fossil fuels. Carbon neutral fuels exist, and if there was a future market for them then OEMs would be investing in ultra-economic small cars which are cheaper to build than EVs.
EVs work great for some drivers, but carbon neutral fuels work great for everyone who already has a car, or has no where to charge, or has to commute 500 miles towing a boat up a mountain every day. Sure, the fuel cost goes up, but is it enough that EVs would be the cheaper option for everyone? Probably not.
I guess this is less obvious in the US, where no one buys small cars anyway and your gas is insanely cheap.
Multiple effective solutions are better than forcing everyone to pick the one solution politicians understand. Politicians are idiots.
These carbon neutral fuels you speak of, do they exist in the volumes needed to replace anything more than even a miniscule fraction of fossil fuels? Because you are talking about not just transport but heating and power generation as well.
They don’t currently exist in volume, because fossil fuels are cheap and there is no reason beyond ethics to pay extra for synthetic fuels, and with the ICE bans looming it’s a dying market.
Had fossil fuels for cars been banned, rather than banning all versions on internal combustion engines regardless of fuel used, then there would have been a huge market for all kinds of wacky carbon neutral liquid fuels. From fully synthetic gasoline made from water and CO2, to plant-based alcohols, it’s all possible on an industrial scale, if we wanted, which apparently we don’t.
And they are just for transport. Heating and power generation can be done much more efficiently without buggering about making a fuel and burning it.
It’s likely that air transport will use carbon neutral liquid fuels, the power density makes them very attractive compared to batteries, plus no one is trying to ban jet engines yet, or marine ICE, despite the colossal carbon emissions from both those sources. It’s almost like they have more political lobbying than motorists.
Last I checked the world uses about 344B gallons of gasoline a year. To make that much gas at 33.4kWh/gal would by my maths require 11,490 TWh of energy (assuming perfect conversion efficiency). To get this energy from FF would be pointless so of course it needs to be sourced from renewable energy.
As of now the world’s entire renewable output is guesstimated to be about 8 300 TWh* including all the worlds hydroelectric. So you’d need to more than double the worlds renewable energy to even hope to meet gasoline demand. Realistically you’d need much more than that with the inefficiencies factored in. If you think you can double or quadruple the worlds renewable energy capacity to make enough fully synthetic gasoline from water and CO2 and plant-based alcohols by all means go for it.
That’s one of the attractions of EVs. They use electricity much more efficiency than ICE cars can ever hope to so the renewable capacity goals are much more achievable.
It’s likely that air transport will use carbon neutral liquid fuels, the power density makes them very attractive compared to batteries, plus no one is trying to ban jet engines yet, or marine ICE, despite the colossal carbon emissions from both those sources.
FYI the world consumes 83B gallons of jet fuel and 270B gallons of distillate (diesel, HFO, etc) per year which would mean yet another tripling of the renewable energy demand to make synthetic fuels for those.
The good news is China has nuclear (thorium) powered container ships and tankers in the works which – if they go mainstream – stand to make a huge dent in global emissions. Unfortunately jet fuel remains the best option for aviation for the forseeable future.
*https://www.iea.org/reports/global-energy-review-2021/renewables
We’re going to have to vastly increase carbon neutral electricity generation anyway to get to carbon neutral, and making liquid fuels is a way of storing energy from peak solar, wind, wave and tidal generation.
How many times in the last 40 years have we already doubled renewable energy generation? And for most of that time there was no urgency or political will to invest in it.
Carbon neutral fuels can’t replace all fossil fuels, we need EVs, more public transport (I know the US doesn’t really do this, but the rest of the world does), more efficient personal transport, fewer journeys and all the other shit we can do to reduce energy use.
But it could have been part of a carbon neutral future, were we not banning ICE.
More expensive/more limited supply of fuels would cause new ICE cars to be smaller, vastly more efficient and powered by wacky new engines. I’m sad we’re missing out on this.
“We’re going to have to vastly increase carbon neutral electricity generation anyway to get to carbon neutral, and making liquid fuels is a way of storing energy from peak solar, wind, wave and tidal generation.”
