Automakers Against Stampede to BEV Dominance

By Siegfried Mortkowitz

---

26th January 2023

When the president of the world’s biggest carmaker talks, people listen.

So, when Akio Toyoda said, in September of last year, that bans on ICE cars within 10 to 15 years  will be “rather difficult to achieve” because EVs “are just going to take longer than the media would like us to believe,” it made waves.

Toyoda doubled down on his statement and his company’s strategy two months later, in Thailand, when he said, first in a press release: “I believe we need to be realistic about when society will be able to fully adopt Battery Electric Vehicles and when our infrastructure can support them at scale.… and frankly, BEVs are not the only way to achieve the world’s carbon neutrality goals.” Then he told journalists that a “silent majority [in the auto industry] is wondering whether EVs are really OK to have as a single option. But they think it’s the trend, so they can’t speak out loudly”.

If Toyoda was the only auto executive to question the imposed time frame for the adoption of BEVs and the banning of ICEs, which varies from 2025 (Norway) to 2050 (Indonesia), he could be written off as an outlier. However, in January 2022 in remarks that went largely unnoticed at the time, Stellantis CEO Carlos Taveras had told several European newspapers that the European Commission’s strategy to phase out combustion engines in favor of EVs carries environmental and social risks.

After declaring that EV technology was imposed on the industry by politicians, Taveras noted, “Given the current European energy mix, an electric car needs to drive 70,000 kilometers to compensate for the carbon footprint of manufacturing the battery and to start catching up with a light hybrid vehicle, which costs half as much as an EV.” He also said the need to quickly transform plants and supply chains to meet the BEV time frame “creates social risk”.

Toyoda and Taveras were expressing their frustration with both the all-electric or nothing approach of governments and the slow take-up of BEVs, owing primarily to stubbornly high prices. Now it seems that more industry players are slowly coming around to their way of thinking.

KPMG’s 23rd Annual Global Automotive Executive Survey found that in 2022 industry leaders were more pessimistic about the prospects of BEV adoption than they had been the previous year. For example, respondents estimated that EVs would make up 10% to 40% of new car sales sold globally by 2030, compared to 20% to 70% in 2021. In the US, the median percentage expected for EV sales in 2030 was 35% of all new car sales, down from 65% the previous year.

Interestingly, the closer the respondent was to the customer, the less optimistic was their prediction. “US executives say car dealers expect EVs to capture 22 percent of the market by 2030, eight percentage points less than OEMs predict,” the survey said. Still, most auto executives remain bullish on EV adoption. Seven of 10 survey respondents said they expect that EVs will reach cost parity with ICE vehicles by 2030 – without subsidies. More than 80% believe that EVs will achieve widespread adoption without government subsidies in the next 10 years but not in all major markets.

According to the KPMG survey, the fall-off in estimated EV penetration was particularly pronounced in India, Brazil and Japan. “India’s infrastructure challenges mean that EV demand is likely to be much lower for cars than for two- and three-wheeled vehicles,” the report declared. “Brazil may focus less on electrification and more on alternative fuel, such as ethanol and Japan’s leading car manufacturers are likely to continue emphasizing hybrid vehicles and other potential energy sources such as hydrogen.” No wonder that some carmakers are hedging their BEV bets.

In fact, offering several sustainable alternatives to BEVs has been Toyota’s strategy for several years. The Japanese carmaker pioneered hybrid technology with its Prius and remains committed to it as long as BEVs remain expensive. In addition, it unveiled the hydrogen fuel-cell Mirai at the November 2014 Los Angeles Auto Show and recently showed off a prototype of its hydrogen ICE Corolla Cross H2.

Furthermore, German auto giants BMW and Audi are developing hydrogen fuel-cell passenger vehicle prototypes. Also at least three Chinese carmakers – Great Wall, Geely and BYD – have either already developed or are developing their own fuel-cell vehicles.

Their efforts were boosted when Beijing’s municipal government set a target of having 3,000 fuel-cell electric vehicles on its roads by the end of 2023, and it wants to increase that number to more than 10,000 in 2025.

This doesn’t mean that batteries will not be the major mode of propulsion in the post-ICE era; it only suggests that carmakers have grown more uncertain. As Akio Toyoda put it: “Because the right answer is still unclear, we shouldn’t limit ourselves to just one option.”