Surplus renewable power will be a drop in the bucket compared to what’s needed. Any such renewable fuel will be best earmarked for industrial hydrogen, currently made from FF rather than any use in transport. To do so otherwise is just robbing Peter to pay Paul.
That BTW is another demand on renewable energy and it would take the entire US capacity of renewables (all its output, not just surplus) just to match the energy content of worldwide industrial hydrogen demand much less the total energy to make it. That’s already a tall order but I think an achievable one with the first doubling of renewable output.
IF the demand for worldwide industrial hydrogen is met then the next step would be to use that renewable energy to make synthetic aviation fuel. Any such fuel would I think go straight into the gas tanks of the worlds militaries. Only after their thirst was quenched would it flow for use in civilian aviation. That’s an even taller order.
After that will be a mix of commercial and personal transport. Overall my by maths it will take several times the current renewable energy capacity of the world to meet all of these needs.
“Carbon neutral fuels can’t replace all fossil fuels, we need EVs, more public transport (I know the US doesn’t really do this, but the rest of the world does), more efficient personal transport, fewer journeys and all the other shit we can do to reduce energy use.”
We will only do so kicking, screaming and pointing fingers every which way. It’s going to be painful and ultimately I think its going to fail miserably because there will be too many folks, especially Americans who see actual conservation as a burden for others to shoulder. You will also get people who take advantage of the conservation efforts of others to reward themselves. As it is many people buy and DD trucks because they “NEED” it to occasionally tow a hobby rather than forgoing that hobby and DD a Prius instead.
“How many times in the last 40 years have we already doubled renewable energy generation?”
Exponential growth of sustainable energy (ironically) isn’t sustainable. Its a LOT easier to double down in the beginning but of course every doubling requires doubling the land needed too. Keep in mind there are only so many places dams, wind and solar farms can be built. Many of the choicest spaces are already taken. NIMBYS will also be fighting any such progress, especially nuclear, every single step of the way.
“And for most of that time there was no urgency or political will to invest in it.”
Most of that was thanks to China. It was China’s political will and urgency that made worldwide solar and wind happen. It is China who is building the biggest hydroelectric dam in the world and it is China and South Korea who are actually building nuclear plants. I don’t think Chinese style political will and urgency is going to go over well in America but that’s what its going to take to tackle the NIMBYS.
Well that’s all thoroughly depressing. I was just hoping for a few more quirky ICE cars before the inevitable climate catastrophe.
You’ll get them but I’m sorry to say they will be a dog and pony show who’s only purpose is to provide false hope. Same with hydrogen.
Sure there will be hydrogen generated from renewables but you’d need to satisfy the industrial demand before you can even think to use it for transport, otherwise you’re just fooling yourself. Given how much industry needs I don’t see that demand ever being met with the tech we have now.
Of course I could be myopic. Who knows, maybe cold fusion research will pay off after all. Or maybe China will start cranking out super cheap and safe modular thorium reactors like they are solar panels and wind turbines.
Or I might be overly optimistic. There are still very dark paths humanity can still take when push comes to shove. Its happened before.
In Europe lots of OEMs are already shutting down new ICE engineering because of the coming bans. We’ll just do the minimum required to get to Euro 7 emissions on current architecture then give up.
The lead time on approving investment means that theses decisions were based on a 2030 deadline, moving it back to 2035 on a whim won’t get anyone to commit hundreds of millions of Euros on a risky new ICE technology. Anything new and clever starting from now will have to be niche high-value products with high return on investment, so not mass market.
What I’d like to see and what I think would be most compatible with those regulations are BMW i3 and i8 style EVs with REX. Lets see how efficient those REX can be with a gallon of fuel. Right now a Prius is at 40% TE, MB has engines at 50% and Mazda has claimed 56% (although they gotten real quiet on that). Lets see not only how efficient those engines can get but how often they can stay in that sweet spot. Don’t need full power? Deactivate a cylinder or hit and miss. How about a turbo to harness waste heat, not to compress intake but to run a generator. Or stage the combustion, have multiple primary cylinders feed into a secondary cylinder designed to harness waste heat on the same crank.
The engine might sound funny, it might not be powerful, its delivery might be less smooth but as a REX I think that’s less important. What is important is efficency, packaging and cost.
Then there’s harnessing what little waste heat that hyper efficent REX makes as heat for both the cabin and the main battery. Harnessing cooling jacket heat is good, exhaust heat is there for the taking too.
Run those engines on gasoline, propane, natural gas even diesel. Advantages of NG is its easier to clean up the exhaust and its fairly easy to make renewably.
Most importantly though change peoples habits. Europeans already gave PHEVs a black eye by not charging them but just filling the tank and running them as a regular hybrid. I think part of that was the limited battery range of PHEVs so I think the solution there is bigger batteries and a smallish fuel tank aka EV REX. Make charging cheaper and more readily available than fuel, at least till those habits favor plugging in before filling up.
When I worked in powertrain research, god 15 years ago now, we were working on all kinds of stuff to improve efficiency, and quite a bit of that work hasn’t made it to production yet. Some of it because it isn’t production feasible, but there was some solid work that’s just been shelved, and soon, binned.
The effort it takes to get an extra 1% of efficiency from an engine can be huge, and then the customers waste it because they pick the wrong gear, or an inappropriate throttle demand, or keep their roof bars on all year, or buy a 2000kg vehicle that does nearly all its mileage with just one occupant. Or, as you say, don’t plug in their PHEV.
Some of that tech I think wasn’t feasible for production at the time due to a combination of immature supporting tech (electronics, materials, designs, etc) and a lack of interest thanks to cheap gas and emissions as a problem for tomorrow. It may be ready for primetime today. I’m hoping, (perhaps naively) the chip shortage is taken by manufacturers as an opportunity to improve ECU chip designs to the point those formally impractical gas saving techs can become practical, even for REX.
Most of the other tech I mentioned is ancient. Hit and miss tech has been around for over a hundred years. Cylinder deactivation at least half that. Compound engines since the days of steam. Automotive turbos since the 60’s – those used to pressurized intake but no reason they couldn’t run a generator instead.
These may not be practical solutions for regular cars but lets not dismiss them out of hand for a REX. At least one company is working on a compound ICE motorcycle engine that might be a good candidate for a REX:
https://en.m.wikipedia.org/wiki/Five-stroke_engine
Addendum: It looks like I’m not the only one that thinks so:
https://m.youtube.com/watch?v=muq1xlF8Gu4
I’m not dismissing improvements in ICE out of hand, I’m dismissing them because companies I’ve worked for as an engine designer are shrinking or closing the departments that used to do this sort of thing, based on the upcoming ICE ban.
I’d love to be wrong/employed.
Sorry, I wasn’t accusing you personally. My comment was more about folks in general losing sight of the larger picture.
I dunno how your ICE ban is worded but ours in California does have a specific carve out for PHEVs. I expect REXEVs will be included under that umbrella, perhaps with a more generous allotment since the REX should be less utilized. If they were to run on renewable fuels such as alcohol, biodiesel, green methane, green propane, or whatever I don’t see why those can’t be permitted in whatever numbers are needed as long as there’s enough fuel to go around. There’s not going to be enough for non hybrid ICE cars but for hyper efficent REXEVs? Maybe.
I expect the ban will be modified as the reality of the situation comes clearer.
Re: ID.2 vs Polo and regulatory concerns, it’s time to point and laugh at Ford for discontinuing the Fiesta prematurely!
What a great little runabout a hybrid or PHEV Fiesta would be! Atkinson cycle NA version of the 1.0 three cylinder running the front wheels, and an electric motor on the rear axle, with maybe 1-5 kWh of batteries shoehorned in someplace in between. I loved my ’14 XFE, I really lament that ford went “trucks only + Mustang” and shed their cars. Really dumb move, IMO.
Alternative view is that it’s even sadder that the company that invented the affordable car could never figure out how to build affordable cars of high quality and sell them, profitably, against international competition in their home country.